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Discontinued Operations
 12 Months Ended
Dec. 31, 2011
Discontinued Operations [Abstract]  
Discontinued Operations

2. Discontinued Operations

In May 2009, the Venezuelan government enacted a law that reserves to the State of Venezuela certain assets and services related to hydrocarbon activities, which included substantially all of our assets and services in Venezuela. The law provides that the reserved activities are to be performed by the State, by the State-owned oil company, Petroleos de Venezuela S.A. (“PDVSA”), or its affiliates, or through mixed companies under the control of PDVSA or its affiliates. The law authorizes PDVSA or its affiliates to take possession of the assets and take over control of those operations related to the reserved activities as a step prior to the commencement of an expropriation process, and permits the national executive of Venezuela to decree the total or partial expropriation of shares or assets of companies performing those services.

In June 2009, PDVSA commenced taking possession of our assets and operations in a number of our locations in Venezuela and by the end of the second quarter of 2009, PDVSA had assumed control over substantially all of our assets and operations in Venezuela.

While the law provides that companies whose assets are expropriated in this manner may be compensated in cash or securities, we are unable to predict what, if any, compensation we ultimately will receive or when we may receive any such compensation. We reserve and will continue to reserve the right to seek full compensation for any and all expropriated assets and investments under all applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with Venezuela and/or PDVSA, which could result in us recording a gain on our investment in future periods. In this connection, on June 16, 2009, our Spanish subsidiary delivered to the Venezuelan government and PDVSA an official notice of dispute relating to the seized assets and investments under the Agreement between Spain and Venezuela for the Reciprocal Promotion and Protection of Investments and under Venezuelan law. On March 23, 2010, our Spanish subsidiary filed a request for the institution of an arbitration proceeding against Venezuela with the International Centre for Settlement of Investment Disputes (“ICSID”) related to the seized assets and investments, which was registered by ICSID on April 12, 2010. The arbitration hearing on jurisdiction and the merits is presently scheduled to take place in July 2012.

 

We maintained insurance for the risk of expropriation of our investments in Venezuela, subject to a policy limit of $50 million. During the year ended December 31, 2009, we recorded a receivable of $50 million related to this insurance policy because we determined that recovery under this policy of a portion of our loss was probable. We collected the $50 million under our policy in January 2010. Under the terms of the insurance policy, certain compensation we may receive from the Venezuelan government or PDVSA for our expropriated assets, receivables and operations will be applied first to the reimbursement of out-of-pocket expenses incurred by us and the insurance company, second to the insurance company until the $50 million payment has been repaid and third to us.

As a result of PDVSA taking possession of substantially all of our assets and operations in Venezuela, we recorded asset impairments during the year ended December 31, 2009, totaling $329.7 million ($379.7 million excluding the insurance proceeds of $50 million). These charges primarily related to receivables, inventory, fixed assets and goodwill, and are reflected in Income (loss) from discontinued operations. We believe the fair value of our seized Venezuelan operations substantially exceeds the historical cost-based carrying value of the assets, including the goodwill allocable to those operations; however, GAAP requires that our claim be accounted for as a gain contingency with no benefit being recorded until resolved. Accordingly, we did not include any compensation we may receive for our seized assets and operations from Venezuela in recording the loss on expropriation.

The expropriation of our business in Venezuela meets the criteria established for recognition as discontinued operations under accounting standards for presentation of financial statements. Therefore, our Venezuela contract operations and aftermarket services businesses are now reflected as discontinued operations in our consolidated statements of operations.

In January 2010, the Venezuelan government announced a devaluation of the Venezuelan bolivar. This devaluation resulted in a translation gain of approximately $12.2 million on the remeasurement of our net liability position in Venezuela and is reflected in Other (income) loss, net in the table below for the year ended December 31, 2010. The functional currency of our Venezuela subsidiary is the U.S. dollar and we had more liabilities than assets denominated in bolivars in Venezuela at the time of the devaluation. The exchange rate used to remeasure our net liabilities changed from 2.15 bolivars per U.S. dollar at December 31, 2009 to 4.3 bolivars per U.S. dollar in January 2010.

Our loss (recovery) attributable to expropriation for the year ended December 31, 2010 includes a benefit of $41.0 million from payments received from PDVSA and its affiliates as consideration for the fixed assets for two projects. These payments relate to the recovery of the loss we recognized on the value of the equipment for these projects in the second quarter of 2009.

The table below summarizes the operating results of the discontinued operations (in thousands):

 

 

                         
    Years Ended December 31,  
    2011     2010     2009  

Revenues

   $ —       $ 2,940     $ 69,050  

Expenses and selling, general and administrative

     1,302       5,892       61,761  

Loss (recovery) attributable to expropriation

     3,092       (38,925 )        329,685  

Other (income) loss, net

     (150 )      (12,145 )      (7,571 ) 

Provision for (benefit from) income taxes

       1,719       2,795       (18,586 ) 
   

 

 

    

 

 

    

 

 

  

Income (loss) from discontinued operations, net of tax

   $ (5,963 )    $ 45,323     $ (296,239 ) 
   

 

 

    

 

 

    

 

 

  

 

The table below summarizes the balance sheet data for discontinued operations (in thousands):

 

 

                 
    December 31,  
    2011     2010  

Cash

   $ 304     $ 754  

Accounts receivable

     9       434  

Inventory

     1,017       1,077  

Other current assets

     2,683       3,653  
   

 

 

    

 

 

  

Total current assets associated with discontinued operations

     4,013       5,918  

Property, plant and equipment, net

     —         502  

Other long-term assets

     —         8,670  
   

 

 

    

 

 

  

Total assets associated with discontinued operations

   $ 4,013     $  15,090  
   

 

 

    

 

 

  

Accounts payable

   $ 589     $ 801  

Accrued liabilities

     4,295       13,932  

Deferred revenues

     1,499       821  
   

 

 

    

 

 

  

Total current liabilities associated with discontinued operations

     6,383       15,554  

Other long-term liabilities

     14,140       13,111  
   

 

 

    

 

 

  

Total liabilities associated with discontinued operations

   $  20,523     $ 28,665