Baker Hughes 2004 Annual Report Download - page 97

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Note฀2.฀Discontinued฀Operations
In฀September฀2004,฀we฀completed฀the฀sale฀of฀Baker฀
Hughes฀Mining฀Tools฀(“BHMT”),฀a฀product฀line฀group฀within฀
the฀Oilfield฀segment฀that฀manufactured฀rotary฀drill฀bits฀used฀
in฀the฀mining฀industry,฀for฀$31.5฀million.฀We฀recorded฀a฀gain฀
on฀the฀sale฀of฀$0.2฀million,฀net฀of฀tax฀of฀$3.6฀million,฀which฀
consisted฀of฀a฀gain฀on฀the฀disposal฀of฀$6.8฀million฀offset฀by฀a฀
loss฀of฀$6.6฀million฀related฀to฀the฀recognition฀of฀the฀cumula-
tive฀foreign฀currency฀translation฀adjustments฀into฀earnings.
In฀October฀2003,฀we฀signed฀a฀definitive฀agreement฀for฀
the฀sale฀of฀BIRD฀Machine฀(“BIRD”),฀the฀remaining฀division฀of฀
the฀former฀Process฀segment,฀and฀recorded฀charges฀totaling฀
$37.4฀million,฀net฀of฀tax฀of฀$10.9฀million,฀which฀consisted฀of฀
a฀loss฀of฀$13.5฀million฀on฀the฀write-down฀of฀BIRD฀to฀fair฀value,฀
$6.2฀million฀of฀severance฀and฀warranty฀accruals฀and฀a฀loss฀of฀
$17.7฀million฀related฀to฀the฀recognition฀of฀cumulative฀foreign฀
currency฀translation฀adjustments฀into฀earnings.฀In฀January฀
2004,฀we฀completed฀the฀sale฀of฀BIRD฀and฀recorded฀an฀addi-
tional฀loss฀on฀the฀sale฀of฀$0.5฀million฀with฀no฀tax฀benefit.฀We฀
received฀$5.6฀million฀in฀proceeds,฀which฀were฀subject฀to฀post-
closing฀adjustments฀to฀the฀purchase฀price,฀and฀retained฀certain฀
accounts฀receivable,฀inventories฀and฀other฀assets.฀During฀the฀
second฀quarter฀of฀2004,฀we฀made฀a฀net฀payment฀of฀$6.8฀mil-
lion฀to฀the฀buyer฀in฀settlement฀of฀the฀final฀purchase฀price฀
adjustments.฀The฀adjustments฀were฀the฀result฀of฀changes฀in฀
the฀value฀of฀assets฀sold฀to฀and฀liabilities฀assumed฀by฀the฀buyer฀
between฀the฀date฀the฀initial฀sales฀price฀was฀negotiated฀and฀the฀
closing฀of฀the฀sale.
In฀December฀2002,฀we฀entered฀into฀exclusive฀negotiations฀
for฀the฀sale฀of฀our฀interest฀in฀our฀oil฀producing฀operations฀in฀
West฀Africa฀for฀$32.0฀million฀in฀proceeds.฀The฀transaction฀was฀
effective฀as฀of฀January฀1,฀2003,฀and฀resulted฀in฀a฀gain฀on฀the฀
sale฀of฀$4.1฀million,฀net฀of฀a฀tax฀benefit฀of฀$0.2฀million.฀We฀
received฀$10.0฀million฀as฀a฀deposit฀in฀2002฀and฀the฀remaining฀
$22.0฀million฀in฀April฀2003.
In฀November฀2002,฀we฀sold฀EIMCO฀Process฀Equipment฀
(“EIMCO”),฀a฀division฀of฀the฀former฀Process฀segment,฀and฀
recorded฀a฀loss฀on฀the฀disposal฀of฀$22.3฀million,฀net฀of฀tax฀of฀
$1.2฀million,฀which฀consisted฀of฀a฀loss฀of฀$2.3฀million฀on฀the฀
write-down฀to฀fair฀value฀and฀a฀loss฀of฀$20.0฀million฀related฀
to฀the฀recognition฀of฀cumulative฀foreign฀currency฀translation฀
adjustments฀into฀earnings.฀We฀received฀total฀proceeds฀of฀
$48.9฀million,฀of฀which฀$4.9฀million฀was฀held฀in฀escrow฀pending฀
completion฀of฀final฀adjustments฀to฀the฀purchase฀price.฀In฀2003,฀
all฀purchase฀price฀adjustments฀were฀completed,฀resulting฀in฀the฀
release฀of฀the฀escrow฀balance,฀of฀which฀we฀received฀$2.0฀mil-
lion฀and฀$2.9฀million฀was฀returned฀to฀the฀buyer.฀In฀2003,฀we฀
also฀recorded฀an฀additional฀loss฀on฀the฀sale฀due฀to฀purchase฀
price฀adjustments฀of฀$2.5฀million,฀net฀of฀tax฀of฀$1.3฀million.
