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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________ 
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-08604
https://cdn.kscope.io/f9a1b1305c282c254602c1381d72495b-tisi-20210930_g1.jpg
TEAM, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 74-1765729
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
13131 Dairy Ashford, Suite 600, Sugar Land, Texas
 77478
(Address of Principal Executive Offices) (Zip Code)
(281) 331-6154
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.30 par valueTISINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨     No  þ
The Registrant had 30,980,014 shares of common stock, par value $0.30, outstanding as of November 8, 2021.


Table of Contents
INDEX
 
  Page No.

1

Table of Contents
PART I—FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
September 30, 2021December 31, 2020
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$16,972 $24,586 
Receivables, net204,294 194,066 
Inventory37,151 36,854 
Income tax receivable1,284 1,474 
Prepaid expenses and other current assets61,451 26,752 
Total current assets321,152 283,732 
Property, plant and equipment, net160,869 170,309 
Operating lease right-of-use assets63,471 63,869 
Intangible assets, net93,228 103,282 
Goodwill34,181 91,351 
Deferred income taxes 6,790 
Other assets, net12,530 11,642 
Total assets$685,431 $730,975 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$49,030 $42,148 
Current portion of long-term debt and finance lease obligations663 337 
Current portion of operating lease obligations16,502 17,375 
Other accrued liabilities115,693 73,144 
Total current liabilities181,888 133,004 
Long-term debt and finance lease obligations362,965 312,159 
Operating lease obligations51,867 52,207 
Defined benefit pension liability1,674 5,282 
Deferred income taxes2,317 4,375 
Other long-term liabilities9,283 9,345 
Total liabilities609,994 516,372 
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; 30,980,014 and 30,874,437 shares issued
9,289 9,257 
Additional paid-in capital428,031 422,589 
Retained deficit(332,531)(189,565)
Accumulated other comprehensive loss(29,352)(27,678)
Total equity75,437 214,603 
Total liabilities and equity$685,431 $730,975 
See accompanying notes to unaudited condensed consolidated financial statements.
2

Table of Contents

TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Revenues$217,410 $219,093 $650,901 $645,236 
Operating expenses164,089 155,388 491,115 466,669 
Gross margin53,321 63,705 159,786 178,567 
Selling, general and administrative expenses67,553 61,089 202,155 198,415 
Restructuring and other related charges, net457 319 2,614 3,365 
Goodwill impairment charge55,837  55,837 191,788 
Operating income (loss)(70,526)2,297 (100,820)(215,001)
Interest expense, net(9,974)(7,757)(28,968)(21,847)
Other expense, net(1,760)(655)(3,754)(1,292)
Loss before income taxes(82,260)(6,115)(133,542)(238,140)
(Provision) benefit for income taxes(8,922)(2,958)(9,424)15,812 
Net loss$(91,182)$(9,073)$(142,966)$(222,328)
Loss per common share:
Basic and diluted$(2.94)$(0.30)$(4.62)$(7.27)
Weighted-average number of shares outstanding:
Basic and diluted30,980 30,628 30,933 30,599 

See accompanying notes to unaudited condensed consolidated financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Net loss$(91,182)$(9,073)$(142,966)$(222,328)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment(3,084)3,180 (2,210)(2,978)
Foreign currency hedge (610) (627)
Other comprehensive income (loss), before tax(3,084)2,570 (2,210)(3,605)
Tax (provision) benefit attributable to other comprehensive income (loss)691 (60)536 74 
Other comprehensive income (loss), net of tax(2,393)2,510 (1,674)(3,531)
Total comprehensive loss$(93,575)$(6,563)$(144,640)$(225,859)
 
See accompanying notes to unaudited condensed consolidated financial statements.

