0000318833-21-000018 | 10-K | XBRL Viewer

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Cover - USD ($) $ in Millions	12 Months Ended
Cover - USD ($) $ in Millions	Dec. 31, 2020	Mar. 08, 2021	Jun. 30, 2020
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Entity File Number	001-08604
Entity Registrant Name	TEAM, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	74-1765729
Entity Address, Address Line One	13131 Dairy Ashford
Entity Address, Address Line Two	Suite 600
Entity Address, City or Town	Sugar Land
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77478
City Area Code	281
Local Phone Number	331-6154
Title of 12(b) Security	Common Stock, $0.30 par value
Trading Symbol	TISI
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Entity Central Index Key	0000318833
Current Fiscal Year End Date	--12-31
Entity Public Float			$ 121
Entity Common Stock, Shares Outstanding		30,874,250
Documents Incorporated by Reference	Portions of our Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.

Consolidated Balance Sheets - USD ($)
$ in Thousands

Dec. 31, 2020

Dec. 31, 2019

Current assets:

Cash and cash equivalents

$ 24,586

$ 12,175

Receivables, net of allowance of $9,918 and $9,990

194,066

245,617

^[1]

Inventory

36,854

39,195

Income tax receivable

1,474

316

Prepaid expenses and other current assets

26,752

20,275

Total current assets

283,732

317,578

Property, plant and equipment, net

170,309

191,951

Intangible assets, net of accumulated amortization of $111,318 and $96,797

103,282

117,019

Operating lease right-of-use assets

63,869

67,048

Goodwill

91,351

282,006

Other assets, net

11,642

4,426

Deferred income taxes

6,790

5,189

Total assets

730,975

985,217

Current liabilities:

Current portion of long-term debt and finance lease obligations

337

5,294

Current portion of operating lease obligations

17,375

17,100

Accounts payable

42,148

41,636

Other accrued liabilities

73,144

86,506

Total current liabilities

133,004

150,536

Deferred income taxes

4,375

6,996

Long-term debt and finance lease obligations

312,159

325,299

Operating lease obligations

52,207

54,436

Defined benefit pension liability

5,282

9,321

Other long-term liabilities

9,345

1,959

Total liabilities

516,372

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; 30,874,437 and 30,518,793 shares issued

9,257

9,153

Additional paid-in capital

422,589

409,034

Retained earnings (accumulated deficit)

(189,565)

48,673

Accumulated other comprehensive loss

(27,678)

(30,190)

Total equity

214,603

436,670

Total liabilities and equity

$ 730,975

$ 985,217

[1]	Includes billed and unbilled amounts, net of allowance for credit losses. See Note 3 for details.

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Receivables, allowance	$ 9,918	$ 9,990
Intangible assets, accumulated amortization	$ 111,318	$ 96,797
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Common stock, par value, in USD per share	$ 0.30	$ 0.30
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	30,874,437	30,518,793

Consolidated Statements of Operations - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2020

Dec. 31, 2019

Dec. 31, 2018

Income Statement [Abstract]

Revenues

^[1]

$ 852,539

$ 1,163,314

$ 1,246,929

Operating expenses

613,828

835,570

918,673

Gross margin

238,711

327,744

328,256

Selling, general and administrative expenses

260,920

328,214

360,692

Restructuring and other related charges, net (see Note 16)

3,365

1,676

6,727

Gain on revaluation of contingent consideration

(202)

Goodwill impairment charge (see Note 7)

191,788

Operating loss

(217,362)

(2,146)

(38,961)

Interest expense, net

(29,818)

(29,713)

(30,875)

Loss on convertible debt embedded derivative (see Note 10)

(24,783)

Loss on debt extinguishment and modification

(2,224)

(279)

Other income (expense), net

(2,514)

(715)

410

Loss before income taxes

(251,918)

(32,853)

(94,209)

Benefit for income taxes (see Note 9)

14,715

436

31,063

Net loss

$ (237,203)

$ (32,417)

$ (63,146)

Loss per common share:

Net income (loss) (in USD per share)

$ (7.74)

$ (1.07)

$ (2.10)

[1]	Revenues attributable to individual countries/geographic areas are based on the country of domicile of the legal entity that performs the work.

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (237,203)	$ (32,417)	$ (63,146)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment	3,697	3,865	(9,241)
Foreign currency hedge	(1,198)	282	658
Defined benefit pension plans
Net actuarial gain (loss) arising during period	0	(421)	109
Settlement cost during period	0	226	0
Prior service cost arising during period	0	0	(669)
Amortization of prior service cost	0	33	0
Amortization of net actuarial (gain) loss	0	0	(78)
Other comprehensive income (loss)	2,499	3,985	(9,221)
Tax (provision) benefit attributable to other comprehensive income (loss)	13	217	(3,045)
Other comprehensive income (loss), net of tax	2,512	4,202	(12,266)
Total comprehensive loss	$ (234,691)	$ (28,215)	$ (75,412)

Consolidated Statements Of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-in Capital	Retained Earnings (Deficit)	Retained Earnings (Deficit) Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjustment
Beginning balance at Dec. 31, 2017	$ 477,174	$ 6,780	$ 8,984	$ 352,500	$ 135,486	$ 9,110	$ (19,796)	$ (2,330)
Beginning balance (in shares) at Dec. 31, 2017			29,953
Net loss	(63,146)				(63,146)
Foreign currency translation adjustment, net of tax	(12,164)						(12,164)
Foreign currency hedge, net of tax	496						496
Defined benefit pension plans, net of tax	(598)						(598)
Reclassification of convertible debt embedded derivative, net of tax	37,698			37,698
Non-cash compensation	12,256			12,256
Vesting of stock awards (in shares)			231
Vesting of stock awards	(1,396)		$ 69	(1,465)
Ending balance at Dec. 31, 2018	457,100	(360)	$ 9,053	400,989	81,450	(360)	(34,392)
Ending balance (in shares) at Dec. 31, 2018			30,184
Net loss	(32,417)				(32,417)
Foreign currency translation adjustment, net of tax	4,258						4,258
Foreign currency hedge, net of tax	213						213
Defined benefit pension plans, net of tax	(269)						(269)
Non-cash compensation	10,055			10,055
Vesting of stock awards (in shares)			335
Vesting of stock awards	(1,910)		$ 100	(2,010)
Ending balance at Dec. 31, 2019	436,670	$ (1,035)	$ 9,153	409,034	48,673	$ (1,035)	(30,190)
Ending balance (in shares) at Dec. 31, 2019			30,519
Net loss	(237,203)				(237,203)
Foreign currency translation adjustment, net of tax	3,359			2			3,357
Foreign currency hedge, net of tax	(904)						(904)
Defined benefit pension plans, net of tax	59						59
Non-cash compensation	6,307			6,307
Vesting of stock awards (in shares)			355
Vesting of stock awards	(989)		$ 104	(1,093)
Extinguishment of convertible debt	(14,044)			(14,044)
Issuance of warrant, net	22,383			22,383
Ending balance at Dec. 31, 2020	$ 214,603		$ 9,257	$ 422,589	$ (189,565)		$ (27,678)
Ending balance (in shares) at Dec. 31, 2020			30,874

Consolidated Statements of Cash Flows - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2020

Dec. 31, 2019

Dec. 31, 2018

Cash flows from operating activities:

Net loss

$ (237,203)

$ (32,417)

$ (63,146)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

45,908

49,059

64,862

Loss on debt extinguishment and modification

2,224

279

Amortization of debt issuance costs and debt discount

8,829

7,695

7,022

Allowance for credit losses

1,612

(2,573)

11,662

Foreign currency loss

2,758

494

1,712

Deferred income taxes

(3,974)

3,795

(31,734)

(Gain) loss on asset disposal

1,161

(187)

(552)

Loss on convertible debt embedded derivative (see Note 10)

24,783

Goodwill impairment charge

191,788

Non-cash compensation cost

6,307

10,055

12,256

Other, net

(3,994)

(2,409)

(3,964)

