National Oilwell Varco 2010 Annual Report Download - page 79

Purchase Price Allocation
Under the purchase method of accounting, the total purchase price was allocated to Grant Pridecos net tangible and identifiable intangible assets
based on their fair values as of April 21, 2008. The excess of the purchase price over the net tangible and identifiable intangible assets was
recorded as goodwill. The following table, set forth below, displays the total purchase price allocated to Grant Pridecos net tangible and
identifiable intangible assets based on their fair values as of April 21, 2008 (in millions):
Cash and cash equivalents $ 171
Receivables 420
Assets held for sale, net 784
Inventories 611
Prepaid and other current assets 210
Property, plant and equipment 392
Goodwill 2,775
Intangibles 3,696
Investment in unconsolidated affiliate 512
Other assets 98
Accounts payable and accrued liabilities (316)
Accrued income taxes (627)
Long-term debt (176)
Deferred income taxes (1,305)
Minority interest (25)
Other liabilities (21)
Total purchase price $ 7,199
Under purchase accounting, a fair value step up adjustment of $89 million was made to inventory and was charged to Cost of sales as the
applicable inventory sold. Cost of sales included $89 million of these inventory charges for the year ended December 31, 2008.
Additionally, the Company identified other intangible assets associated with tradenames, patents, and customer relationships, and the fair values
assigned were $1.2 billion, $0.3 billion, and $2.2 billion, respectively. The initial range of useful lives associated with trade names, patents, and
customer relationships were 40 years to an indefinite life, 5 to 15 years and 16 to 17 years, respectively. Of the $1.2 billion associated with trade
names, $0.8 billion was initially identified as having an indefinite life.
Disposition of Certain Grant Prideco Businesses
Prior to the Merger, Grant Prideco had entered into a definitive Purchase and Sale Agreement with Vallourec S.A. and Vallourec & Mannesman
Holdings, Inc. (collectively referred to as Vallourec) to sell four of its tubular businesses for approximately $800 million in cash, subject to
final working capital adjustments and standard closing conditions (including regulatory approval). The transaction closed May 16, 2008. The
amount included in Assets held for sale, net included in the preliminary purchase price allocation above, relates to this disposition.
Additionally, $256 million is included above in Accrued income taxes for taxes related to the disposition.
Unaudited Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of operations of National Oilwell Varco and Grant
Prideco, on a pro forma basis, as though the companies had been combined as of the beginning of 2008. The pro forma financial information is
presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the merger had
taken place at the beginning of 2008. The pro forma financial information for the year ended December 31, 2008 includes the business
combination accounting effect on historical Grant Prideco revenues, adjustments to depreciation on acquired property, amortization charges from
acquired intangible assets, financing costs on new debt in connection with the merger and related tax effects for the year ended December 31,
2008 (in millions, except per share data):
Total revenues $ 14,035
Net income attributable to Company $ 2,080
Basic net income attributable to Company per share $ 5.02
Diluted net income attributable to Company per share $ 4.99
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