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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 September 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/2d235baabefbebd82e47aefc7d3a3255-tisi-20200930_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 30,627,882 shares of common stock, par value $0.30, outstanding as of October 30, 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)
 
September 30, 2020December 31, 2019
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$19,611 $12,175 
Accounts receivable, net of allowance of $9,633 and $9,990, respectively
214,361 245,617 
Inventory36,361 39,195 
Income tax receivable1,001 316 
Prepaid expenses and other current assets33,212 20,275 
Total current assets304,546 317,578 
Property, plant and equipment, net173,049 191,951 
Operating lease right-of-use assets62,082 67,048 
Intangible assets, net of accumulated amortization of $107,459 and $96,797, respectively
106,602 117,019 
Goodwill89,895 282,006 
Deferred income taxes5,167 5,189 
Other assets, net11,522 4,426 
Total assets$752,863 $985,217 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable42,022 41,636 
Current portion of long-term debt and finance lease obligations5,323 5,294 
Current portion of operating lease obligations16,977 17,100 
Other accrued liabilities64,517 86,506 
Total current liabilities128,839 150,536 
Long-term debt and finance lease obligations338,872 325,299 
Operating lease obligations50,598 54,436 
Defined benefit pension liability5,817 9,321 
Deferred income taxes3,893 6,996 
Other long-term liabilities11,344 1,959 
Total liabilities539,363 548,547 
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; 30,627,882 and 30,518,793 shares issued, respectively
9,183 9,153 
Additional paid-in capital412,727 409,034 
Retained earnings (deficit)(174,689)48,673 
Accumulated other comprehensive loss(33,721)(30,190)
Total equity213,500 436,670 
Total liabilities and equity$752,863 $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
September 30,
Nine Months Ended
September 30,
 2020201920202019
Revenues$219,093 $290,079 $645,236 $875,507 
Operating expenses155,388 207,044 466,669 631,928 
Gross margin63,705 83,035 178,567 243,579 
Selling, general and administrative expenses61,089 84,647 198,415 248,507 
Restructuring and other related charges, net319 228 3,365 436 
Goodwill impairment charge  191,788  
Operating income (loss)2,297 (1,840)(215,001)(5,364)
Interest expense, net7,757 7,647 21,847 22,658 
Other expense, net655 116 1,292 371 
Loss before income taxes(6,115)(9,603)(238,140)(28,393)
Less: Provision (benefit) for income taxes2,958 (2,546)(15,812)(3,210)
Net loss$(9,073)$(7,057)$(222,328)$(25,183)
Loss per common share:
Basic$(0.30)$(0.23)$(7.27)$(0.83)
Diluted$(0.30)$(0.23)$(7.27)$(0.83)
Weighted-average number of shares outstanding:
Basic30,628 30,300 30,599 30,267 
Diluted30,628 30,300 30,599 30,267 

See accompanying notes to unaudited condensed consolidated financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Net loss$(9,073)$(7,057)$(222,328)$(25,183)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment3,180 (2,954)(2,978)(473)
Foreign currency hedge(610)556 (627)651 
Other comprehensive income (loss), before tax2,570 (2,398)(3,605)178 
Tax (provision) benefit attributable to other comprehensive income (loss)(60)(148)74 112 
Other comprehensive income (loss), net of tax2,510 (2,546)(3,531)290 
Total comprehensive loss$(6,563)$(9,603)$(225,859)$(24,893)
 
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 
Net loss— — — (9,073)— (9,073)
Foreign currency translation adjustment, net of tax— — — — 2,970 2,970 
Foreign currency hedge, net of tax— — — — (460)(460)
Non-cash compensation— — 1,128 — — 1,128 
Net settlement of vested stock awards— — (1)— — (1)
Balance at September 30, 202030,628 $9,183 $412,727 $(174,689)$(33,721)$213,500 
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 
Net loss— — — (7,057)— (7,057)
Foreign currency translation adjustment, net of tax— — — — (3,014)(3,014)
Foreign currency hedge, net of tax— — — — 468 468 
Non-cash compensation— — 2,588 — — 2,588 
Net settlement of vested stock awards47 14 (439)— — (425)
Balance at September 30, 201930,340 $9,100 $408,837 $55,824 $(34,102)$439,659 