Changes in operating assets and liabilities:

Accounts receivable

46,147

27,194

15,386

Inventory

2,702

9,551

(21)

Prepaid expenses and other current assets

(210)

494

6,933

Increase (decrease) (net of the effects of acquisitions):

Accounts payable

3,782

(5,356)

(8,994)

Other accrued liabilities

(12,798)

(8,378)

9,168

Income taxes

(2,275)

1,540

(3,514)

Net cash provided by operating activities

52,764

58,836

41,859

Cash flows from investing activities:

Capital expenditures

^[1]

(19,958)

(29,035)

(27,164)

Business acquisitions, net of cash acquired

(1,013)

Proceeds from disposal of assets

2,645

934

2,580

Other

(443)

Net cash used in investing activities

(18,301)

(28,101)

(25,027)

Cash flows from financing activities:

Net payments under Credit Facility revolver

(76,638)

(82,396)

(19,690)

Borrowings under ABL Facility

44,000

Payments under ABL Facility

(35,000)

Borrowings (payments) under Credit Facility term loan, net of debt discount

(50,000)

49,745

Borrowings under Term Loan, net of discount

242,500

Repurchase of convertible debt

(135,501)

Contingent consideration payments

(428)

(1,106)

Payments for debt issuance costs

(9,113)

(1,524)

(855)

(990)

(1,911)

(1,390)

Payments for debt extinguishment and equity reacquisition costs

(2,447)

Other

(272)

(291)

Net cash used in financing activities

(23,461)

(36,805)

(23,041)

Effect of exchange rate changes on cash

1,409

(43)

(2,055)

Net increase (decrease) in cash and cash equivalents

12,411

(6,113)

(8,264)

Cash and cash equivalents at beginning of period

12,175

18,288

26,552

Cash and cash equivalents at end of period

24,586

12,175

18,288

Cash paid (refunded) during the year for:

Interest

23,623

22,697

24,924

Income taxes

$ (9,996)

$ (3,536)

$ 2,720

[1]	Excludes accrued capital expenditures for the twelve months ended December 31, 2020, 2019 and 2018.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Description of Business. Unless otherwise indicated, the terms “we,” “our” and “us” are used in this report to refer to either Team, Inc., to one or more of our 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 clients’ 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 we are uniquely qualified to provide integrated solutions involving: 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 we are unique in our 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 conventional and advanced non-destructive testing (“NDT”) services primarily for the process, pipeline and power sectors, pipeline integrity management services, and field heat treating services, 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 solutions designed to serve clients’ unique needs during both the operational (onstream) and off-line states of their assets. Our onstream services include our range of standard to custom-engineered leak repair and composite solutions; emissions control and compliance; hot tapping and line stopping; and on-line valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes client production time. Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns. Our specialty maintenance, turnaround and outage services are designed to minimize client downtime and are primarily delivered while assets are off-line and often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules. These critical services include on-site field machining; bolted-joint integrity; vapor barrier plug testing; and valve management solutions.

Quest Integrity provides integrity and reliability management solutions for the process, pipeline and power sectors. These solutions encompass three broadly-defined disciplines: (1) highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software; (2) advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support; and (3) advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.

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.

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 created significant volatility and uncertainty in domestic and international markets over the past year. Additionally, oil demand significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus. These negative factors created significant volatility and 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, the applicable government mandates have adversely affected our workforce and operations, as well as the operations of our clients, suppliers and contractors. The ultimate duration and impact on our global operations remains unclear. 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 reduce costs, preserve capacity and manage margins to align our business with the 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 during the second quarter of 2020. 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 continue into 2021.

Under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we are qualified to defer the employer portion of social security taxes incurred through the end of calendar 2020. As of December 31, 2020, we have deferred employer payroll taxes of $14.2 million with approximately half of the deferral due in each of 2021 and 2022. We may defer additional future employer payroll taxes under the CARES Act. Additionally, other governments in jurisdictions where we operate passed legislation to provide employers with relief programs, which include wage subsidy grants and deferral of certain payroll related expenses and tax payments and other benefits. We elected to treat qualified government subsidies from Canada and other governments as offsets to the related expenses. As a result, we recognized $9.9 million and $2.4 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2020. As of December 31, 2020, we also deferred certain payroll related expenses and tax payments of $4.6 million under other foreign government programs which will be due in 2021 and 2022.

Consolidation. The consolidated financial statements include the accounts of our subsidiaries where we have control over operating and financial policies. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates. Our accounting policies conform to Generally Accepted Accounting Principles (“GAAP”) in the United States. 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, (8) assessments of fair value and (9) managing our foreign currency risk in foreign operations. Our most significant accounting policies are described below.

Fair value of financial instruments. As defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 Fair Value Measurements and Disclosure (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information available. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The use of unobservable inputs is intended to allow for fair value determinations in situations in which there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances based on the observability of those inputs. ASC 820 establishes a

fair value hierarchy such that “Level 1” measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, “Level 2” measurements include quoted market prices for identical assets or liabilities in an active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets, and “Level 3” measurements include those that are unobservable and of a highly subjective measure.

Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations. The carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our ABL Facility and Term Loan (defined below) 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 debt. The fair value of our 5.00% Convertible Senior Notes due 2023 (the “Notes”) as of December 31, 2020 and 2019 was $91.9 million and $241.7 million, respectively, (inclusive of the fair value of the conversion option) and are a “Level 2” measurement, determined based on the observed trading price of these instruments. For additional information regarding our ABL Facility, Term Loan and Notes, see Note 10. Long-Term Debt, Derivatives and Letters of Credit.

Cash and cash equivalents. Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid short-term investments with original maturities of three months or less.

Inventory. Except for certain inventories that are valued based on weighted-average cost, we use the first-in, first-out method to value our inventory. Inventory includes material, labor and certain fixed overhead costs. Inventory is stated at the lower of cost and net realizable value. Inventory quantities on hand are reviewed periodically and carrying cost is reduced to net realizable value for inventories for which their cost exceeds their utility. The cost of inventories consumed or products sold are included in operating expenses.

Property, plant and equipment. Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized over the shorter of their respective useful life or the lease term. Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:


Classification						Useful Life
Buildings						20-40 years
Enterprise Resource Planning (“ERP”) System						15 years
Leasehold improvements						2-15 years
Machinery and equipment						2-12 years
Furniture and fixtures						2-10 years
Computers and computer software						2-5 years
Automobiles						2-5 years

Goodwill and intangible assets. We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities. We also allocate a portion of the purchase price to identifiable intangible assets, such as client relationships, non-compete agreements, trade names, technology and licenses. Allocations are based on estimated fair values of assets and liabilities. We use all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, economic lives and the selection of a discount rate, as well as the use of “Level 3” measurements as defined in ASC 820. Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax bases of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known. Any remaining excess of cost over allocated fair values is recorded as goodwill. We typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact our results of operations.

Goodwill and intangible assets acquired in a business combination determined to have an indefinite useful life are not amortized, but are instead tested for impairment, and assessed for potential triggering events, at least annually in accordance with the provisions of the ASC 350 Intangibles—Goodwill and Other (“ASC 350”). Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350. We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments. Each reporting unit has goodwill relating to past acquisitions.

If the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Our goodwill annual test date is December 1 of each year.

Income taxes. We follow the guidance of ASC 740 Income Taxes (“ASC 740”), which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable or receivable and related tax expense or benefit together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.

In accordance with ASC 740, we are required to assess the likelihood that our deferred tax assets will be realized and, to the extent we believe it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes the reversal of existing taxable temporary differences, taxable income in prior carryback years if carryback is permitted by tax law, information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance and tax planning strategies.

We regularly assess whether it is more likely than not that we will realize the deferred tax assets in the jurisdictions we operate in. Management believes future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize the deferred tax assets for which no valuation allowance has been established. Our valuation allowance primarily relates to net operating loss carryforwards. While we have considered these factors in assessing the need for additional valuation allowance, there is no assurance that additional valuation allowance would not need to be established in the future if information about future years change. Any changes in valuation allowance would impact our income tax provision and net income (loss) in the period in which such a determination is made. As of December 31, 2020, our deferred tax assets were $90.5 million, less a valuation allowance of $53.4 million. As of December 31, 2020, our deferred tax liabilities were $34.7 million.

