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Table of Content
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________ 
FORM 10-Q
(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-08604
https://cdn.kscope.io/8b30a7adf120f9b86c50cadefdc98bd8-tisi-20200630_g1.jpg
TEAM, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 74-1765729
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
13131 Dairy Ashford, Suite 600, Sugar Land, Texas
 77478
(Address of Principal Executive Offices) (Zip Code)
(281) 331-6154
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.30 par valueTISINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨     No  þ
The Registrant had 30,627,638 shares of common stock, par value $0.30, outstanding as of July 31, 2020.


Table of Content
INDEX
 
  Page No.

1

Table of Content
PART I—FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
June 30, 2020December 31, 2019
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$15,550  $12,175  
Accounts receivable, net of allowance of $9,951 and $9,990, respectively
195,522  245,617  
Inventory36,810  39,195  
Income tax receivable2,529  316  
Prepaid expenses and other current assets31,317  20,275  
Total current assets281,728  317,578  
Property, plant and equipment, net181,310  191,951  
Operating lease right-of-use assets61,505  67,048  
Intangible assets, net of accumulated amortization of $103,698 and $96,797, respectively
110,006  117,019  
Goodwill88,958  282,006  
Deferred income taxes5,881  5,189  
Other assets, net9,804  4,426  
Total assets$739,192  $985,217  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable43,377  41,636  
Current portion of long-term debt and finance lease obligations5,316  5,294  
Current portion of operating lease obligations17,055  17,100  
Other accrued liabilities67,735  86,506  
Total current liabilities133,483  150,536  
Long-term debt and finance lease obligations321,094  325,299  
Operating lease obligations49,665  54,436  
Defined benefit pension liability6,619  9,321  
Deferred income taxes2,694  6,996  
Other long-term liabilities6,701  1,959  
Total liabilities520,256  548,547  
Commitments and contingencies
Equity:
Preferred stock, 500,000 shares authorized, none issued
    
Common stock, par value $0.30 per share, 60,000,000 shares authorized; 30,627,638 and 30,518,793 shares issued, respectively
9,183  9,153  
Additional paid-in capital411,600  409,034  
Retained earnings (deficit)(165,616) 48,673  
Accumulated other comprehensive loss(36,231) (30,190) 
Total equity218,936  436,670  
Total liabilities and equity$739,192  $985,217  

See accompanying notes to unaudited condensed consolidated financial statements.
2

Table of Content

TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Revenues$189,304  $315,829  $426,143  $585,428  
Operating expenses131,928  221,232  311,281  424,884  
Gross margin57,376  94,597  114,862  160,544  
Selling, general and administrative expenses58,882  81,593  137,326  163,860  
Restructuring and other related charges, net2,860    3,046  208  
Goodwill impairment charge    191,788    
Operating income (loss)(4,366) 13,004  (217,298) (3,524) 
Interest expense, net7,314  7,586  14,090  15,011  
Other expense, net165  313  637  255  
Income (Loss) before income taxes(11,845) 5,105  (232,025) (18,790) 
Less: Provision (benefit) for income taxes1,683  (997) (18,770) (664) 
Net income (loss)$(13,528) $6,102  $(213,255) $(18,126) 
Income (Loss) per common share:
Basic$(0.44) $0.20  $(6.97) $(0.60) 
Diluted$(0.44) $0.20  $(6.97) $(0.60) 
Weighted-average number of shares outstanding:
Basic30,628  30,270  30,584  30,250  
Diluted30,628  30,467  30,584  30,250  

See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Content
TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Net income (loss)$(13,528) $6,102  $(213,255) $(18,126) 
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment3,583  672  (6,158) 2,481  
Foreign currency hedge(282) (184) (17) 95  
Other comprehensive income (loss), before tax3,301  488  (6,175) 2,576  
Tax (provision) benefit attributable to other comprehensive income (loss)319  329  134  260  
Other comprehensive income (loss), net of tax3,620  817  (6,041) 2,836  
Total comprehensive income (loss)$(9,908) $6,919  $(219,296) $(15,290) 
 
See accompanying notes to unaudited condensed consolidated financial statements.

