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BUSINESS COMBINATIONS | 12 Months Ended
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Sep. 30, 2017
BUSINESS COMBINATIONS |
BUSINESS COMBINATIONS | NOTE 2 BUSINESS COMBINATIONS On June 2, 2017, we completed a merger transaction (“MOTIVE Merger”) pursuant to which an unaffiliated drilling technology company, MOTIVE Drilling Technologies, Inc., a Delaware corporation (“MOTIVE”), was merged with and into our wholly owned subsidiary Spring Merger Sub, Inc., a Delaware corporation. MOTIVE survived the transaction and is now a wholly owned subsidiary of the Company. The operations for MOTIVE are included with all other non-reportable business segments. At the effective time of the MOTIVE Merger, MOTIVE shareholders received aggregate cash consideration of $74.3 million, net of customary closing adjustments, and may receive up to an additional $25.0 million in potential earnout payments based on future performance. At closing, $9.4 million of the cash consideration was placed in escrow, with one-half to be released to the seller on each of the twelve and eighteen month anniversaries of the merger completion date. Transaction costs related to the MOTIVE Merger incurred during fiscal 2017 were $3.2 million and are recorded in the Consolidated Statement of Operations within the general and administrative expense line item. We recorded revenue of $3.3 million and a net loss of $2.2 million related to the MOTIVE Merger during fiscal 2017. MOTIVE has a proprietary Bit Guidance System that is an algorithm-driven system that considers the total economic consequences of directional drilling decisions and has proven to consistently lower drilling costs through more efficient drilling and increase hydrocarbon production through smoother wellbores and more accurate well placement. Given our strong and longstanding technology and innovation focus, we believe the technology will continue to advance and provide further benefits for the industry. The MOTIVE Merger is accounted for as a business combination in accordance with ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values. The following table summarizes the purchase price and the allocation of the fair values of assets acquired and liabilities assumed and separately identifiable intangible assets at the acquisition date (in thousands):
Purchase Price |  |  |
Consideration given |  |  |
Cash consideration |  | $ | 74,275
Long-term contingent earnout liability (Other noncurrent liabilities) |  |  | 14,509
Total consideration given |  | $ | 88,784
Allocation of Purchase Price |  |  |
Fair value of assets acquired |  |  |
Current assets |  | $ | 4,425
Property, plant and equipment |  |  | 300
Intangible asset - developed technology (Intangible assets, net of amortization) |  |  | 51,000
Goodwill |  |  | 46,987
Total assets acquired |  | $ | 102,712
Fair value of liabilities assumed |  |  |
Current liabilities |  | $ | 25
Deferred income taxes |  |  | 13,903
Total liabilities acquired |  | $ | 13,928
Fair value of total assets and liabilities acquired |  | $ | 88,784
The fair value of the contingent consideration of $14.5 million at June 2, 2017 and $14.9 million at September 30, 2017 was calculated using a Monte Carlo simulation which evaluates numerous potential earnings and pay out scenarios and is considered a level 3 measurement under the fair value hierarchy. The developed technology is an intangible asset that will be amortized on a straight-line basis over an estimated 15-year life. During fiscal 2017, we recorded $1.1 million of amortization related to the developed technology. We expect annual amortization to be approximately $3.4 million. The developed technology intangible asset was valued using an income approach, considering the estimated discounted future cash flows expected to be realized over the life of the asset, which is considered a level 3 measurement under the fair value hierarchy. Goodwill represents the residual of the purchase price paid and consists largely of the synergies and economies of scale expected from the drilling technology providing more efficient drilling and directional drilling services, the first mover advantage obtained through the acquisition and expected future developments resulting from the assembled workforce. The goodwill is reported in the Other segment and will not be allocated to any other reporting unit. The goodwill is not subject to amortization but will be evaluated at least annually for impairment or more frequently if impairment indicators are present. The developed technology and goodwill are not deductible for income tax purposes. An associated deferred tax liability has been recorded in regards to the developed technology. The following unaudited pro forma combined financial information is provided for fiscal 2017 and fiscal 2016, as though the MOTIVE Merger had been completed as of October 1, 2015. These pro forma combined results of operations have been prepared by adjusting our historical results to include the historical results of MOTIVE and reflect pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including application of an appropriate income tax to MOTIVE pre-tax loss. Additionally, pro forma earnings for fiscal 2017 were adjusted to exclude $2.1 million of after-tax transaction costs. The unaudited pro forma combined financial information is provided for illustrative purposes only and is not necessarily indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. Future results may vary significantly from the results reflected in this pro forma financial information.
|  | Pro Forma
|  | 2017 |  | 2016
|  | (unaudited)
Revenues |  | $ | 1,807,950 |  | $ | 1,626,305
Net loss |  | $ | (127,093) |  | $ | (59,776)

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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