Significant judgment is required in assessing the timing and amounts of deductible and taxable items for tax purposes. In accordance with ASC 740-10, we establish reserves for uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is not more likely than not that the position will be sustained upon challenge. When facts and circumstances change, we adjust these reserves through our provision for income taxes. To the extent interest and penalties may be assessed by taxing authorities on any related underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense (benefit) in our consolidated statements of operations. As of December 31, 2020, our gross unrecognized tax benefits, excluding penalties and interest related to uncertain tax positions, were $1.6 million.

Workers’ compensation, auto, medical and general liability accruals. In accordance with ASC 450 Contingencies (“ASC 450”), we record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet. These reserves are based on historical experience with claims incurred but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. For workers’ compensation, our self-insured retention is $1.0 million and our automobile liability self-insured retention is currently $1.0 million per occurrence. For general liability claims, we have an effective self-insured retention of $1.0 million and a deductible of $2.0 million per occurrence. For medical claims, our self-insured retention is $350,000 per individual claimant determined on an annual basis. For environmental liability claims, our self-insured retention is $1.0 million per occurrence. We maintain insurance for claims that exceed such self-retention limits. The insurance is subject to terms, conditions, limitations and exclusions that may not fully compensate us for all losses. Our estimates and judgments could change based on new information, changes in laws or regulations, changes in management’s plans or intentions, or the outcome

of legal proceedings, settlements or other factors. If different estimates and judgments were applied with respect to these matters, it is likely that reserves would be recorded for different amounts.

Allowance for credit losses. In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various reasons. We establish an allowance to account for those accounts receivable that we estimate will eventually be deemed uncollectible. The allowance for credit losses is based on a combination of our historical experience and management’s review of long outstanding accounts receivable.

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 income (loss) from continuing operations, income (loss) from discontinued operations or net income (loss) by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing income (loss) from continuing operations, income (loss) from discontinued operations or net income (loss) 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 Notes under the treasury stock method. Our current intent is to settle the principal amount of our 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 and the numerator is adjusted for any recorded gain or loss, net of tax, on the embedded derivative associated with the conversion feature.

Amounts used in basic and diluted loss per share, for all periods presented, are as follows (in thousands):


	Twelve Months Ended December 31,
	2020	2019	2018
Weighted-average number of basic shares outstanding	30,638	30,310	30,031
Stock options, stock units and performance awards	—	—	—

Convertible senior notes	—	—	—
Total shares and dilutive securities	30,638	30,310	30,031

For the years ended December 31, 2020, 2019 and 2018, 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 loss from continuing operations in those periods. Also, the effect of our Notes was excluded from the calculation of diluted earnings (loss) per share since the conversion price exceeded the average price of our common stock during the applicable periods. For information on our Notes and our share-based compensation awards, refer to Note 10 and Note 12, respectively.

Non-cash investing and financing activities. Non-cash investing and financing activities are excluded from the consolidated statements of cash flows and are as follows (in thousands):


	Twelve Months Ended December 31,
	2020		2019		2018
Assets acquired under finance lease	$	60	$	326	$	5,302

Also, we had $1.2 million, $4.0 million, and $1.4 million of accrued capital expenditures as of December 31, 2020, 2019 and 2018, respectively, which are excluded from the consolidated statements of cash flows until paid.

Foreign currency. For subsidiaries whose functional currency is not the U.S. Dollar, assets and liabilities are translated at period ending rates of exchange and revenues and expenses are translated at period average exchange rates. Translation adjustments for the asset and liability accounts are included as a separate component of accumulated other comprehensive loss in stockholders’ equity. Foreign currency transaction gains and losses are included in our statements of operations.

We utilize monthly foreign currency swap contracts to reduce exposures to changes in foreign currency exchange rates related to our largest exposures including, but not limited to, the Australian Dollar, Canadian Dollar, Brazilian Real, British

Pound, Euro, Malaysian Ringgit and Mexican Peso. The impact from these swap contracts was not material as of December 31, 2020 or 2019 or for the years ended December 31, 2020, 2019 and 2018.

Defined benefit pension plans. Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined based on reference to yields. The expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with GAAP, actual results that differ from the assumptions are accumulated and are subject to amortization over future periods and, therefore, generally affect recognized expense in future periods. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense.

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 Standards

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 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 prepaid expenses and other current assets and $4.0 million reclassified to other assets, net on our consolidated balance sheet.

Accounting Standards 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. Our adoption of this ASU as of January 1, 2021 did not have a material impact to our financial statements.

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 in ASU 2020-04 and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which was issued in January 2021, 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. While we are currently determining whether we will elect the optional expedients, we do not expect our adoption of these ASU’s to have a significant impact 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. We expect to adopt ASU 2020-06 beginning January 1, 2022, at which time we would utilize the if-converted method, which would require us to assume the Notes would be settled entirely in shares of common stock for purposes of calculating diluted earnings per share, if the effect would be dilutive. We are still evaluating the other impacts this ASU may have on our financial statements.

REVENUE

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

REVENUE

In accordance with ASC Topic 606, Revenue from Contracts with Customers, (“ASC 606”), 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.

Most 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. Generally, in contracts where the amount of consideration is variable, the amount is determinable each period based on our right to invoice (as discussed further below) the customer for services performed to date. As most of our contracts contain only one performance obligation, the allocation of a contracts 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 twelve months or less from the date of service. Warranty expenses were not material for the twelve months ended December 31, 2020, 2019 and 2018.

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.

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):


	Twelve Months Ended December 31, 2020
	United States and Canada		Other Countries		Total
Revenue:
IHT	$	365,847	$	8,893	$	374,740
MS	278,882		113,602		392,484
Quest Integrity	49,117		36,198		85,315
Total	$	693,846	$	158,693	$	852,539


	Twelve Months Ended December 31, 2019
	United States and Canada		Other Countries		Total
Revenue:
IHT	$	496,789	$	16,161	$	512,950
MS	393,120		142,252		535,372
Quest Integrity	76,050		38,942		114,992
Total	$	965,959	$	197,355	$	1,163,314


	Twelve Months Ended December 31, 2020
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	294,838	$	206	$	50,220	$	29,476	$	374,740
MS	—		388,313		1,088		3,083		392,484
Quest Integrity	85,315		—		—		—		85,315
Total	$	380,153	$	388,519	$	51,308	$	32,559	$	852,539


	Twelve Months Ended December 31, 2019
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	409,413	$	755	$	71,689	$	31,093	$	512,950
MS	—		527,020		2,773		5,579		535,372
Quest Integrity	114,992		—		—		—		114,992
Total	$	524,405	$	527,775	$	74,462	$	36,672	$	1,163,314

_________________

For additional information on our reportable operating segments and geographic information, refer to Note 15.

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 our trade receivables and the allowance for credit losses. 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.

The following table provides information about trade accounts receivable, contract assets and contract liabilities as of December 31, 2020 and 2019 (in thousands):


	December 31, 2020		December 31, 2019
Trade accounts receivable, net1	$	194,066	$	245,617
Contract assets2	$	5,242	$	4,671
Contract liabilities3	$	930	$	1,224

_________________

1 Includes billed and unbilled amounts, net of allowance for credit losses. See Note 3 for details.

2 Included in the “Prepaid expenses and other current assets” line on the consolidated balance sheet.

3 Included in the “Other accrued liabilities” line of the consolidated balance sheet.

The $0.5 million decrease in our contract assets from December 31, 2019 to December 31, 2020 is due to fewer fixed price contracts in progress at December 31, 2020 as compared to December 31, 2019, consistent with lower activity levels in the fourth quarter of 2020 compared to the same quarter in 2019. The $0.9 million decrease in contract liabilities is due to our completion of performance obligations during the year ended December 31, 2019 associated with contracts under which customers had paid for all or a portion of the consideration in advance of the work being performed. Due to the short-term nature of our contracts, contract liability balances as of the end of any period are generally recognized as revenue in the following quarter. Accordingly, essentially all of the contract liability balance at December 31, 2019 was recognized as revenue during the year ended December 31, 2020.