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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(Unaudited)
Common StockAdditional
Paid-in
Capital
Retained
Earnings (Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
SharesAmount
Balance at December 31, 201930,519  $9,153  $409,034  $48,673  $(30,190) $436,670  
Adoption of new accounting principle, net of tax—  —  —  (1,034) —  (1,034) 
Net loss—  —  —  (199,727) —  (199,727) 
Foreign currency translation adjustment, net of tax—  —  —  —  (9,861) (9,861) 
Foreign currency hedge, net of tax—  —  —  —  200  200  
Non-cash compensation—  —  1,530  —  —  1,530  
Net settlement of vested stock awards109  30  (379) —  —  (349) 
Balance at March 31, 202030,628  $9,183  $410,185  $(152,088) $(39,851) $227,429  
Net loss—  —  —  (13,528) —  (13,528) 
Foreign currency translation adjustment, net of tax—  —  —  —  3,832  3,832  
Foreign currency hedge, net of tax—  —  —  —  (212) (212) 
Non-cash compensation—  —  1,415  —  —  1,415  
Balance at June 30, 202030,628  $9,183  $411,600  $(165,616) $(36,231) $218,936  
Balance at December 31, 201830,184  $9,053  $400,989  $81,450  $(34,392) $457,100  
Adoption of new accounting principle, net of tax—  —  —  (767) —  (767) 
Net loss—  —  —  (24,228) —  (24,228) 
Foreign currency translation adjustment, net of tax—  —  —  —  1,809  1,809  
Foreign currency hedge, net of tax—  —  —  —  210  210  
Non-cash compensation—  —  2,434  —  —  2,434  
Net settlement of vested stock awards63  19  (360) —  —  (341) 
Balance at March 31, 201930,247  $9,072  $403,063  $56,455  $(32,373) $436,217  
Net income—  —  —  6,102  —  6,102  
Foreign currency translation adjustment, net of tax—  —  —  —  1,005  1,005  
Foreign currency hedge, net of tax—  —  —  —  (188) (188) 
Non-cash compensation—  —  3,648  —  —  3,648  
Net settlement of vested stock awards46  14  (23) —  —  (9) 
Other1
—  —  —  324  —  324  
Balance at June 30, 201930,293  $9,086  $406,688  $62,881  $(31,556) $447,099  

_________________
1  Amount reflects a revision of tax effects for the adoption of ASC 842.


See accompanying notes to unaudited condensed consolidated financial statements.


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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Six Months Ended
June 30,
 20202019
Cash flows from operating activities:
Net loss$(213,255) $(18,126) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization23,186  24,650  
Amortization of deferred loan costs and debt discounts4,191  3,743  
Provision for doubtful accounts1,122  889  
Foreign currency loss876  234  
Deferred income taxes(5,177) 2,466  
Loss (gain) on asset disposal447  (188) 
Goodwill impairment charge191,788    
Non-cash compensation cost2,946  6,082  
Other, net(2,226) (1,196) 
Changes in operating assets and liabilities:
Accounts receivable36,033  3,534  
Inventory1,989  2,512  
Prepaid expenses and other current assets(3,750) (5,312) 
Accounts payable4,023  4,627  
Other accrued liabilities(12,992) (15,156) 
Income taxes(1,956) (3,189) 
Net cash provided by operating activities27,245  5,570  
Cash flows from investing activities:
Capital expenditures(12,486) (14,396) 
Business acquisitions, net of cash acquired(1,013)   
Proceeds from disposal of assets181  782  
Other54  89  
Net cash used in investing activities(13,264) (13,525) 
Cash flows from financing activities:
Net borrowings (payments) under revolving credit agreement(5,198) 3,341  
Payments under term loan(2,500)   
Contingent consideration payments  (428) 
Debt issuance costs on Credit Facility(1,841)   
Taxes paid related to net share settlement of share-based awards(349) (351) 
Other(129) (121) 
Net cash provided by (used in) financing activities(10,017) 2,441  
Effect of exchange rate changes on cash and cash equivalents(589) (24) 
Net increase (decrease) in cash and cash equivalents3,375  (5,538) 
Cash and cash equivalents at beginning of period12,175  18,288  
Cash and cash equivalents at end of period$15,550  $12,750  