_________________
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)
 Nine Months Ended
September 30,
 20202019
Cash flows from operating activities:
Net loss$(222,328)$(25,183)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization34,709 36,700 
Amortization of deferred loan costs and debt discounts6,493 5,691 
Provision for doubtful accounts1,160 (440)
Foreign currency loss1,628 348 
Deferred income taxes(3,132)261 
Loss (gain) on asset disposal938 (137)
Goodwill impairment charge191,788  
Non-cash compensation cost4,073 8,670 
Other, net(3,248)(1,398)
Changes in operating assets and liabilities:
Accounts receivable22,147 4,384 
Inventory2,744 5,030 
Prepaid expenses and other current assets(6,000)(3,490)
Accounts payable4,718 4,537 
Other accrued liabilities(13,838)1,005 
Income taxes(1,687)(2,959)
Net cash provided by operating activities20,165 33,019 
Cash flows from investing activities:
Capital expenditures(16,684)(23,199)
Business acquisitions, net of cash acquired(1,013) 
Proceeds from disposal of assets198 802 
Other(53)38 
Net cash used in investing activities(17,552)(22,359)
Cash flows from financing activities:
Net borrowings (payments) under revolving credit agreement10,802 (64,886)
Borrowings (payments) under term loan(3,750)49,745 
Contingent consideration payments (428)
Debt issuance costs(1,841)(1,475)
Taxes paid related to net share settlement of share-based awards(350)(776)
Other(199)(230)
Net cash provided by (used in) financing activities4,662 (18,050)
Effect of exchange rate changes on cash and cash equivalents161 (630)
Net increase (decrease) in cash and cash equivalents7,436 (8,020)
Cash and cash equivalents at beginning of period12,175 18,288 
Cash and cash equivalents at end of period$19,611 $10,268 


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 5,500 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 will continue through the end 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 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 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 September 30, 2020 and December 31, 2019 is $196.1 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 nine months ended September 30, 2020 and 2019, are as follows (in thousands): 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
 (unaudited)(unaudited)(unaudited)(unaudited)
Weighted-average number of basic shares outstanding30,628 30,300 30,599 30,267 
Stock options, stock units and performance awards    
Convertible Senior Notes    
Total shares and dilutive securities30,628 30,300 30,599 30,267 
For both the three and nine months ended September 30, 2020 and 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 nine months ended September 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.
Reclassifications. Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have any effect on our financial condition or results of operations as previously reported.
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 our adoption of ASC 326 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
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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 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.
ASU No. 2020-06. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating certain separation models and will generally be reported as a single liability at its amortized cost. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The amendments in ASU 2020-06 are effective for this Company as of January 1, 2022 with the option to early adopt as of January 1, 2021. We are currently determining when we will elect to adopt as well as the impact this ASU will have on our financial statements.

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 nine months ended September 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
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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.
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 September 30, 2020Three Months Ended September 30, 2019
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal
Revenue:
IHT$94,414 $2,223 $96,637 $121,772 $4,607 $126,379 
MS73,204 28,534 101,738 101,929 33,696 135,625 
Quest Integrity12,382 8,336 20,718 18,370 9,705 28,075 
Total$180,000 $39,093 $219,093 $242,071 $48,008 $290,079 

Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal
Revenue:
IHT$277,947 $7,045 $284,992 $379,460 $12,633 $392,093 
MS217,189 81,888 299,077 296,557 105,491 402,048 
Quest Integrity35,967 25,200 61,167 57,376 23,990 81,366 
Total$531,103 $114,133 $645,236 $733,393 $142,114 $875,507 

Three Months Ended September 30, 2020
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$77,323 $ $12,667 $6,647 $96,637 
MS 101,032 221 485 101,738 
Quest Integrity20,718    20,718 
Total$98,041 $101,032 $12,888 $7,132 $219,093 

Three Months Ended September 30, 2019
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$102,448 $100 $16,500 $7,331 $126,379 
MS 134,096 382 1,147 135,625 
Quest Integrity28,075    28,075 
Total$130,523 $134,196 $16,882 $8,478 $290,079 
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Nine Months Ended September 30, 2020
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$226,693 $121 $37,583 $20,595 $284,992 
MS 295,741 896 2,440 299,077 
Quest Integrity61,167    61,167 
Total$287,860 $295,862 $38,479 $23,035 $645,236 

Nine Months Ended September 30, 2019
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$313,375 $598 $52,804 $25,316 $392,093 
MS 396,493 2,041 3,514 402,048 
Quest Integrity81,366    81,366 
Total$394,741 $397,091 $54,845 $28,830 $875,507 
For additional information on our reportable operating segments and geographic information, refer to Note 17.
Contract balances. The timing of revenue recognition, billings and cash collections results in trade accounts receivable, contract assets and contract liabilities on the consolidated balance sheets. Trade accounts receivable include billed and unbilled amounts currently due from customers and represent unconditional rights to receive consideration. The amounts due are stated at their net estimated realizable value. Refer to Notes 1 and 3 for additional information on the allowance for credit losses and our trade receivables. Contract assets include unbilled amounts typically resulting from sales under fixed-price contracts when the cost-to-cost method of revenue recognition is utilized, the revenue recognized exceeds the amount billed to the customer and the right to payment is conditional on something other than the passage of time. Amounts may not exceed their net realizable value. If we receive advances or deposits from our customers, a contract liability is recorded. Additionally, a contract liability arises if items of variable consideration result in less revenue being recorded than what is billed. Contract assets and contract liabilities are generally classified as current.
Trade accounts receivable, contract assets and contract liabilities consisted of the following (in thousands):
September 30, 2020December 31, 2019
(unaudited)
Trade accounts receivable, net