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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(Unaudited)
Common StockAdditional
Paid-in
Capital
Retained
Earnings (Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
SharesAmount
Balance at December 31, 202030,874 $9,257 $422,589 $(189,565)$(27,678)$214,603 
Net loss— — — (34,291)— (34,291)
Foreign currency translation adjustment, net of tax— — — — 319 319 
Non-cash compensation— — 2,330 — — 2,330 
Net settlement of vested stock awards19 6 (107)— — (101)
Balance at March 31, 202130,893 $9,263 $424,812 $(223,856)$(27,359)$182,860 
Net loss— — — (17,493)— (17,493)
Foreign currency translation adjustment, net of tax— — — — 400 400 
Non-cash compensation— — 2,138 — — 2,138 
Net settlement of vested stock awards86 26 (26)— —  
Balance at June 30, 202130,979 $9,289 $426,924 $(241,349)$(26,959)$167,905 
Net loss— — — (91,182)— (91,182)
Foreign currency translation adjustment, net of tax— — — — (2,393)(2,393)
Non-cash compensation— — 1,108 — — 1,108 
Net settlement of vested stock awards1 — (1)— — (1)
Balance at September 30, 202130,980 $9,289 $428,031 $(332,531)$(29,352)$75,437 
Balance at December 31, 201930,519 $9,153 $409,034 $48,673 $(30,190)$436,670 
Adoption of new accounting principle, net of tax— — — (1,034)— (1,034)
Net loss— — — (199,727)— (199,727)
Foreign currency translation adjustment, net of tax— — — — (9,861)(9,861)
Foreign currency hedge, net of tax— — — — 200 200 
Non-cash compensation— — 1,530 — — 1,530 
Net settlement of vested stock awards109 30 (379)— — (349)
Balance at March 31, 202030,628 $9,183 $410,185 $(152,088)$(39,851)$227,429 
Net loss— — — (13,528)— (13,528)
Foreign currency translation adjustment, net of tax— — — — 3,832 3,832 
Foreign currency hedge, net of tax— — — — (212)(212)
Non-cash compensation— — 1,415 — — 1,415 
Balance at June 30, 202030,628 $9,183 $411,600 $(165,616)$(36,231)$218,936 
Net loss— — — (9,073)— (9,073)
Foreign currency translation adjustment, net of tax— — — — 2,970 2,970 
Foreign currency hedge, net of tax— — — — (460)(460)
Non-cash compensation— — 1,128 — — 1,128 
Net settlement of vested stock awards— — (1)— — (1)
Balance at September 30, 202030,628 $9,183 $412,727 $(174,689)$(33,721)$213,500 



See accompanying notes to unaudited condensed consolidated financial statements.


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TEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended
September 30,
 20212020
Cash flows (used in) provided by operating activities:
Net loss$(142,966)$(222,328)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization31,416 34,709 
Amortization of deferred loan costs and debt discounts6,388 6,493 
Allowance for credit losses1,985 1,160 
Foreign currency losses4,274 1,628 
Deferred income taxes5,083 (3,132)
Loss on asset disposals17 938 
Goodwill impairment charges55,837 191,788 
Non-cash compensation costs5,576 4,073 
Other, net(3,629)(3,248)
Changes in operating assets and liabilities:
Accounts receivable(14,817)22,147 
Inventory(334)2,744 
Prepaid expenses and other current assets3,700 (6,000)
Accounts payable6,012 4,718 
Other accrued liabilities5,321 (13,838)
Income taxes276 (1,687)
Net cash (used in) provided by operating activities(35,861)20,165 
Cash flows (used in) provided by investing activities:
Capital expenditures(12,376)(16,684)
Business acquisitions, net of cash acquired (1,013)
Proceeds from disposal of assets154 198 
Other (53)
Net cash used in investing activities(12,222)(17,552)
Cash flows (used in) provided by financing activities:
Borrowings under Credit Facility revolver, net 10,802 
Borrowings under ABL Facility, net46,300  
Borrowings under ABL Facility, gross124,700  
Payments under ABL Facility, gross(125,900) 
Payments under Credit Facility term loan (3,750)
Payments for debt issuance costs(2,899)(1,841)
Taxes paid related to net share settlement of share-based awards(102)(350)
Other(356)(199)
Net cash provided by financing activities41,743 4,662 
Effect of exchange rate changes on cash and cash equivalents(1,274)161 
Net (decrease) increase in cash and cash equivalents(7,614)7,436 
Cash and cash equivalents at beginning of period24,586 12,175 
Cash and cash equivalents at end of period$16,972 $19,611 