Contract costs. We recognize the incremental costs of obtaining contracts as selling, general and administrative expenses when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less. Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered. Costs to fulfill recognized as assets primarily consist of labor and materials costs and generally relate to engineering and set-up costs incurred prior to the satisfaction of performance obligations begins. Assets recognized for costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the consolidated balance sheets and were not material as of December 31, 2020 and 2019. Such assets are recognized as expenses as we transfer the related goods or services to the customer. All other costs to fulfill a contract are expensed as incurred.

Remaining performance obligations. As of December 31, 2020 and 2019, there were no material amounts of remaining performance obligations that are required to be disclosed. As permitted by ASC 606, we have elected not to disclose information about remaining performance obligations where i) the performance obligation is part of a contract that has an original expected duration of one year or less or ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

RECEIVABLES

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

RECEIVABLES

A summary of accounts receivable as of December 31, 2020 and 2019 is as follows (in thousands):


	December 31,
	2020		2019
Trade accounts receivable	$	157,513	$	192,743
Unbilled revenues	46,471		62,864
Allowance for credit losses	(9,918)		(9,990)
Total	$	194,066	$	245,617

ASC 326 applies to financial assets measured at amortized cost, including trade and unbilled accounts receivable, and requires immediate recognition of lifetime expected credit losses. Significant factors that affect the expected collectability of our receivables include macroeconomic trends and forecasts in the oil and gas, refining, power, and petrochemical markets and changes in our results of operations and forecasts. For unbilled receivables, we consider them as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate. We have identified the following factors that primarily impact the collectability of our receivables and therefore determine the pools utilized to calculate expected credit losses: (i) the aging of the receivable, (ii) any identification of known collectability concerns with specific receivables and (iii) variances in economic risk characteristics across geographic regions.

For trade receivables, customers typically are provided with payment due date terms of 30 days upon issuance of an invoice. We have tracked historical loss information for our trade receivables and compiled historical credit loss percentages for different aging categories. We believe that the historical loss information we have compiled is a reasonable basis on which to determine expected credit losses for trade receivables because the composition of the trade receivables is consistent with that used in developing the historical credit-loss percentages as typically our customers and payment terms do not change significantly. Generally, a longer outstanding receivable equates to a higher percentage of the outstanding balance as current expected credit losses. We update the historical loss information for current conditions and reasonable and supportable forecasts that affect the expected collectability of the trade receivable using a loss-rate approach. We have not seen a negative trend in the current economic environment that significantly impacts our historical credit-loss percentages; however, we will continue to monitor for changes that would indicate the historical loss information is no longer a reasonable basis for the determination of our expected credit losses. Our forecasted loss rates inherently incorporate expected macroeconomic trends. A loss-rate method

for estimating expected credit losses on a pooled basis is applied for each aging category for receivables that continue to exhibit similar risk characteristics.

To measure expected credit losses for individual receivables with specific collectability risk, we identify specific factors based on customer-specific facts and circumstances that are unique to each customer. Customer accounts with different risk characteristics are separately identified and a specific reserve is determined for these accounts based on the assessed credit risk.

We have also identified the following geographic regions in which to distinguish our trade receivables: the (i) United States, (ii) Canada, (iii) the European Union, (iv) the United Kingdom, and (v) other countries. These geographic regions are considered appropriate as they each operate in different economic environments with different foreign currencies, and therefore share similar economic risk characteristics. For each geographic region we evaluate the historical loss information and determine credit-loss percentages to apply to each aging category and individual receivable with specific risk characteristics. We estimate future expected credit losses based on forecasted changes in gross domestic product and oil demand for each region.

We consider one year from the financial statement reporting date as representing a reasonable forecast period as this period aligns with the expected collectability of our trade receivables. Financial distress experienced by our customers could have an adverse impact on us in the event our customers are unable to remit payment for the products or services we provide or otherwise fulfill their obligations to us. In determining the current expected credit losses, we review macroeconomic conditions, market specific conditions, and internal forecasts to identify potential changes in our assessment.

The following table shows a rollforward of the allowance for credit losses:


	Twelve Months Ended December 31,
	2020		2019		2018
Balance at beginning of period	$	9,990	$	15,182	$	11,308
Adoption of account pronouncement ASC 3261	1,410		—		—
Provision for expected credit losses	1,612		(2,573)		11,662
Write-offs	(3,193)		(2,673)		(7,475)
Foreign exchange effects	99		54		(313)
Balance at end of period	$	9,918	$	9,990	$	15,182

_________________

1 Due to the initial adoption of ASC 326 as of January 1, 2020.

INVENTORY

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

INVENTORY

A summary of inventory as of December 31, 2020 and 2019 is as follows (in thousands):


	December 31,
	2020		2019
Raw materials	$	7,395	$	7,555
Work in progress	2,890		2,851
Finished goods	26,569		28,789
Total	$	36,854	$	39,195

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of December 31, 2020 and 2019 is as follows (in thousands):


	December 31,
	2020		2019
Land	$	5,805	$	6,380
Buildings and leasehold improvements	57,632		59,177
Machinery and equipment	302,886		284,020
Furniture and fixtures	11,450		10,946
Capitalized ERP system development costs	45,917		46,637
Computers and computer software	20,508		22,906
Automobiles	4,518		4,642
Construction in progress	8,329		13,088
Total	457,045		447,796
Accumulated depreciation and amortization	(286,736)		(255,845)
Property, plant, and equipment, net	$	170,309	$	191,951

Included in the table above are assets under finance leases of $5.7 million and $5.6 million and accumulated amortization of $0.9 million and $0.5 million as of December 31, 2020 and 2019, respectively. Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $31.5 million, $34.4 million and $36.2 million, respectively.

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

A summary of intangible assets as of December 31, 2020 and 2019 is as follows (in thousands):


	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	175,418	$	(76,541)	$	98,877
Non-compete agreements	5,569		(5,569)		—
Trade names	24,870		(21,794)		3,076
Technology	7,879		(6,691)		1,188
Licenses	864		(723)		141
Total	$	214,600	$	(111,318)	$	103,282


	December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	174,940	$	(63,727)	$	111,213
Non-compete agreements	5,466		(5,306)		160
Trade names	24,724		(21,146)		3,578
Technology	7,838		(5,976)		1,862
Licenses	848		(642)		206
Total	$	213,816	$	(96,797)	$	117,019

Amortization expense on intangible assets for the years ended December 31, 2020, 2019 and 2018 was $14.0 million, $14.3 million and $28.7 million, respectively. Amortization expense for current intangible assets is forecast to be approximately $13 million per year from 2021 through 2024.

The decline in amortization expense in 2019 is primarily due to a change in the estimated useful life of an intangible asset associated with the Furmanite trade name in 2018. Management determined that, as a result of initiatives to consolidate our branding, the useful life of this intangible asset was not expected to extend beyond December 31, 2018. In accordance with ASC 350, we accounted for the change in useful life prospectively effective January 1, 2018 and amortized the remaining balance over 2018, which resulted in incremental amortization expense in 2018 of $12 million which did not recur in 2019.

The weighted-average amortization period for intangible assets subject to amortization was 13.6 years as of December 31, 2020. The weighted-average amortization period as of December 31, 2020 is 13.6 years for customer relationships, 5.0 years for non-compete agreements, 15.0 years for trade names, 10.0 years for technology and 10.5 years for licenses.

