Curaçao | 1-4601 | 52-0684746 | ||
(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
of incorporation) | Identification No.) |
Item 8.01 Other Events. | ||||||||
Item 9.01 Financial Statements and Exhibits. | ||||||||
SIGNATURE | ||||||||
EX-99 |
99
|
Unaudited pro forma condensed combined statement of income and explanatory notes. |
2
SCHLUMBERGER N.V. (SCHLUMBERGER LIMITED) |
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By: | /s/ Howard Guild | |||
Howard Guild | ||||
Chief Accounting Officer | ||||
3
Pro Forma | Pro Forma | |||||||||||||||||||
Schlumberger | Smith(*) | Reclassifications(A) | Adjustments | Combined | ||||||||||||||||
Revenue |
$ | 27,447 | $ | 5,967 | $ | (147 | )(B) | $ | 33,267 | |||||||||||
Interest and other income, net |
214 | 2 | $ | 16 | (78 | )(C) | 154 | |||||||||||||
Gain on investment in M-I SWACO |
1,270 | (1,270 | )(D) | |||||||||||||||||
Expenses: |
||||||||||||||||||||
Cost of revenue |
21,499 | 4,293 | 950 | (147 | )(B) | 26,535 | ||||||||||||||
(36 | )(E) | |||||||||||||||||||
(153 | ) (F) | |||||||||||||||||||
129 | (G) | |||||||||||||||||||
Research & engineering |
919 | 102 | 1,021 | |||||||||||||||||
General & administrative |
650 | 161 | 811 | |||||||||||||||||
Selling, general &
administrative |
1,235 | (1,235 | ) | |||||||||||||||||
Merger & integration |
169 | 38 | (189 | )(H) | 18 | |||||||||||||||
Restructuring & other |
331 | 331 | ||||||||||||||||||
Interest |
207 | 99 | (20 | )(I) | 286 | |||||||||||||||
Income from Continuing
Operations before taxes |
5,156 | 342 | | (1,079 | ) | 4,419 | ||||||||||||||
Taxes on income |
890 | 117 | 18 | (C) | 1,032 | |||||||||||||||
(32 | )(D) | |||||||||||||||||||
11 | (H) | |||||||||||||||||||
28 | (J) | |||||||||||||||||||
Income from Continuing
Operations |
4,266 | 225 | | (1,104 | ) | 3,387 | ||||||||||||||
Income attributable to
noncontrolling interests |
1 | (102 | ) | 96 | (C) | (5 | ) | |||||||||||||
Income from Continuing
Operations Attributable to
Schlumberger/Smith |
$ | 4,267 | $ | 123 | $ | | $ | (1,008 | ) | $ | 3,382 | |||||||||
Income from continuing
operations per share attributable to
Schlumberger/Smith: |
||||||||||||||||||||
Basic earnings per share |
$ | 3.41 | $ | 2.47 | ||||||||||||||||
Diluted earnings per share |
$ | 3.38 | $ | 2.45 | ||||||||||||||||
Average shares outstanding: |
||||||||||||||||||||
Basic |
1,250 | 1,368 | (K) | |||||||||||||||||
Assuming dilution |
1,263 | 1,381 | (K) |
(*)
|
Represents Smiths results for the period January 1, 2010 to August 27, 2010. |
(In millions, except exchange ratio and per share amounts) | ||||
Number of shares of Smith common stock outstanding as of
August 27, 2010 |
248 | |||
Number of Smith unvested restricted stock units outstanding as
of August 27, 2010 |
4 | |||
252 | ||||
Multiplied by the exchange ratio |
0.6966 | |||
Equivalent Schlumberger shares of common stock issued |
176 | |||
Schlumberger closing share price on August 27, 2010 |
$ | 55.76 | ||
Common stock equity consideration |
$ | 9,812 | ||
Fair value of Schlumberger equivalent stock options issued |
16 | |||
Total fair value of the consideration transferred |
$ | 9,828 | ||
(A) | Certain reclassifications have been made to Smiths historical statement of income to conform to Schlumbergers presentation, primarily relating to selling and research and engineering expenses. | |
(B) | Reflects the elimination of revenue and cost of revenue in connection with Smith sales to Schlumberger. | |
(C) | Reflects the elimination of Schlumbergers equity earnings relating to M-I SWACO, a drilling fluids joint venture that was 40% owned by Schlumberger and 60% owned by Smith, as well as Smiths corresponding noncontrolling interest in the net income of the venture, respectively. This joint venture was structured as a partnership in the U.S. Smith consolidated the results of M-I SWACO and, as such, reflected the pretax income of the entire joint venture (including the U.S. partnership), and had appropriately not recorded income taxes associated with Schlumbergers 40% interest in the U.S. partnership. Therefore, an adjustment is required to reclassify these additional taxes which were previously reflected as a component of Schlumbergers equity income. | |