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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Description of business. Unless otherwise indicated, the terms “Team, Inc.,” “Team,” “we,” “our” and “us” are used in this report to refer to Team, Inc., to one or more of its consolidated subsidiaries or to all of them taken as a whole.
We are a global leading provider of integrated, digitally-enabled asset performance assurance and optimization solutions. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our client’s most critical assets. We conduct operations in three segments: Inspection and Heat Treating (“IHT”), Mechanical Services (“MS”) and Quest Integrity. Through the capabilities and resources in these three segments, we believe that Team is uniquely qualified to provide integrated solutions involving in their most basic form: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the client’s election. In addition, we are capable of escalating with the client’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that Team is unique in its ability to provide services in three distinct client demand profiles: (i) turnaround or project services, (ii) call-out services and (iii) nested or run-and-maintain services.
IHT provides integrity management and performance solutions, conventional and advanced non-destructive testing (“NDT”) services, heat treating and thermal services, tank management solutions, and pipeline integrity solutions, as well as associated engineering and condition assessment services. These services can be offered while facilities are running (on-stream), during facility turnarounds or during new construction or expansion activities.
MS provides machining, bolting, and vapor barrier weld testing services, hot tap and line intervention services, valve management solutions, and emission control services primarily as call-out and turnaround services under both on-stream and off-line/shut down circumstances. On-stream services offered by MS represent the services offered while plants are operating and under pressure. Turnaround services are project-related and demand is a function of the number and scope of scheduled and unscheduled facility turnarounds as well as new industrial facility construction or expansion activities.
Quest Integrity provides integrity and reliability management solutions for the process, pipeline and power sectors. These solutions encompass three broadly-defined disciplines including (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 industries which include:
Energy (refining, power, and nuclear);
Energy Transition (liquefied natural gas, hydrogen, carbon capture & sequestration, biofuels, and renewable power);
Manufacturing and Process (chemical, petrochemical, pulp and paper industries, manufacturing, automotive and mining);
Upstream, 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 Financing Transactions. On November 9, 2021, we entered into a credit agreement with Corre Credit Fund, LLC, as agent, and the lenders party thereto (the “Subordinated Term Loan Credit Agreement”) providing for an unsecured $50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”). Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $22.5 million on November 9, 2021, and we expect to borrow an additional $27.5 million on December 8, 2021, subject to certain conditions. The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2026 and the date that is two weeks later than the maturity or full repayment of the Term Loan (as defined in Note 11 - Long-Term Debt). The stated interest rate on the Subordinated Term Loan is 12%.
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Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders a warrant providing for the purchase of an aggregate of 5,000,000 shares of our common stock, exercisable at the holder’s option at any time, in whole or in part, until the seventh anniversary of the issue date, at an exercise price of $1.50 per share (the “New Warrants”), (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom shall be our Chief Executive Officer, and (iii) reconstitute our Board of Directors. The Subordinated Term Loan also contains other customary prepayment provisions, events of default and covenants.
In connection with our entry into the Subordinated Term Loan Credit Agreement, on November 9, 2021, we also entered into Amendment No. 3 (the “Third Amendment”) to the Term Loan Credit Agreement (as defined below). The Third Amendment to the Term Loan Credit Agreement, among other things, (i) waives certain covenants until September 30, 2022 and modifies covenants thereafter to provide us with additional flexibility and (ii) requires us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC Holdco II, L.P. (“APSC”), providing for the purchase of an aggregate of 1,417,051 shares of our common stock, and to amend the Warrants (as defined in Note 11 - Long-Term Debt) currently held by APSC, to provide for, an exercise price of $1.50 per share.
Our entry into the Subordinated Term Loan Credit Agreement, the Third Amendment and related transactions are referred to collectively herein as the “Recent Financing Transactions.”
Ongoing Effects of COVID.  The impact of the COVID pandemic continues to affect our workforce and operations, as well as the operations of our clients, suppliers and contractors. During this period, we have continued to focus on the following key priorities:
the health and safety of our employees and business continuity;
the alignment of our business to the near term market dynamics and demand for our services; and
our end market revenue diversification strategy.
The ultimate duration and economic impact of the COVID pandemic remains unclear. However, we believe the increased availability and administration of COVID vaccines, easing of pandemic related restrictions, reopening of economies, and increasing commodity prices are positive signs of broader economic recovery.
The extent of COVID’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), impact of the new COVID variants and the rollout of COVID vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.
Basis for presentation. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain disclosures have been condensed or omitted from the interim financial statements included in this report. These financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“the 2020 Form 10-K”).
Going Concern. The financial statements have been prepared on a going concern basis, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. In evaluating our ability to continue as a going concern, we have considered conditions and events that could raise substantial doubt about our ability to continue as a going concern for one year following the date that our financial statements are issued. These conditions and evaluations included our current financial condition and liquidity sources, including current cash and cash equivalents balances, forecasted cash flows, our obligations due within twelve months of the date these financial statements are issued, including our obligations described in Note 11 - Long-Term Debt, and the other conditions and events described below.