We฀have฀reclassified฀the฀consolidated฀financial฀statements฀
for฀all฀prior฀periods฀presented฀to฀reflect฀these฀operations฀as฀
discontinued.฀฀Summarized฀financial฀information฀from฀discon-
tinued฀operations฀is฀as฀follows฀for฀the฀years฀ended฀December฀31:
฀ 2004฀ 2003฀ 2002
Revenues:฀
฀ ฀ BHMT฀ $฀ 29.4฀ $฀ 40.4฀ $฀ 41.5฀
฀ ฀ BIRD฀ ฀ 1.6฀ ฀ 94.2฀ ฀ 118.7฀
฀ ฀ Oil฀producing฀operations฀฀ ฀ –฀ ฀ 4.2฀ ฀ 49.1฀
฀ ฀ EIMCO฀ ฀ –฀ ฀ –฀ ฀ 138.0
Total฀ $฀ 31.0฀ $฀ 138.8฀ $฀ 347.3
Income฀(loss)฀before฀฀
฀ income฀taxes:฀
฀ ฀ BHMT฀ $฀ 1.1฀ $฀ 3.5฀ $฀ 2.8฀
฀ ฀ BIRD฀ ฀ (0.2)฀ ฀ (16.9)฀ ฀ (9.1)฀
฀ ฀ Oil฀producing฀operations฀฀ ฀ –฀ ฀ 1.8฀ ฀ 19.7฀
฀ ฀ EIMCO฀ ฀ –฀ ฀ –฀ ฀ (1.5)
Total฀ ฀ 0.9฀ ฀ (11.6)฀ ฀ 11.9
Income฀taxes:฀
฀ ฀ BHMT฀ ฀ (0.3)฀ ฀ (1.3)฀ ฀ (1.0)฀
฀ ฀ BIRD฀ ฀ 0.1฀ ฀ 6.0฀ ฀ 3.2฀
฀ ฀ Oil฀producing฀operations฀฀ ฀ –฀ ฀ (0.7)฀ ฀ (8.7)฀
฀ ฀ EIMCO฀ ฀ –฀ ฀ –฀ ฀ 0.5
Total฀ ฀ (0.2)฀ ฀ 4.0฀ ฀ (6.0)
Income฀(loss)฀before฀฀
฀ gain฀(loss)฀on฀disposal:฀
฀ ฀ BHMT฀ ฀ 0.8฀ ฀ 2.2฀ ฀ 1.8฀
฀ ฀ BIRD฀ ฀ (0.1)฀ ฀ (10.9)฀ ฀ (5.9)฀
฀ ฀ Oil฀producing฀operations฀฀ ฀ –฀ ฀ 1.1฀ ฀ 11.0฀
฀ ฀ EIMCO฀ ฀ –฀ ฀ –฀ ฀ (1.0)
Total฀ ฀ (0.7)฀ ฀ (7.6)฀ ฀ 5.9
Gain฀(loss)฀on฀disposal,฀฀
฀ net฀of฀tax:฀ ฀ ฀ ฀ ฀ ฀ ฀
฀ ฀ BHMT฀ ฀ 0.2฀ ฀ –฀ ฀ –฀
฀ ฀ BIRD฀ ฀ (0.5)฀ ฀ (37.4)฀ ฀ –฀
฀ ฀ Oil฀producing฀operations฀฀ ฀ –฀ ฀ 4.1฀ ฀ –฀
฀ ฀ EIMCO฀ ฀ –฀ ฀ (2.5)฀ ฀ (22.3)
Total฀ ฀ (0.3)฀ ฀ (35.8)฀ ฀ (22.3)
Income฀(loss)฀from฀฀
฀ discontinued฀operations฀ $฀ 0.4฀ $฀ (43.4)฀ $฀ (16.4)
2004฀Form฀10-K฀฀฀฀฀47