See accompanying notes to unaudited condensed consolidated financial statements.
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TEAM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Description of business. Unless otherwise indicated, the terms “Team, Inc.,” “Team,” “the Company,” “we,” “our” and “us” are used in this report to refer to Team, Inc., to one or more of its consolidated subsidiaries or to all of them taken as a whole.
We are a global leading provider of integrated, digitally-enabled asset performance assurance and optimization solutions. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our client’s most critical assets. We conduct operations in three segments, Inspection and Heat Treating (“IHT”), Mechanical Services (“MS”) and Quest Integrity. Through the capabilities and resources in these three segments, we believe that Team is uniquely qualified to provide integrated solutions involving in their most basic form: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the client’s election. In addition, we are capable of escalating with the client’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that Team is unique in its ability to provide services in three distinct client demand profiles: (i) turnaround or project services, (ii) call-out services and (iii) nested or run-and-maintain services.
IHT provides integrity management and performance solutions, conventional and advanced non-destructive testing (“NDT”) services, heat treating and thermal services, tank management solutions, and pipeline integrity solutions, as well as associated engineering and condition assessment services. These services can be offered while facilities are running (on-stream), during facility turnarounds or during new construction or expansion activities.
MS provides machining, bolting, and vapor barrier weld testing services, hot tap and line intervention services, valve management solutions, and emission control services primarily as call-out and turnaround services under both on-stream and off-line/shut down circumstances. On-stream services offered by MS represent the services offered while plants are operating and under pressure. Turnaround services are project-related and demand is a function of the number and scope of scheduled and unscheduled facility turnarounds as well as new industrial facility construction or expansion activities.
Quest Integrity provides integrity and reliability management solutions for the process, pipeline and power sectors. These solutions encompass three broadly-defined disciplines including highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software; advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support; and advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.
We offer these services globally through approximately 200 locations in more than 20 countries throughout the world with approximately 5,700 employees. We market our services to companies in a diverse array of heavy industries which include:
Energy (refining, power, renewables, nuclear and liquefied natural gas);
Manufacturing and Process (chemical, petrochemical, pulp and paper industries, manufacturing, automotive and mining);
Midstream and Others (valves, terminals and storage, pipeline and offshore oil and gas);
Public Infrastructure (amusement parks, bridges, ports, construction and building, roads, dams and railways); and
Aerospace and Defense.
Our stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “TISI”.
Recent Developments.  In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States and the rest of the world. The COVID-19 pandemic and related economic repercussions have created significant volatility and uncertainty in domestic and international markets.  Additionally, oil demand has significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus.  Further, other macroeconomic events such as the geopolitical tensions between the Organization of the Petroleum Exporting Countries (OPEC) and Russia, resulted in a significant drop in oil prices. Although oil prices have since seen a recovery, this price volatility undermines our client’s confidence in terms of project planning and execution. As such, these negative factors have created significant volatility and
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uncertainty in the markets in which we operate and, as a result, certain clients have responded with capital spending budget cuts, cost cutting measures, personnel layoffs, limited facility access, and facility closures among other actions.
Though the impact of COVID-19 and the decline in crude oil prices on our operations has varied by geographic conditions and applicable government mandates, it has adversely affected our workforce and operations, as well as the operations of our clients, suppliers and contractors. Global oil demand is recovering, driven by gasoline and diesel while jet fuel remains suppressed, however, all three refined products collectively remain below 2019 levels. The ultimate duration and impact on our global operations is presently unclear. Furthermore, the extent to which we or our clients may successfully mitigate the impact of COVID-19 and the decline in the oil and gas industry, if at all, is not presently known. We expect that our results of operations in future periods may continue to be adversely impacted due to the factors noted above.  To successfully navigate through this unprecedented period, we continue to focus on the following key priorities:
the safety of our employees and business continuity;
decisive and aggressive actions taken to align our business with the current and near-term decrease in demand for our services; and
our end market revenue diversification strategy.
To respond to the economic downturn resulting from the COVID-19 pandemic and the drop in oil prices, we initiated a cost reduction and efficiency program. All named executive officers have voluntarily taken temporary salary reductions ranging from 15% to 20% of their base salary. In addition, we instituted a reduction for certain other salaried employees, at lower percentages, and suspended our voluntary match under the executive deferred compensation retirement plan and our 401(k) plan. Further, our board of directors voluntarily agreed to a 20% reduction of their cash compensation. These reductions were effective during the second quarter of 2020 and into the third quarter of 2020.
On March 27, 2020, in response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020. Based on our evaluation of the CARES Act, we qualified for certain provisions of income tax relief and the deferral of certain payroll tax payments. Additionally, other governments in jurisdictions where the we operate passed legislation to provide employers with wage subsidy grants and deferral of certain payroll related expenses and tax payments. Most notably was the Canada Emergency Wage Subsidy (“CEWS”) which helps employers offset a portion of their employee salaries and wages for a limited period. We elected to treat qualified government subsidies from Canada and other governments as offsets to the related operating expenses.
For additional risks relating to the COVID-19 pandemic and its impact on us and our oil and gas industry clients, see Part II, Item 1A “Risk Factors” of this report.
Basis for presentation. These interim condensed consolidated financial statements are unaudited, but in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. The condensed consolidated balance sheet at December 31, 2019 is derived from the December 31, 2019 audited consolidated financial statements. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain disclosures have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 16, 2020 (“the 2019 Form 10-K”).
Use of estimates. Our accounting policies conform to Generally Accepted Accounting Principles in the United States (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for workers’ compensation, auto, medical and general liability, (4) establishing an allowance for uncollectible accounts receivable, (5) estimating the useful lives of our assets, (6) assessing future tax exposure and the realization of tax assets, (7) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans and (8) managing our foreign currency risk with certain debt obligations associated with net investments in foreign operations.
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Fair value of financial instruments. Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations. The carrying amount of cash, cash equivalents, accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our banking facility is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the banking facility. The fair value of our convertible senior notes as of June 30, 2020 and December 31, 2019 is $146.3 million and $241.7 million, respectively, (inclusive of the fair value of the conversion option) and is a “Level 2” (as defined in Note 13) measurement, determined based on the observed trading price of these instruments.
Concentration of credit risk. No single customer accounts for more than 10% of consolidated revenues.
Earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to Team shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) available to Team shareholders by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of share-based compensation using the treasury stock method and (3) the dilutive effect of the assumed conversion of our convertible senior notes under the treasury stock method. Our intent is to settle the principal amount of the convertible senior notes in cash upon conversion. If the conversion value exceeds the principal amount, we may elect to deliver shares of our common stock with respect to the remainder of our conversion obligation in excess of the aggregate principal amount (the “conversion spread”). Accordingly, the conversion spread is included in the denominator for the computation of diluted earnings per common share using the treasury stock method.