We have suffered recurring operating losses related to the COVID pandemic and related economic repercussions, and difficult market conditions. During the quarter, revenues and margins continued to decline along with margin pressures from inflationary costs including labor, materials, and transportation resulting in further operating losses. We are in compliance with our debt covenants, however, our current financial forecasts indicate insufficient cash flows from operations to maintain compliance with our ABL covenants and repay our outstanding debt if it were to come due. Subsequent to quarter-end, we had limited borrowing capacity to fund our increasing working capital needs. As of September 30, 2021, if an accelerated triggering event had occurred, the Company would not be able to be in compliance with the Fixed Charge Coverage Ratio (“FCCR”) requirement. These factors raise substantial doubt about our ability to continue as a going concern.
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In response to the above, (i) we have entered into the Recent Financing Transactions to address our near-term liquidity needs; (ii) we have taken definitive actions to reduce costs, improve operations, profitability, and liquidity, and position the Company for future growth; and (iii) we are actively pursuing other strategic alternatives. While the Recent Refinancing Transactions provide us with additional funding to meet our short-term liquidity needs, there can be no assurance that we will generate adequate liquidity to fund operations and meet our debt service obligations in the future or that our lenders will continue to provide amendments to the Company.
These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities with respect to our ability to continue as a going concern. However, we have provided incremental valuation allowances related to our net deferred tax assets as their recoverability was no longer considered more likely than not.
Use of estimates. Our accounting policies conform to Generally Accepted Accounting Principles in the United States (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for contingencies, workers’ compensation, auto, medical, and general liability, (4) establishing an allowance for credit losses, (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.
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, accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our ABL Facility and Term Loan (each defined in Note 11) is representative of the carrying value based upon the variable terms and management’s opinion that the current rates are available to us with the same maturity and security structure are equivalent to that of the debt. The fair value of our 5% Convertible Senior Notes due 2023 (the “Notes”) as of September 30, 2021 and December 31, 2020 is $88.2 million and $91.9 million, respectively, (inclusive of the fair value of the conversion option) and is 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 11.
Concentration of credit risk. No single customer accounts for more than 10% of consolidated revenues.
Earnings (loss) per share. Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the sum of the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the assumed exercise or conversion of (1) outstanding share-based compensation, (2) our Notes and (3) outstanding Warrants (defined in Note 11). The impact of share-based compensation, the Notes and warrants are calculated using the treasury stock method.
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Our intent is to settle the principal amount of the 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.

Amounts used in basic and diluted earnings per share, for the three and nine months ended September 30, 2021 and 2020, are as follows (in thousands): 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
 (unaudited)(unaudited)(unaudited)(unaudited)
Weighted-average number of basic shares outstanding30,980 30,628 30,933 30,599 
Stock options, stock units and performance awards    
Notes    
Warrants    
Total shares and dilutive securities30,980 30,628 30,933 30,599 
For the three and nine months ended September 30, 2021 and 2020, all outstanding share-based compensation awards and the Warrants were excluded from the calculation of diluted EPS as their inclusion would be antidilutive due to the net loss in both periods. Also, for the three and nine months ended September 30, 2021 and 2020, the Notes were excluded from diluted EPS as the conversion price exceeded the average price of our common stock during those periods. For information on our Notes and Warrants, refer to Note 11. For information on our share-based compensation awards, refer to Note 14.
Newly Adopted Accounting Principles
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. The adoption of ASU No. 2019-12 as of January 1, 2021 had no impact in the period ended September 30, 2021.
Accounting Principles Not Yet Adopted
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 EPS 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 EPS, if the effect would be dilutive. We are still evaluating the other impacts this ASU may have on our consolidated financial position, results of operations, and cash flows.