(D) | Represents a pro forma adjustment to eliminate Schlumbergers pretax gain and the related tax effect as a result of remeasuring its previously held equity interest in M-I SWACO. Generally accepted accounting principles require that an acquirer remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The gain is calculated based upon the acquisition date fair value of M-I SWACO. Because this pro forma adjustment will not have a continuing impact, it is excluded from the unaudited pro forma condensed combined statement of income. | |
(E) | To eliminate Smiths historical intangible asset amortization expense. | |
(F) | Schlumberger recorded an adjustment in purchase accounting of $153 million to write-up acquired inventory to its estimated fair market value. Schlumbergers cost of revenue reflected this increased valuation as this inventory was sold. The impact of this adjustment has been eliminated from the unaudited pro forma condensed combined statement of income because it will not have a continuing impact. | |
(G) | The fair value of identifiable intangible assets was determined primarily using the income approach, which requires a forecast of all of the expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. Some of the more significant assumptions inherent in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, and the assessment of the assets life cycle, as well as other factors. The fair value of the identifiable intangible assets, the related amortization expense and their weighted-average useful lives have been estimated as follows: |
Weighted Average | Annual Amortization | |||||||||||
Fair Value | Estimated Useful Life | Expense | ||||||||||
(in millions) | (in years) | (in millions) | ||||||||||
Customer Relationships |
$ | 1,360 | 23 | $ | 59 | |||||||
Technology / Technical Know-How |
1,170 | 16 | 73 | |||||||||
Tradenames / Trademarks |
1,560 | 25 | 62 | |||||||||
$ | 4,090 | $ | 194 | |||||||||
The pro forma adjustment of $129 million represents the $194 million of annual amortization expense less the $65 million of amortization expense that Schlumberger recorded relating to these identifiable intangible assets during the period from August 27, 2010 to December 31, 2010. | ||
(H) | Reflects merger-related advisory and legal fees, and the related tax benefit, incurred by both Schlumberger and Smith during the year ended December 31, 2010 which do not have a continuing impact and therefore are not reflected in the unaudited pro forma condensed combined statement of income. | |
(I) | Represents the amortization associated with the fair value adjustment to increase Smiths fixed rate long-term debt and its fair value at the closing of the merger for the period from January 1, 2010 to August 27, 2010, over the weighted-average remaining term of the obligations. | |
(J) | Schlumberger has assumed a 35% tax rate when estimating the tax impacts of the appropriate pro forma adjustments, which represents the U.S. federal statutory tax rate. The effective tax rate of the combined company could be significantly different from what is presented in these unaudited pro forma condensed combined financial statements for a variety of reasons, including post-merger activities. |
Year Ended | ||||
December 31, | ||||
2010 | ||||
Elimination of Smiths historical
amortization expense |
$ | (36 | ) | |
Elimination
of inventory fair value adjustment |
(153 | ) | ||
Amortization expense associated with
intangible assets |
129 | |||
Amortization of debt fair value adjustment |
(20 | ) | ||
Pro forma
incremental income |
$ | (80 | ) | |
U.S. federal statutory tax rate |
35 | % | ||
Tax expense
relating to pro forma adjustments
|
$ | 28 | ||
(K) | Represents the adjusted weighted-average shares outstanding calculated as follows (in millions): |
Year Ended | ||||||||
December 31, 2010 | ||||||||
Assuming | ||||||||
Basic | Dilution | |||||||
Schlumberger historical shares outstanding |
1,250 | 1,263 | ||||||
Pro forma adjustment for the new Schlumberger shares of common stock issued |
118 | 118 | ||||||
1,368 | 1,381 | |||||||