Amounts used in basic and diluted earnings (loss) per share, for the three and six months ended June 30, 2020 and 2019, are as follows (in thousands): 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
 (unaudited)(unaudited)(unaudited)(unaudited)
Weighted-average number of basic shares outstanding30,628  30,270  30,584  30,250  
Stock options, stock units and performance awards  197      
Convertible Senior Notes        
Total shares and dilutive securities30,628  30,467  30,584  30,250  
For both the three and six months ended June 30, 2020 and six months ended June 30, 2019, all outstanding share-based compensation awards were excluded from the calculation of diluted loss per share because their inclusion would be antidilutive due to the net loss in those periods. Also, for both the three and six months ended June 30, 2020 and 2019, the convertible senior notes were excluded from diluted loss per share because the conversion price exceeded the average price of our common stock during those periods. For information on our convertible senior notes and our share-based compensation awards, refer to Note 10 and Note 14, respectively.
Newly Adopted Accounting Principles
Topic 326 - Credit Losses. In June 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses, which established ASC Topic 326, Credit Losses (“ASC 326”). Along with subsequent ASUs to clarify certain provisions, ASC 326 introduced a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets measured at amortized cost, including trade accounts receivable.
We adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts are reported in accordance with previously applicable GAAP based on incurred credit losses. The cumulative effect of adoption on January 1, 2020 resulted in a $1.0 million decrease, net of tax, to beginning retained earnings on our consolidated balance sheet. Refer to Note 3 for further discussion of ASC 326.
ASU No. 2018-15. In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), that requires implementation costs incurred in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized in a software licensing arrangement under the internal-use software guidance in Topic 350. ASU 2018-15 requires an entity to disclose the nature of its
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hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. Our adoption of ASU No. 2018-15 as of January 1, 2020 resulted in a reduction of $4.9 million from property, plant, and equipment with $0.9 million reclassified to other current assets and $4.0 million reclassified to other non-current assets on our consolidated balance sheet.
Accounting Principles Not Yet Adopted
ASU No. 2019-12. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, that simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes as well as clarifies aspects of existing guidance to promote more consistent application. ASU 2019-12 clarifies and amends existing guidance related to intraperiod tax allocation and calculations, recognition of deferred taxes for change in ownership group, evaluation of a step-up in the tax basis of goodwill and other clarifications. We are currently evaluating the impact this ASU will have on our financial statements and we plan to adopt it as of January 1, 2021.
ASU No. 2020-04. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently determining whether we will elect the optional expedients as well as evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows.

