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Discontinued Operations
 3 Months Ended
Mar. 31, 2013
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 business is reflected as discontinued operations in our condensed 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.

 

In August 2012, our Venezuelan subsidiary sold 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. We received an installment payment of $16.8 million in the year ended December 31, 2012. In March 2013, we received an installment payment of $34.3 million, which includes a prepayment of $17.2 million for the second quarter 2013 installment payment due to us. The remaining principal amount due to us of approximately $215 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.

 

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 February 2013, the Venezuelan government announced a devaluation of the Venezuelan bolivar. This devaluation resulted in a translation gain of approximately $1.4 million on the remeasurement of our net liability position associated with our discontinued operations in Venezuela and is reflected in other (income) loss, net in the table below during the three months ended March 31, 2013. 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 4.3 bolivars per U.S. dollar at December 31, 2012 to 6.3 bolivars per U.S. dollar in February 2013.

 

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 condensed consolidated financial statements. These operations were previously included in our North American contract operations and aftermarket services business segments. In connection with the planned disposition, we recorded impairments of long-lived assets totaling $2.1 million during the three months ended March 31, 2013. 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):

 

 

 

Three Months Ended March 31, 2013

 

Three Months Ended March 31, 2012

 

 

 

Venezuela

 

Canada

 

Total

 

Venezuela

 

Canada

 

Total

 

Revenue

 

$

—

 

$

10,828

 

$

10,828

 

$

—

 

$

11,274

 

$

11,274

 

Expenses and selling, general and administrative

 

227

 

11,039

 

11,266

 

172

 

13,851

 

14,023

 

Loss (recovery) attributable to expropriation and impairments

 

(33,199

)

2,076

 

(31,123

)

13

 

—

 

13

 

Other (income) loss, net

 

(2,592

)

34

 

(2,558

)

—

 

(686

)

(686

)

Provision for (benefit from) income taxes

 

—

 

(7

)

(7

)

440

 

(1,354

)

(914

)

Income (loss) from discontinued operations, net of tax

 

$

35,564

 

$

(2,314

)

$

33,250

 

$

(625

)

$

(537

)

$

(1,162

)

 

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

 

 

 

March 31, 2013

 

December 31, 2012

 

 

 

Venezuela

 

Canada

 

Total

 

Venezuela

 

Canada

 

Total

 

Cash

 

$

134

 

$

194

 

$

328

 

$

113

 

$

791

 

$

904

 

Accounts receivable

 

13

 

8,604

 

8,617

 

17

 

9,148

 

9,165

 

Inventory

 

—

 

10,319

 

10,319

 

—

 

9,826

 

9,826

 

Other current assets

 

14

 

1,716

 

1,730

 

41

 

1,810

 

1,851

 

Total current assets associated with discontinued operations

 

161

 

20,833

 

20,994

 

171

 

21,575

 

21,746

 

Property, plant and equipment

 

—

 

273

 

273

 

—

 

—

 

—

 

Intangible and other long-term assets

 

—

 

24

 

24

 

—

 

—

 

—

 

Total assets associated with discontinued operations

 

$

161

 

$

21,130

 

$

21,291

 

$

171

 

$

21,575

 

$

21,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

367

 

$

2,911

 

$

3,278

 

$

499

 

$

3,345

 

$

3,844

 

Accrued liabilities

 

2,558

 

3,265

 

5,823

 

4,335

 

2,724

 

7,059

 

Deferred revenue

 

—

 

681

 

681

 

—

 

669

 

669

 

Total current liabilities associated with discontinued operations

 

2,925

 

6,857

 

9,782

 

4,834

 

6,738

 

11,572

 

Other long-term liabilities

 

340

 

593

 

933

 

455

 

589

 

1,044

 

Total liabilities associated with discontinued operations

 

$

3,265

 

$

7,450

 

$

10,715

 

$

5,289

 

$

7,327

 

$

12,616