GOODWILL AND IMPAIRMENT CHARGES

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Impairment Charges

GOODWILL AND IMPAIRMENT CHARGES

The COVID-19 pandemic and subsequent mitigation efforts, which included global business and societal shutdowns and the implementation of mandatory social distancing requirements, created an unprecedented disruption to our business during 2020. These mitigation efforts coupled with the negative economic impacts to the oil and gas industry caused by the substantial decline in the global demand for oil and the concurrent surplus in the supply of oil resulting from geopolitical tensions between OPEC regarding limits on production of oil significantly impacted our business. Even though our services are primarily related to infrastructure support, the oil and gas industry is one of the key industries we serve and our clients have been significantly impacted as a result of these events.

As our clients continue to adjust spending levels in response to the lower commodity prices, we have experienced activity reductions and pricing pressure for our products and services, primarily in our IHT and MS reporting units, which we expect to continue. In line with these changing market conditions, our market capitalization also deteriorated during the first quarter of 2020 and most significantly in late March 2020. In response to these events and the related decline in our forecasts from the COVID-19 pandemic, we announced cost-cutting measures to offset the expected impact to our business. We determined the totality of these events constituted a triggering event that required us to perform an interim goodwill impairment assessment as of March 31, 2020.

We determined the fair value for each reporting unit in our goodwill impairment assessment using both a discounted cash flow analysis and a multiples based market approach for comparable companies. We utilized third-party valuation advisors to assist us with these valuations. These analyses included significant judgment, including forecasted revenue, short-term and long-term forecast of operating performance, discount rates based on our weighted average cost of capital, revenue growth rates, profitability margins, capital expenditures and the timing of future cash flows. These impairment assessments incorporate inherent uncertainties, including supply and demand for our services, utilization forecasts, pricing forecasts and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the assumptions utilized in our forecasts.

Based upon our impairment assessment, we determined the carrying amount of our IHT reporting unit exceeded the fair value. As a result, we recorded $191.8 million in goodwill impairment charges on our IHT reporting unit during the three months ended March 31, 2020. The fair value of the MS and Quest Integrity reporting units exceeded their respective carrying values.

We have three reporting units and perform a goodwill impairment test at a reporting unit level on an annual basis on December 1 and whenever there are sufficient indicators that the carrying value of a reporting unit exceeds its fair value. For our annual goodwill impairment test as of December 1, 2020, we elected to perform a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair values of our reporting units were less than their respective carrying values as of the test date. Our qualitative assessment for December 1, 2020 considered relevant events and circumstances occurring since the quantitative assessment performed on March 31, 2020. Specifically, we considered changes in our stock price, industry and market conditions, our internal forecasts of future revenue and expenses, any significant events affecting us and actual changes in the carrying value of our net assets. After considering all positive and negative evidence for the assessments as of this date, we concluded that it was not more likely than not that our carrying values exceeded fair values and, as such, no additional impairment was indicated. We will continue to evaluate our goodwill and long-lived assets for potential triggering events as conditions warrant.

There was $91.4 million and $282.0 million of goodwill at December 31, 2020 and 2019, respectively. A summary of goodwill is as follows (in thousands):


	IHT						MS						Quest Integrity						Consolidated
	Goodwill, Gross		Accumulated Impairment		Goodwill, Net		Goodwill, Gross		Accumulated Impairment		Goodwill, Net		Goodwill, Gross		Accumulated Impairment		Goodwill, Net		Goodwill, Gross		Accumulated Impairment		Goodwill, Net
Balance at December 31, 2018	$	213,748	$	(21,140)	$	192,608	$	109,728	$	(54,101)	$	55,627	$	33,415	$	—	$	33,415	$	356,891	$	(75,241)	$	281,650
FX Adjustments	608		—		608		(218)		—		(218)		(34)		—		(34)		356		—		356
Balance at December 31, 2019	$	214,356	$	(21,140)	$	193,216	$	109,510	$	(54,101)	$	55,409	$	33,381	$	—	$	33,381	$	357,247	$	(75,241)	$	282,006
FX Adjustments	(1,428)		—		(1,428)		1,211		—		1,211		854		—		854		637		—		637
Impairment charge	—		(191,788)		(191,788)		—		—		—		—		—		—		—		(191,788)		(191,788)
Additions	—		—		—		—		—		—		496		—		496		496		—		496
Balance at December 31, 2020	$	212,928	$	(212,928)	$	—	$	110,721	$	(54,101)	$	56,620	$	34,731	$	—	$	34,731	$	358,380	$	(267,029)	$	91,351

OTHER ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of December 31, 2020 and 2019 is as follows (in thousands):


	December 31,
	2020		2019
Payroll and other compensation expenses	$	42,668	$	45,934
Legal and professional accruals	4,135		5,201
Insurance accruals	6,659		10,951
Property, sales and other non-income related taxes	8,722		8,593
Accrued commission	1,048		3,299
Accrued interest	2,437		5,015
Other	7,475		7,513
Total	$	73,144	$	86,506

INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

For the years ended December 31, 2020, 2019 and 2018, our income tax benefit on the loss from continuing operations resulted in an effective tax rate of 5.8%, 1.3% and 33.0%, respectively. Our income tax benefit on continuing operations for the years ended December 31, 2020, 2019 and 2018 was $14.7 million, $0.4 million and $31.1 million, respectively, and includes federal, state and foreign taxes. The components of our tax benefit on continuing operations were as follows (in thousands):


	Current		Deferred		Total
Twelve months ended December 31, 2020:
U.S. Federal	$	(14,853)	$	(1,228)	$	(16,081)
State & local	1,113		(1,010)		103
Foreign jurisdictions	2,942		(1,679)		1,263
	$	(10,798)	$	(3,917)	$	(14,715)
Twelve months ended December 31, 2019:
U.S. Federal	$	(105)	$	(4,349)	$	(4,454)
State & local	519		(1,230)		(711)
Foreign jurisdictions	2,340		2,389		4,729
	$	2,754	$	(3,190)	$	(436)
Twelve months ended December 31, 2018:
U.S. Federal	$	(3,295)	$	(27,670)	$	(30,965)
State & local	509		(2,360)		(1,851)
Foreign jurisdictions	3,457		(1,704)		1,753
	$	671	$	(31,734)	$	(31,063)

The components of pre-tax income (loss) from continuing operations for the years ended December 31, 2020, 2019 and 2018 were as follows (in thousands):


	Twelve Months Ended December 31,
	2020		2019		2018
Domestic	$	(240,064)	$	(34,720)	$	(90,822)
Foreign	(11,854)		1,867		(3,387)
	$	(251,918)	$	(32,853)	$	(94,209)

The income tax benefit attributable to the loss from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate (21% in 2020, 2019 and 2018) to pre-tax loss from continuing operations as a result of the following (in thousands):


	Twelve Months Ended December 31,
	2020		2019		2018
Pre-tax loss from continuing operations	$	(251,918)	$	(32,853)	$	(94,209)
Computed income taxes at statutory rate	(52,903)		(6,899)		(19,784)
State income taxes, net of federal benefit1	(114)		(820)		(974)
Foreign tax rate differential	404		(300)		(52)

Deferred taxes on investment in foreign subsidiaries	525		18		(7,284)
Non-deductible expenses	518		658		686
Non-deductible compensation1	89		559		829
Foreign withholding 1	1,063		670		1,615
Convertible debt1	(2,949)		—		2,865
Other tax credits	—		—		(1,995)
Deemed repatriation tax	—		—		(1,751)
Goodwill impairment	12,586		—		—

Valuation allowance	32,957		3,682		2,923
Cares Act rate benefit	(7,267)		—		—
Rate change	(551)		684		81
Other1	927		1,312		(8,222)
Total benefit for income tax on continuing operations	$	(14,715)	$	(436)	$	(31,063)

_____________

1 Compared to our previously filed 2018 Annual Report on Form 10-K, $1.4 million was reclassified from “Other” to “State income taxes, net of federal benefit” for the twelve months ended December 31, 2018. Additionally, “Non-deductible compensation”, “Convertible debt “and “Foreign withholding tax” were moved from “Other” to separate line disclosures.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):