2. REVENUE
In accordance with ASC 606, Revenue from Contracts with Customers, we follow a five-step process to recognize revenue: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations, and (5) recognize revenue when the performance obligations are satisfied.
The majority of our contracts with customers are short-term in nature and billed on a time and materials basis, while certain other contracts are at a fixed price. Certain contracts may contain a combination of fixed and variable elements. We act as a principal and have performance obligations to provide the service itself or oversee the services provided by any subcontractors. Revenue is measured based on consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties, such as taxes assessed by governmental authorities. In contracts where the amount of consideration is variable, we consider our experience with similar contracts in estimating the amount to which we will be entitled and recognize revenues accordingly. As most of our contracts contain only one performance obligation, the allocation of a contract’s transaction price to multiple performance obligations is generally not applicable. Customers are generally billed as we satisfy our performance obligations and payment terms typically range from 30 to 90 days from the invoice date. Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require advance customer payment. Our contracts do not include significant financing components since the contracts typically span less than one year. Contracts generally include an assurance type warranty clause to guarantee that the services comply with agreed specifications. The warranty period typically is 12 months or less from the date of service. Warranty expenses were not material for the three and six months ended June 30, 2020 and 2019.
Revenue is recognized as (or when) the performance obligations are satisfied by transferring control over a service or product to the customer. Revenue recognition guidance prescribes two recognition methods (over time or point in time). Most of our performance obligations qualify for recognition over time because we typically perform our services on customer facilities or assets and customers receive the benefits of our services as we perform. Where a performance obligation is satisfied over time, the related revenue is also recognized over time using the method deemed most appropriate to reflect the measure of progress and transfer of control. For our time and materials contracts, we are generally able to elect the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date. For our fixed price contracts, we typically recognize revenue using the cost-to-cost method, which measures the extent of progress towards completion based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Under this method, revenue is recognized proportionately as costs are incurred. For contracts where control is transferred at a point in time, revenue is recognized at the time control of the asset is transferred to the customer, which is typically upon delivery and acceptance by the customer.
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Disaggregation of revenue. Essentially all of our revenues are associated with contracts with customers. A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below (in thousands):
Three Months Ended June 30, 2020Three Months Ended June 30, 2019
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal
Revenue:
IHT$78,234  $2,240  $80,474  $134,068  $4,590  $138,658  
MS67,403  25,417  92,820  107,176  37,721  144,897  
Quest Integrity10,748  5,262  16,010  24,649  7,625  32,274  
Total$156,385  $32,919  $189,304  $265,893  $49,936  $315,829  

Six Months Ended June 30, 2020Six Months Ended June 30, 2019
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal