Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Note 2 – Discontinued Operations

On June 22, 2011, the Company completed the sale of its wholly owned manufacturing subsidiary, LeTourneau Technologies, Inc, (“LeTourneau”), at a price of $1.1 billion in cash, subject to certain post-closing working capital adjustments, and recognized a gain on sale of $660.9 million ($424.5 million, net of tax) in the second quarter of 2011.

The operations of LeTourneau previously comprised the “Drilling Products and Systems” segment and the “Mining, Forestry and Steel Products” segment and, accordingly, have been included in “Discontinued operations, net of tax,” in the Condensed Consolidated Statements of Income for all periods presented.

In connection with the sale, the Company entered into certain other agreements with LeTourneau including a facilities lease agreement, an employee services agreement, and an amendment to the construction contract for the Joe Douglas drilling rig currently under construction in Vicksburg, Mississippi, in order for the Company to direct the completion of construction, commissioning and delivery of such rig.  The lease and employee services agreements shall terminate at the earliest of (i) 120 days following completion of construction, (ii) one year following the Closing Date or (iii) the effective date of any other termination of the lease or employee services agreements pursuant to the agreements.  Costs incurred in connection with the facilities lease and employee services agreements will be capitalized as part of the cost of the rig.

Additionally, on July 19, 2011, the Company entered into an agreement to sell its land drilling services business for $510 million in cash, plus a working capital adjustment currently estimated to be approximately $30 million, and expects to recognize a gain on sale of approximately $200 million ($132 million, net of tax) upon closing, which is expected to occur in the third quarter of 2011.  The land drilling services business was previously a component of the Company's Drilling Services segment, and, accordingly, results of land drilling services have been reclassified to discontinued operations for all periods presented.

The following table sets forth the components of “Discontinued operations, net of tax,” for the three and six months ended June 30, 2011 and 2010 (in thousands):

	2011								2010
	Manufacturing			Drilling		Total			Manufacturing			Drilling		Total
Three months ended June 30:
Revenues	$	110,242		$	48,445	$	158,687		$	161,759		$	46,097	$	207,856
Pretax income (loss)	$	(3,113	)	$	3,770	$	657		$	4,725		$	4,240	$	8,965
Provision (benefit) for
taxes on income		2,295			1,379		3,674			(36	)		1,530		1,494
Income (loss) from discontinued
operations, net of tax		(5,408	)		2,391		(3,017	)		4,761			2,710		7,471
Pretax gain on sale of
discontinued operations		660,877			-		660,877			-			-		-
Provision for tax on gain on sale		236,404			-		236,404			-			-		-
Gain on sale of discontinued
operations, net of tax		424,473			-		424,473			-			-		-
Discontinued operations, net of tax	$	419,065		$	2,391	$	421,456		$	4,761		$	2,710	$	7,471

	2011							2010
	Manufacturing			Drilling		Total		Manufacturing			Drilling		Total
Six months ended June 30:
Revenues	$	224,488		$	92,514	$	317,002	$	263,180		$	88,581	$	351,761
Pretax income (loss)	$	(950	)	$	9,654	$	8,704	$	(32,518	)	$	6,273	$	(26,245	)
Provision (benefit) for
taxes on income		3,006			3,438		6,444		(11,647	)		2,242		(9,405	)
Income (loss) from discontinued
operations, net of tax		(3,956	)		6,216		2,260		(20,871	)		4,031		(16,840	)
Pretax gain on sale of
discontinued operations		660,877			-		660,877		-			-		-
Provision for tax on gain on sale		236,404			-		236,404		-			-		-
Gain on sale of discontinued
operations, net of tax		424,473			-		424,473		-			-		-
Discontinued operations, net of tax	$	420,517		$	6,216	$	426,733	$	(20,871	)	$	4,031	$	(16,840	)

During the first quarter of 2010, the Drilling Products and Systems Manufacturing segment performed an assessment of its Houston-based raw materials and supplies inventory.  As a result, the Company increased its inventory valuation reserve by approximately $42.0 million and recorded a corresponding charge to its operations during the period to reflect a reduction in the estimated realizable value of items that were deemed to be nonconforming or slow-moving.  Such amount is included in discontinued operations for manufacturing for the three and six months ended June 30, 2010.

The following assets and liabilities have been segregated and included in “Assets of discontinued operations” and “Liabilities of discontinued operations,” as appropriate, in the Condensed Consolidated Balance Sheets at June 30, 2011, and December 31, 2010 (in thousands):

	June 30, 2011						December 31, 2010
	Manufacturing		Drilling		Total		Manufacturing		Drilling		Total
Cash and cash equivalents	$	-	$	-	$	-	$	-	$	-	$	-
Receivables - trade and other		-		46,914		46,914		106,705		41,280		147,985
Inventories - raw materials and supplies		-		-		-		277,527		-		277,527
Inventories - work-in-progress		-		-		-		70,114		-		70,114
Inventories - finished goods		-		-		-		212		-		212
Prepaid expenses and other current assets		-		-		-		37,368		332		37,700
Property and equipment, net		-		299,994		299,994		137,624		311,291		448,915
Other assets		26,795		-		26,795		1,569		-		1,569
Assets of discontinued operations	$	26,795	$	346,908	$	373,703	$	631,119	$	352,903	$	984,022
Accounts payable - trade	$	-	$	5,452	$	5,452	$	44,223	$	5,876	$	50,099
Deferred revenues		20,122		1,479		21,601		143,950		1,748		145,698
Billings in excess of costs and estimated
profits on uncompleted contracts		-		-		-		7,915		-		7,915
Accrued compensation and related costs		-		2,587		2,587		20,217		2,738		22,955
Other current liabilities		10,600		1,227		11,827		47,737		3,607		51,344
Liabilities of discontinued operations	$	30,722	$	10,745	$	41,467	$	264,042	$	13,969	$	278,011

In connection with the sale of LeTourneau, the Company took ownership of a land rig that LeTourneau was constructing on behalf of a customer, plus a related customer deposit.  The Company is holding the asset for sale.  The asset and related deposit are classified as other assets and deferred revenues, respectively, at June 30, 2011, in the table above.

At June 30, 2011, estimated accrued transaction costs in connection with the sale of manufacturing operations totaled $10.6 million, which is classified as other current liabilities in the table above.