	December 31,
	2020		2019
Deferred tax assets:
Accrued compensation and benefits	$	9,058	$	8,909
Receivables	1,551		1,644
Inventory	336		397
Share based compensation	256		768

Other accrued liabilities	2,109		1,247
Tax credit carry forward	3,642		312
Interest expense limitation	7,040		7,719
Goodwill and intangible costs	6,754		—
Net operating loss carry forwards	58,759		50,447
Other	1,013		1,798
Deferred tax assets	90,518		73,241
Less: Valuation allowance	(53,417)		(14,912)
Deferred tax assets, net	37,101		58,329
Deferred tax liabilities:
Property, plant and equipment	(23,783)		(17,921)
Goodwill and intangible costs	—		(28,655)
Unremitted earnings of foreign subsidiaries	(5,918)		(5,393)
Convertible debt	(1,755)		(5,767)
Other	(3,230)		(2,400)
Deferred tax liabilities	(34,686)		(60,136)
Net deferred tax asset (liability)	$	2,415	$	(1,807)

Management evaluates all available evidence, both positive and negative, to determine whether sufficient future taxable income will be generated to allow for the realization of the existing deferred tax assets. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. A significant factor of negative evidence evaluated was the cumulative pre-tax loss incurred over the three-year period ended December 31, 2020. This objective evidence limits the ability to consider other subjective positive evidence, such as our projections for future pre-tax income.

On the basis of this evaluation, as of December 31, 2020, a valuation allowance of $53.4 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. This valuation allowance relates primarily to the deferred tax assets for federal, foreign and state tax net operating loss carryforwards. The amount of deferred tax asset considered realizable could be adjusted if there are changes to net operating loss carryforward periods or there is a change to the weight assessed on various sources of positive and negative evidence.

The deferred tax asset presented for net operating loss carryforwards is net of any unrecognized tax benefits that has been established related to income tax returns filed.

At December 31, 2020, we had net operating loss carry forwards for U.S. federal income tax purposes of $174.9 million. Of this amount, $93.4 million expires in various dates through 2037 and $81.5 million has an indefinite carry forward period. These carryforwards are available, subject to certain limitations, to offset future taxable income. Further, we have state net operating loss carryforwards of $166.0 million with $151.5 million expiring on various dates through 2040 and $14.5 million with an indefinite carryforward period.

As of December 31, 2019, we had alternative minimum tax credits of approximately $2.1 million which can be used to offset regular income tax or is refundable. Pursuant to a provision of the CARES Act, we filed for and received the full refund of these alternative minimum tax credits in 2020.

The Company has $3.5 million of tax credits that will expire on various dates through 2037 if not utilized.

As of December 31, 2020, we had foreign net operating loss carry forwards totaling $47.8 million. Of this amount, $26.1 million will expire in various dates through 2030 and $21.7 million has an unlimited carry forward period.

At December 31, 2020, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas. As of December 31, 2020, the deferred tax liability related to undistributed earnings of foreign subsidiaries was $5.9 million.

As of December 31, 2020, $1.0 million of unrecognized tax benefits would affect our effective tax rate. We estimate the uncertain tax benefits that may be recognized within the next twelve months will not be material. Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

We file income tax returns in the U.S. with federal and state jurisdictions as well as various foreign jurisdictions. With few exceptions, we are no longer subject to U.S. Federal, state and local or non-U.S. income tax examinations by tax authorities for years prior to 2016. We are currently under federal audit for the tax year ended December 31, 2017 and under state audit in one of the taxing jurisdictions in which we do substantial business. We do not anticipate any material adjustments related to these examinations.

Periodic examinations of our tax filings occur by the taxing authorities for the jurisdictions in which we conduct business. These examinations review the significant positions taken on our returns, including the timing and amount of income and deductions reported, as well as the allocation of income among multiple taxing jurisdictions. We do not expect any material adjustments to result from positions taken on our income tax returns.

The following table summarizes the Company’s reconciliation of gross unrecognized tax benefits, excluding penalties and interest, for the year ended December 31, 2020, 2019 and 2018 (in thousands):


	Twelve Months Ended December 31,
	2020		2019		20181
Unrecognized tax benefits - January 1	$	1,547	$	1,749	$	991

Additions based on current year tax positions	7		—		—
Additions based on tax positions related to prior years	89		227		1,004
Reductions based on tax positions related to prior years			(415)		—
Settlements	—		—		—
Reductions resulting from a lapse of the applicable statute of limitations	(33)		(14)		(246)
Unrecognized tax benefits - December 31	$	1,610	$	1,547	$	1,749

_____________

1 2018 revised figures were not considered material. Penalties and interest were excluded in 2019, therefore 2018 amounts were revised for consistency.

We have recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets. As of December 31, 2020, 2019 and 2018, the total amount of accrued interest and penalties related to unrecognized tax benefits was $0.4 million, $0.3 million and $0.5 million, respectively. There were approximately $0.1 million, $(0.1) million and $0.3 million, respectively, of interest and penalties related to unrecognized tax benefits that are recorded in income tax expense for the periods ended December 31, 2020, 2019 and 2018.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

LONG-TERM DEBT

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

LONG-TERM DEBT

As of December 31, 2020 and 2019, our long-term debt and finance lease obligations are summarized as follows (in thousands):


	December 31,
	2020		2019

ABL Facility	$	9,000	$	—
Term Loan	213,809		—
Credit Facility revolver	—		73,876
Credit Facility term loan	—		49,735
Total	222,809		123,611
Convertible debt1	84,534		201,619
Finance lease obligations	5,153		5,363
Total debt and finance lease obligations	312,496		330,593
Current portion of long-term debt and finance lease obligations	(337)		(5,294)
Total long-term debt and finance lease obligations, less current portion	$	312,159	$	325,299

_________________

1 Comprised of principal amount outstanding, less unamortized discount and issuance costs. See Convertible Debt section below for additional information.

Future maturities of long-term debt, excluding finance leases, are as follows (in thousands):


December 31
2021	$	—
2022	—
2023	93,130
2024	9,000
2025	—
Thereafter	250,000
Total	$	352,130

For information on our finance lease obligations, see footnote 11.

ABL Facility

On December 18, 2020, we entered into an asset-based credit agreement (the “ABL Facility”) led by Citibank, N.A., as agent, which provides for available borrowings up to $150 million. The ABL Facility matures and all outstanding amounts become due and payable on December 18, 2024. However, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $50 million or more outstanding 120 days prior to their maturity date (the “Trigger Date”), or if there are Notes in an aggregate principal amount of less than $50 million outstanding and we do not have sufficient availability of more than 20% under the ABL Facility on the Trigger Date, the ABL Facility will terminate on the Trigger Date. The ABL Facility includes a $50 million sublimit for letters of credit issuance and $35 million sublimit for swingline borrowings. Additionally, subject to certain conditions, including obtaining additional commitments, the ABL Facility may be increased by an amount not to exceed $50 million.

Our obligations under the ABL Facility are guaranteed by certain of our direct and indirect subsidiaries, as set forth in the ABL Facility agreement. The ABL Facility is secured on a first priority basis by, among other things, our accounts receivable, deposit accounts, securities accounts and inventory, including those of our direct and indirect subsidiary guarantors, and on a second priority basis by substantially all other assets of our direct and indirect subsidiary guarantors. Borrowing availability under the ABL Facility is based on a percentage of the value of accounts receivable and inventory, reduced for certain reserves.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin. The Base Rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50%, (ii) Citibank, N.A.’s prime rate, and (iii) the one-month LIBOR rate plus 1.00%. Depending on the amount of average excess availability, the applicable margin is between 1.75% to 2.25% for Base Rate borrowings with a 1.75% Base Rate floor and between 2.75% and 3.25% for LIBOR rate

borrowings with a 0.75% LIBOR rate floor. Interest is payable either (i) monthly for Base Rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the ABL Facility agreement. The fee for undrawn amounts ranges from 0.375% to 0.5%, depending on usage and is due quarterly.

