C&J Merger

3 Months Ended

Mar. 31, 2020

On October 31, 2019 (the “C&J Acquisition Date”), the Company completed the C&J Merger in accordance with the terms of the Agreement and Plan of Merger, dated as of June 16, 2019 (the "Merger Agreement"), by and among NexTier, C&J and King Merger Sub Corp., a wholly owned subsidiary of NexTier ("Merger Sub"), pursuant to which Merger Sub merged with and into C&J, with C&J surviving the merger as a wholly owned subsidiary of NexTier, and immediately following the C&J Merger, C&J was merged with and into King Merger Sub II LLC ("LLC Sub"), with LLC Sub continuing as the surviving entity as a wholly-owned subsidiary of NexTier and the successor in interest to C&J.

The C&J Merger was completed for total consideration of approximately $485.1 million, consisting of (i) equity consideration in the form of 105.9 million shares of Keane common stock issued to C&J stockholders with a value of $481.9 million and (ii) replacement share based compensation awards attributable to pre-merger services with a value of $3.2 million.

The Company accounted for the C&J Merger using the acquisition method of accounting. The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition. The majority of the measurements of assets acquired and liabilities assumed, are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired inventory and property and equipment is based on both available market data and a cost approach. The fair value of the financial assets acquired includes trade receivables with a fair

value of $312.6 million. The gross amount due under the contracts is $322.8 million, of which $10.2 million is expected to be uncollectible. A liability of $40.2 million has been recognized for legal reserves and sales and use tax assessments. As of March 31, 2020, there has been no change in the amount recognized for the liability or any change in the range of outcomes or assumptions used to develop the estimates on October 31, 2019.

The preliminary purchase price has been allocated to the net assets acquired and liabilities assumed based upon their estimated fair values. The estimated fair values of certain assets and liabilities, including accounts receivable, taxes (including uncertain tax positions), and contingencies require significant judgments and estimates. C&J is subject to the legal and regulatory requirements, including but not limited to those related to environmental matters and taxation. The Company has conducted a preliminary assessment of liabilities arising from these matters and has recognized provisional amounts in its initial accounting for the C&J Merger for all identified liabilities in accordance with the requirements of ASC Topic 805. Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, valuation of pre-acquisition contingencies and final tax returns that provide underlying tax basis of assets acquired and liabilities assumed. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized. As a result, the provisional measurements below are preliminary and subject to change during the measurement period and such changes could be material. The Company will finalize the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate. The Company continues to assess the fair values of the assets acquired and liabilities assumed.

The following table summarizes the fair value of the consideration transferred in the C&J Merger and the preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the C&J Merger Date:



Total Purchase Consideration:	Purchase Price Allocation as of March 31, 2020
(Thousands of Dollars)
Equity consideration	$	481,912
Replacement awards attributable to pre-combination services	3,212
Less: Cash acquired	(68,807		)
Total purchase consideration	416,317

Trade and accounts receivable	312,620
Inventories	43,142
Prepaid and other current assets	18,512
Property and equipment	311,886
Intangible assets	17,590
Right of use assets	24,318
Other noncurrent assets	4,409
Total identifiable assets acquired	732,477
Accounts payable	43,620
Accrued expenses	236,959
Short term lease liability	7,842
Long term lease liability	15,517
Non-current liabilities	17,156
Total liabilities assumed	321,094
Goodwill	4,934
Total purchase consideration	$	416,317