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Rowan Transaction | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | Rowan Transaction On April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan pursuant to the Transaction Agreement (the "Rowan Transaction"). Assets acquired and liabilities assumed in the Rowan Transaction were recorded at their estimated fair values as of the Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. As of March 31, 2020, we completed our fair value assessments of assets acquired and liabilities assumed. Assets Acquired and Liabilities Assumed The provisional amounts for assets acquired and liabilities assumed as of the Transaction Date and respective measurement period adjustments were as follows (in millions):
| Amounts Recognized as of Transaction Date | Measurement Period Adjustments (1) | Estimated Fair Value
Assets: |  |  |
Cash and cash equivalents | $ | 931.9 |  | $ | — |  | $ | 931.9 |
Accounts receivable (2) | 207.1 |  | (6.9) |  | 200.2 |
Other current assets | 101.6 |  | (2.6) |  | 99.0 |
Long-term notes receivable from ARO | 454.5 |  | — |  | 454.5 |
Investment in ARO | 138.8 |  | 2.5 |  | 141.3 |
Property and equipment | 2,989.8 |  | (26.0) |  | 2,963.8 |
Other assets | 41.7 |  | 1.1 |  | 42.8 |
Liabilities: |  |  |
Accounts payable and accrued liabilities | 259.4 |  | 15.7 |  | 275.1 |
Current portion of long-term debt | 203.2 |  | — |  | 203.2 |
Long-term debt | 1,910.9 |  | — |  | 1,910.9 |
Other liabilities | 376.3 |  | 34.5 |  | 410.8 |
Net assets acquired | 2,115.6 |  | (82.1) |  | 2,033.5 |
Less: Merger consideration | (1,402.8) |  | — |  | (1,402.8) |
Estimated bargain purchase gain | $ | 712.8 |  | $ | (82.1) |  | $ | 630.7 |
(1) The measurement period adjustments reflect changes in the estimated fair values of certain assets and liabilities, primarily related to long-lived assets, deferred income taxes and uncertain tax positions. The measurement period adjustments were recorded to reflect new information obtained about facts and circumstances existing as of the Transaction Date and did not result from subsequent intervening events. The adjustments recorded resulted in a $6.3 million decline to bargain purchase gain during the first quarter of 2020 and are included in other, net, in our condensed consolidated statements of operations for the nine months ended September 30, 2020. (2) Gross contractual amounts receivable totaled $208.3 million as of the Transaction Date. Bargain Purchase Gain The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resulting in a bargain purchase gain primarily driven by the decline in our share price from $33.92 to $15.88 between the last trading day prior to the announcement of the Rowan Transaction and the Transaction Date. Intangible Assets and Liabilities We recorded intangible assets and liabilities of $16.2 million and $2.1 million, respectively, representing the estimated fair value of Rowan's firm contracts in place at the Transaction Date with favorable or unfavorable contract terms compared to then-market day rates for comparable drilling rigs. As a result of a price concession negotiated following the onset of the COVID-19 pandemic, on one of our bare boat charter agreements for a rig leased to our 50/50 joint venture with Saudi Aramco ("ARO"), we recognized a $5.7 million impairment to the related contract intangible during the second quarter of 2020. The impairment was included in loss on impairment in our condensed consolidated statements of operations for the nine months ended September 30, 2020. Amortization of the intangible assets and liabilities resulted in a net reduction of operating revenues of $0.5 million and $2.4 million for the three and nine months ended September 30, 2020. The remaining balance of intangible assets and liabilities of $3.1 million and $0.7 million, respectively, was included in other assets and other liabilities, respectively, on our condensed consolidated balance sheet as of September 30, 2020. These balances will be amortized to operating revenues over the respective remaining contract terms on a straight-line basis. As of September 30, 2020, the remaining term of the underlying contracts is approximately 1.3 years. Amortization of these intangibles is expected to result in a reduction to revenue of $0.4 million and $2.0 million for the remainder of 2020 and 2021, respectively. Uncertain Tax Positions Uncertain tax positions assumed in a business combination are measured at the largest amount of the tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of the Transaction Date, Rowan had previously recognized net liabilities for uncertain tax positions totaling $50.4 million. During 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately €142.0 million (approximately $166.5 million converted using the current period-end exchange rate) related to tax years 2014, 2015 and 2016 for several of Rowan's Luxembourg subsidiaries. As a result of our review and analysis of facts and circumstances that existed at the Transaction Date, we recognized liabilities related to the Luxembourg tax assessments totaling €93.0 million (approximately $109.0 million converted using the current period-end exchange rates). See "Note 13 - Income Taxes" for further information on this matter. Transaction-related costs Transaction-related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $0.2 million and $18.0 million for the three and nine months ended September 30, 2019. These costs were included in general and administrative expense in our condensed consolidated statement of operations. Revenue and Earnings of Rowan Our condensed consolidated statements of operations for the three and nine months ended September 30, 2019 include revenues of $138.9 million and $286.2 million, respectively, and net losses of $31.2 million and $95.1 million, respectively, associated with Rowan's operations from the Transaction Date through September 30, 2019. Unaudited Pro Forma Impact of the Rowan Transaction The following unaudited supplemental pro forma results present consolidated information as if the Rowan Transaction was completed on January 1, 2019. The pro forma results include, among others, (i) the amortization associated with acquired intangible assets and liabilities, (ii) a reduction in depreciation expense for adjustments to property and equipment, (iii) the amortization of premiums and discounts recorded on Rowan's debt, (iv) removal of the historical amortization of unrealized gains and losses related to Rowan's pension plans and (v) the amortization of basis differences in assets and liabilities of ARO. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the Rowan Transaction.
(in millions, except per share amounts) |  | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Revenues |  | $ | 552.0 |  |  | $ | 1,729.5 |
Net loss |  | $ | (136.0) |  |  | $ | (788.2) |
Loss per share - basic and diluted |  | $ | (0.48) |  |  | $ | (4.02) |
(1) Pro forma net loss and loss per share were adjusted to exclude an aggregate $16.0 million and $85.4 million of transaction-related and integration costs incurred during the three and nine months ended September 30, 2019, respectively. Additionally, pro forma net loss and loss per share exclude the measurement period adjustments and estimated gain on bargain purchase of $53.0 million and $659.8 million recognized during the three and nine months ended September 30, 2019, respectively.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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