The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that restrict our ability to sell assets, makes changes to the nature of our business, engage in mergers and acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distribution or redeem or repurchase capital stock. In the event that our excess availability is less than the greater of (i) $15.0 million and (ii) 10.00% of the lesser of (1) the current borrowing base and (2) the commitments under the ABL Facility then in effect, a consolidated fixed charge coverage ratio of at least 1.00 to 1.00 must be maintained. Upon the occurrence of certain events of default, an additional 2.0% interest maybe required on the outstanding loans under the ABL Facility.

At December 31, 2020, we had $24.6 million of cash on hand and approximately $59.5 million of available borrowing capacity under the ABL Facility. Direct and incremental costs associated with the issuance of the ABL Facility were approximately $3.3 million and were capitalized as debt issuance costs. These costs are being amortized on a straight-line basis over the term of the ABL Facility.

Atlantic Park Term Loan

On December 18, 2020, we also entered into a credit agreement with Atlantic Park Strategic Capital Fund, L.P., as agent, and APSC Holdco II, L.P. (“APSC”), as lender, pursuant to which we borrowed a $250.0 million term loan (the “Term Loan”). The Term Loan was issued with a 3% original issuance discount (“OID”), such that total proceeds received were $242.5 million. The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026. However, certain conditions could result in an earlier maturity, including if the Notes have an aggregate principal amount outstanding of $50 million or more on the Trigger Date, in which case the Term Loan will terminate on the Trigger Date. As set forth in the Term Loan agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the ABL Facility, and we may increase the Term Loan by an amount not to exceed $100 million.

The Term Loan bears an interest through maturity at a variable rate based upon, at our option, an annual rate of either a Base rate or a LIBOR rate, plus an applicable margin. The Base rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50%, (ii), the prime rate as specified in the Term Loan agreement, and (iii) one-month LIBOR rate plus 1.00%. The applicable margin is defined as a rate of 6.50% for Base rate borrowings with a 2.00% Base rate floor and 7.50% for LIBOR rate borrowings with a 1.00% LIBOR rate floor. Interest is payable either (i) monthly for Base rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Term Loan agreement. The loans under the Term Loan were issued with an original issue discount of 3.00%, and are, in whole or in part, prepayable any time and from time to time, at a prepayment premium (including a make whole during the first two years) specified in the Term Loan agreement (subject to certain exceptions), plus accrued and unpaid interest. The effective interest rate on the Term Loan at December 31, 2020 was 11.93%.

The Term Loan contains customary payment penalties, events of default and covenants, including but not limited to, covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur additional indebtedness and guarantees, pay dividends, issue equity instruments and make distributions or redeem or repurchase capital stock.

Commencing with the fiscal quarter ending March 31, 2022, we are also required to maintain a net leverage ratio of less than or equal to 7.00 to 1.00, calculated quarterly on a trailing twelve-month basis. In addition, our capital expenditures may not exceed $33.0 million during any four fiscal quarter period, provided that this covenant will not apply if the total net leverage ratio is less than or equal to 4.00 to 1.00 at the end of the second and fourth quarter of each year.

Our ability to maintain compliance with the financial covenants is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties. The effects of the COVID-19 pandemic and the decline in oil and gas end markets could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers. Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our ABL Facility. In addition to our current sources of funding our business, the effects of such events may impact our liquidity or our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change our business strategy. Although the COVID-19 pandemic and decline in the oil and gas end markets could have a broad range of effects on our liquidity sources, the effects will depend on future developments and cannot be predicted at this time.

In order to secure our casualty insurance programs, we are required to post letters of credit generally issued by a bank as collateral. A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit. If this were to occur, we would be obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit. We were contingently liable for outstanding stand-by letters of credit totaling $19.5 million at December 31, 2020 and $20.5 million at December 31, 2019. Outstanding letters of credit reduce amounts available under our ABL Facility and are considered as having been funded for purposes of calculating our financial covenants under the ABL Facility.

Warrant

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC a warrant to purchase up to 3,582,949 shares of our common stock (the “Warrant”), which is exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $7.75 per share. The exercise price and the number of share of common stock issuable on exercise of the Warrant are subject to certain antidilution adjustments, including stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.

The Warrant (and shares of common stock issuable upon exercise of the Warrant) are transferable upon the earliest of (i) the date that is 365 days from the date of the agreement, (ii) the last consecutive trading day where the last reported sale price of our common stock equals or exceeds $20.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 10 trading days within any 15-trading day period commencing at least 180 days after the date of the agreement, or (iii) such date on which we complete a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property, without our consent, except for transfers to certain disqualified institutions pursuant to one or more privately negotiated transactions.

Recognition, Use of Proceeds and Debt Issuance Costs

ASC 470 requires that proceeds from the sale of a debt instrument with stock purchase warrants should be allocated between the two elements based on the relative fair values of (i) the debt instrument without the warrants and (ii) the warrants themselves at time of issuance. We determined the fair value of the Warrant at time of issuance was $23.8 million and the fair value of the Term Loan was $218.7 million. The fair value of the Warrant was recognized in additional paid in capital and treated as discount to the face value of the Term Loan. Direct and incremental costs associated with the issuance of the Term Loan were approximately $5.1 million and were capitalized as debt issuance costs. Issuance costs allocated to the Warrant based on the comparable cost method were $1.4 million and were recorded as a reduction to additional paid in capital. The debt issuance costs, the discount associated with the Warrant and the OID will be amortized using the effective interest method over the term of the Term Loan.

We used a portion of the proceeds from the Term Loan, totaling approximately $128.8 million, to repay all borrowings, including accrued interest, outstanding under our prior credit facility (the “Credit Facility”). The Credit Facility, which was comprised of a revolver and term loan, was retired. Unamortized costs associated with the Credit Facility were $2.2 million at time of repayment and were expensed as loss on debt extinguishment.

We retired $136.9 million par value of our Notes for $135.5 million, excluding accrued interest, using proceeds from the Term Loan and borrowings under the ABL Facility. ASC 470 requires that the fair value of consideration transferred at settlement be allocated between the debt component and equity component of the Notes. To determine the fair value of the debt component of the Notes, we measured the fair value of a similar debt instrument without an associated conversion feature. The remaining fair value was allocated to the equity component of the Notes. The amounts allocated to the debt and equity components were in accordance with ASC 470 and ASC 815, Derivatives and Hedging (“ASC 815”). We determined the fair value of the retired Notes was $121.8 million at extinguishment, with the remaining consideration of $13.7 million allocated to the equity component. The carrying amount of the retired Notes at extinguishment, net of unamortized discount and debt issuance costs was $124.0 million. Therefore, in connection with the retirement of the Notes, we recognized a gain on extinguishment of $2.2 million. Additionally, we incurred approximately $2.6 million in third-party fees in connection with the retirement of the Notes, of which $2.2 million were expensed as loss on debt extinguishment and $0.4 million recorded as equity reacquisition costs.

Convertible Debt

Description of the Notes

On July 31, 2017, we issued $230.0 million principal amount of senior unsecured 5.00% Convertible Senior Notes due 2023 in a private offering to qualified institutional buyers (as defined in the Securities Act of 1933) pursuant to Rule 144A under the Securities Act (the “Offering”). As discussed above, in December 2020, we retired $136.9 million par value of our Notes, and as of December 31, 2020, the principal amount of Notes outstanding was $93.1 million.

The Notes bear interest at rate of 5.0% per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2018. The Notes mature on August 1, 2023 unless repurchased, redeemed or converted in accordance with their terms prior to such date. The Notes are convertible at an initial conversion rate of 46.0829 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $21.70 per share, which represents a conversion premium of 40% to the last reported sale price of $15.50 per share on the NYSE on July 25, 2017, the date the pricing of the Notes was completed. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture governing the Notes.

Holders may convert their Notes at their option prior to the close of business on the business day immediately preceding May 1, 2023, but only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on such trading day;

•if we call any or all of the Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or;

•upon the occurrence of specified corporate events described in the indenture governing the Notes.

