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Discontinued Operations | 12 Months Ended
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Dec. 31, 2012
Discontinued Operations |
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. 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 reflected as discontinued operations in our consolidated financial statements. In March 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 under the Agreement between Spain and Venezuela for the Reciprocal Promotion and Protection of Investments and under Venezuelan law. The arbitration hearing occurred in July 2012. 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 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, net of tax. 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 for our seized assets and operations from Venezuela in recording the loss on expropriation. In August 2012, our Venezuelan subsidiary completed the sale of its previously nationalized assets to PDVSA Gas, S.A. (“PDVSA Gas”) for a purchase price of approximately $441.7 million. We received an initial payment of $176.7 million in cash at closing, of which we remitted $50.0 million to the insurance company from which we collected $50.0 million in January 2010 under the terms of an insurance policy we maintained for the risk of expropriation. In December 2012, we received an installment payment of $16.8 million. The remaining principal amount due to us of approximately $248 million is payable in quarterly cash installments through the third quarter of 2016. We have not recognized amounts payable to us by PDVSA Gas as a receivable and will therefore recognize quarterly payments received in the future as income from discontinued operations in the periods such payments are received. The proceeds from the sale of assets are not subject to Venezuelan national taxes due to an exemption allowed under the Venezuelan Reserve Law applicable to expropriation settlements. In addition, and in connection with the sale, we and the Venezuelan government agreed to waive rights to assert certain claims against each other. We therefore recorded a reduction in previously unrecognized tax benefits, resulting in a $15.5 million benefit reflected in Income (loss) from discontinued operations, net of tax, in our consolidated statements of operations during the year ended December 31, 2012. In connection with the sale of these assets, we have agreed to suspend the arbitration proceeding previously filed by our Spanish subsidiary against Venezuela pending payment in full by PDVSA Gas of the purchase price for these nationalized assets. 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. In June 2012, we committed to a plan to sell our contract operations and aftermarket services businesses in Canada as part of our continued emphasis on simplification and focus on our core businesses. We expect this sale to be completed within the next twelve months. Our Canadian contract operations and aftermarket services businesses are reflected as discontinued operations in our consolidated financial statements. These operations were previously included in our North American contract operations and aftermarket services business segments. In conjunction with the planned disposition, we recorded impairments of long-lived assets, including intangible and other assets, and inventory, that totaled $80.2 million during the year ended December 31, 2012. The impairment charges are reflected in Income (loss) from discontinued operations, net of tax. The table below summarizes the operating results of the discontinued operations (in thousands):
|  | Years Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
|  | Venezuela |  | Canada |  | Total |  | Venezuela |  | Canada |  | Total |  | Venezuela |  | Canada |  | Total |
Revenue |  | $ | — |  | $ | 50,557 |  | $ | 50,557 |  | $ | — |  | $ | 53,591 |  | $ | 53,591 |  | $ | 2,940 |  | $ | 44,350 |  | $ | 47,290 |
Expenses and selling, general and administrative |  | 1,275 |  | 50,521 |  | 51,796 |  | 1,302 |  | 59,421 |  | 60,723 |  | 5,892 |  | 52,559 |  | 58,451 |
Loss (recovery) attributable to expropriation, impairments and inventory write downs |  | (136,947 | ) | 80,159 |  | (56,788 | ) | 3,092 |  | 944 |  | 4,036 |  | (38,925 | ) | 3,029 |  | (35,896 | )
Other (income) loss, net |  | (219 | ) | (130 | ) | (349 | ) | (150 | ) | 228 |  | 78 |  | (12,145 | ) | (2,350 | ) | (14,495 | )
Provision for (benefit from) income taxes |  | (13,509 | ) | 2,564 |  | (10,945 | ) | 1,719 |  | (2,860 | ) | (1,141 | ) | 2,795 |  | (4,304 | ) | (1,509 | )
Income (loss) from discontinued operations, net of tax |  | $ | 149,400 |  | $ | (82,557 | ) | $ | 66,843 |  | $ | (5,963 | ) | $ | (4,142 | ) | $ | (10,105 | ) | $ | 45,323 |  | $ | (4,584 | ) | $ | 40,739 |
The table below summarizes the balance sheet data for discontinued operations (in thousands):
|  | December 31, |
|  | 2012 |  | 2011 |
|  | Venezuela |  | Canada |  | Total |  | Venezuela |  | Canada |  | Total |
Cash |  | $ | 113 |  | $ | 791 |  | $ | 904 |  | $ | 304 |  | $ | 135 |  | $ | 439 |
Accounts receivable |  | 17 |  | 9,148 |  | 9,165 |  | 9 |  | 13,973 |  | 13,982 |
Inventory |  | — |  | 9,826 |  | 9,826 |  | 1,017 |  | 19,590 |  | 20,607 |
Other current assets |  | 41 |  | 1,810 |  | 1,851 |  | 2,683 |  | 953 |  | 3,636 |
Total currents assets associated with discontinued operations |  | 171 |  | 21,575 |  | 21,746 |  | 4,013 |  | 34,651 |  | 38,664 |
Property, plant and equipment |  | — |  | — |  | — |  | — |  | 69,788 |  | 69,788 |
Intangible and other long-term assets |  | — |  | — |  | — |  | — |  | 9,432 |  | 9,432 |
Total assets associated with discontinued operations |  | $ | 171 |  | $ | 21,575 |  | $ | 21,746 |  | $ | 4,013 |  | $ | 113,871 |  | $ | 117,884 |
Accounts payable |  | $ | 499 |  | $ | 3,345 |  | $ | 3,844 |  | $ | 589 |  | $ | 5,515 |  | $ | 6,104 |
Accrued liabilities |  | 4,335 |  | 2,724 |  | 7,059 |  | 4,295 |  | 3,924 |  | 8,219 |
Deferred revenue |  | — |  | 669 |  | 669 |  | 1,499 |  | 320 |  | 1,819 |
Total currents liabilities associated with discontinued operations |  | 4,834 |  | 6,738 |  | 11,572 |  | 6,383 |  | 9,759 |  | 16,142 |
Other long-term liabilities |  | 455 |  | 589 |  | 1,044 |  | 14,140 |  | 548 |  | 14,688 |
Total liabilities associated with discontinued operations |  | $ | 5,289 |  | $ | 7,327 |  | $ | 12,616 |  | $ | 20,523 |  | $ | 10,307 |  | $ | 30,830 |

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- Definition The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1474-107760 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 144 -Paragraph 43-48 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1436-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2941-110230 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=8077374&loc=d3e2443-110228 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1012-107759 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1510-107760 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1020-107759 + Details
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