Acquisition

3 Months Ended

Mar. 31, 2012

Acquisition [Abstract]

Acquisition

Note 4—Acquisition

In April 2011, we completed the acquisition of the drilling fluids and engineering services business from Rheochem PLC, a publicly-traded Australian-based oil and gas company. The acquired business provides drilling fluids and related engineering services to the oil and gas exploration and geothermal industries with operations in Australia, New Zealand and India. Total cash paid was AUD$27.2 million ($28.8 million), including post-closing payments of AUD$0.8 million ($0.8 million) based on a true-up of the final working capital conveyed at closing and AUD$2.0 million ($2.1 million) related to a six month earn-out provision in the agreement. Additional consideration is payable based on financial results of the acquired business over a one year earn-out period ending February 2012. As of March 31, 2012, AUD$10.6 million ($11.0 million) is recorded in accrued liabilities, reflecting the estimated one year earn-out obligation.

The transaction has been accounted for using the acquisition method of accounting and accordingly, assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date. The excess of the total consideration, including projected additional consideration, was recorded as goodwill and includes the value of the access to markets in Asia Pacific and an assembled workforce.

The following table summarizes the amounts recognized for assets acquired and liabilities assumed, as of the April 2011 acquisition date.

(In thousands)
Cash and cash equivalents	$	315
Receivables, net		3,316
Inventories		7,166
Prepaid expenses and other current assets		773
Property, plant and equipment, net		9,465
Goodwill		12,914
Customer relationships (11 year life)		10,492
Tradename (5 year life)		700
Other assets		510
Total assets acquired	$	45,651
Accounts payable	$	717
Accrued liabilities		15,315
Deferred tax liability		3,432
Other noncurrent liabilities		271
Total liabilities assumed	$	19,735
Total cash conveyed at closing	$	25,916

The accrued liabilities at the date of acquisition in the table above includes $13.9 million reflecting anticipated post-closing payments to the seller under the terms of the agreement, of which $2.9 million was paid during the third quarter of 2011. The remaining $11.0 million balance at March 31, 2012, which reflects estimated obligations under the one-year earn-out provision, is expected to be paid during the second quarter of 2012.

Proforma results of operation for the acquired business have not been presented as the effect of this acquisition is not material to our consolidated financial statements.