On or after May 1, 2023 until the close of business on the business day immediately preceding the maturity date, holders may, at their option, convert their Notes at any time, regardless of the foregoing circumstances.

The Notes were initially convertible into 10,599,067 shares of common stock. Previously, because the Notes could be convertible in full into more than 19.99% of our outstanding common stock, we were required by the listing rules of the NYSE to obtain the approval of the holders of our outstanding shares of common stock before the Notes could be converted. At our annual shareholders’ meeting, held on May 17, 2018, our shareholders approved the issuance of shares of common stock upon conversion of the Notes.

As a result of the redemption and extinguishment of the Notes discussed above, the Notes are convertible into 4,291,705 shares of common stock. The Notes will be convertible into, subject to various conditions, cash or shares of our common stock or a combination of cash and shares of our common stock, in each case, at our election.

If holders elect to convert the Notes in connection with certain fundamental change transactions described in the indenture governing the Notes, we will, under certain circumstances described in the indenture governing the Notes, increase the conversion rate for the Notes so surrendered for conversion.

We may not redeem the Notes prior to August 5, 2021. We will have the option to redeem all or any portion of the Notes on or after August 5, 2021, if certain conditions are met (including that our common stock is trading at or above 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption) at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Net proceeds received from the Offering were approximately $222.3 million after deducting discounts, commissions and expenses and were used to repay outstanding borrowings under the Credit Facility.

Accounting Treatment of the Notes

As of December 31, 2020 and 2019, the Notes were recorded in our consolidated balance sheet as follows (in thousands):


	December 31,
	2020		2019
Liability component:
Principal	$	93,130	$	230,000
Unamortized issuance costs	(1,440)		(4,756)
Unamortized discount	(7,156)		(23,625)
Net carrying amount of the liability component1	84,534		201,619

Equity component:
Carrying amount of the equity component, net of issuance costs2	$	7,969	$	13,912
Carrying amount of the equity component, net of issuance costs3	$	37,276	$	45,377

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1 Included in the “Long-term debt and finance lease obligations” line of the consolidated balance sheets.

2 Relates to the portion of the Notes accounted for under ASC 470-20 (defined below) and is included in the “Additional paid-in capital” line of the consolidated balance sheets.

3 Relates to the portion of the Notes accounted for under ASC 815-15 (defined below) and is included in the “Additional paid-in capital” line of the consolidated balance sheets.

Under ASC 470-20, Debt with Conversion and Other Options, (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments that may be settled entirely or partially in cash upon conversion (such as the Notes) in a manner that reflects the issuer’s economic interest cost. However, entities must first consider the guidance in ASC 815-15, Embedded Derivatives (“ASC 815-15”), to determine if an instrument contains an embedded feature that should be separately accounted for as a derivative. As the Notes were initially convertible into more than 19.99% of our outstanding common stock and shareholder approval in accordance with the NYSE rules (as described above) had not yet been obtained at the time the Notes were issued, we concluded that embedded derivative accounting under ASC 815-15 was applicable to approximately 60% of the Notes, while the remaining 40% of the Notes were subject to ASC 470-20.

As a result of obtaining shareholder approval on May 17, 2018, the embedded derivative met the criteria to be classified in stockholders’ equity, effective on the date of the approval. Accordingly, we recorded the change in fair value of the embedded derivative liability in our results of operations through May 17, 2018 and then reclassified the embedded derivative liability, which totaled $45.4 million to stockholders’ equity during the second quarter of 2018. The related income tax effects of the reclassification charged directly to stockholders’ equity were $7.8 million. As a result of the reclassification to stockholders’ equity, the embedded derivative is no longer marked to fair value each period. Losses on the embedded derivative liability recognized in the consolidated statements of operations were $24.8 million for the twelve months ended December 31, 2018 (incurred in the first and second quarters of 2018).

The following table sets forth interest expense information related to the Notes (dollars in thousands):


	Twelve Months Ended December 31,
	2020			2019

Coupon interest	$	11,329		$	11,500
Amortization of debt discount and issuance costs	6,938			6,435
Total interest expense	$	18,267		$	17,935

Effective interest rate	9.12		%	9.12		%

Hedges

ASC 815 requires that derivative instruments be recorded at fair value and included in the balance sheet as assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception date of a derivative. Special accounting for derivatives qualifying as fair value hedges allows derivatives’ gains and losses to offset related results on the hedged item in the statement of operations. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time. Credit risks related to derivatives include the possibility that the counter-party will not fulfill the terms of the contract. We consider counterparty credit risk to our derivative contracts when valuing our derivative instruments.

We previously had borrowings of €12.3 million under the Credit Facility which served as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the borrowing attributable to the U.S. Dollar/Euro spot rate to offset translation gains or losses attributable to our investment in our European operations. In connection with the repayment of the Credit Facility, the economic hedge was terminated, and at December 31, 2020 we had approximately $1.2 million in accumulated other comprehensive income, related to the terminated hedge.

LEASES

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

LEASES

We adopted ASC 842 effective January 1, 2019 and elected the modified retrospective transition method. We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use (‘ROU’) assets”, “operating lease liabilities” and “current portion of operating lease obligations” on our consolidated balance sheets. Finance leases are included in “property, plant and equipment, net”, “current portion of long-term debt and finance lease obligations” and “long-term debt and finance lease obligations” on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments and short-term lease payments (leases with initial terms less than twelve months) are expensed as incurred.

We have lease agreements with lease and non-lease components for certain equipment, office, and vehicle leases. We have elected the practical expedient to not separate lease and non-lease components and account for both as a single lease component.

We have operating and finance leases primarily for equipment, real estate, and vehicles. Our leases have remaining lease terms of 1 year to 14 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within 1 year.

The components of lease expense are as follows (in thousands):


	Twelve Months Ended December 31, 2020		Twelve Months Ended December 31, 2019
Operating lease costs	$	26,431	$	30,331
Variable lease costs	5,440		6,195
Finance lease costs:
Amortization of right-of-use assets	441		322
Interest on lease liabilities	320		333
Total lease cost	$	32,632	$	37,181

Other information related to leases are as follows (in thousands):


	Twelve Months Ended December 31, 2020		Twelve Months Ended December 31, 2019
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	20,883	$	24,263
Operating cash flows from finance leases	327		389
Financing cash flows from finance leases	278		291
Right-of-use assets obtained in exchange for lease obligations
Operating leases	4,624		16,242
Finance leases	60		326

Amounts recognized in the condensed consolidated balance sheet are as follows (in thousands):


	December 31, 2020			December 31, 2019
Operating Leases:
Operating lease right-of-use assets	$	63,869		$	67,048
Current portion of operating lease obligations	17,375			17,100
Operating lease obligations (non-current)	52,207			54,436

Finance Leases:
Property, plant and equipment, net	$	4,779		$	5,156
Current portion of long-term debt and finance lease obligations	337			294
Long-term debt and finance lease obligations	4,816			5,069

Weighted average remaining lease term
Operating leases	6 years			6 years
Finance leases	12 years			13 years
Weighted average discount rate
Operating leases	6.7		%	8.3		%
Finance lease	6.2		%	6.3		%

As of December 31, 2020, we have no material additional operating and finance leases that have not yet commenced.

As of December 31, 2020, future minimum lease payments under non-cancellable (excluding short-term leases) are as follows (in thousands):


Twelve Months Ended December 31,	Operating Leases		Finance Lease
2021	19,337		621
2022	14,418		625
2023	12,387		559
2024	10,196		545
2025	7,883		555
Thereafter	17,074		4,553
Total future minimum lease payments	81,295		7,458
Less: Interest	11,713		2,305
Present value of lease liabilities	$	69,582	$	5,153

Total rent expense resulting from operating leases, including short-term leases, for the years ended December 31, 2020, 2019 and 2018 were $38.8 million, $43.0 million and $44.9 million, respectively.

Leases

LEASES

The components of lease expense are as follows (in thousands):


	Twelve Months Ended December 31, 2020		Twelve Months Ended December 31, 2019
Operating lease costs	$	26,431	$