2. REVENUE
In accordance with ASC 606, Revenue from Contracts with Customers, we follow a five-step process to recognize revenue: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations, and (5) recognize revenue when the performance obligations are satisfied.
The majority of our contracts with customers are short-term in nature and billed on a time and materials basis, while certain other contracts are at a fixed price. Certain contracts may contain a combination of fixed and variable elements. We act as a principal and have performance obligations to provide the service itself or oversee the services provided by any
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subcontractors. Revenue is measured based on consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties, such as taxes assessed by governmental authorities. In contracts where the amount of consideration is variable, we consider our experience with similar contracts in estimating the amount to which we will be entitled and recognize revenues accordingly. As most of our contracts contain only one performance obligation, the allocation of a contract’s transaction price to multiple performance obligations is generally not applicable. Customers are generally billed as we satisfy our performance obligations and payment terms typically range from 30 to 90 days from the invoice date. Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require advance customer payment. Our contracts do not include significant financing components since the contracts typically span less than one year. Contracts generally include an assurance type warranty clause to guarantee that the services comply with agreed specifications. The warranty period typically is 12 months or less from the date of service. Warranty expenses were not material for the three and nine months ended September 30, 2021 and 2020.
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):
Geographic area:
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal
Revenue:
IHT$98,812 $2,664 $101,476 $94,414 $2,223 $96,637 
MS63,885 32,518 96,403 73,204 28,534 101,738 
Quest Integrity11,421 8,110 19,531 12,382 8,336 20,718 
Total$174,118 $43,292 $217,410 $180,000 $39,093 $219,093 

Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
(unaudited)(unaudited)
United States and CanadaOther CountriesTotalUnited States and CanadaOther CountriesTotal
Revenue:
IHT$302,871 $7,206 $310,077 $277,947 $7,045 $284,992 
MS189,234 91,732 280,966 217,189 81,888 299,077 
Quest Integrity36,956 22,902 59,858 35,967 25,200 61,167 
Total$529,061 $121,840 $650,901 $531,103 $114,133 $645,236 




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Operating segment and service type:
Three Months Ended September 30, 2021
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$80,553 $56 $11,928 $8,939 $101,476 
MS 95,560 71 772 96,403 
Quest Integrity19,531    19,531 
Total$100,084 $95,616 $11,999 $9,711 $217,410 

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

Nine Months Ended September 30, 2021
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$244,374 $344 $42,650 $22,709 $310,077 
MS 278,685 768 1,513 280,966 
Quest Integrity59,858    59,858 
Total$304,232 $279,029 $43,418 $24,222 $650,901 

Nine Months Ended September 30, 2020
(unaudited)
Non-Destructive Evaluation and Testing ServicesRepair and Maintenance ServicesHeat TreatingOtherTotal
Revenue:
IHT$226,693 $121 $37,583 $20,595 $284,992 
MS 295,741 896 2,440 299,077 
Quest Integrity61,167    61,167 
Total$287,860 $295,862 $38,479 $23,035 $645,236 

For additional information on our reportable operating segments and geographic information, refer to Note 17.
Contract balances. The timing of revenue recognition, billings and cash collections results in trade accounts receivable, contract assets and contract liabilities on the consolidated balance sheets. Trade accounts receivable include billed and unbilled
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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 Note 3 for additional information on the allowance for credit losses and our trade receivables. Contract assets include unbilled amounts typically resulting from sales under fixed-price contracts when the cost-to-cost method of revenue recognition is utilized, the revenue recognized exceeds the amount billed to the customer and the right to payment is conditional on something other than the passage of time. Amounts may not exceed their net realizable value. If we receive advances or deposits from our customers, a contract liability is recorded. Additionally, a contract liability arises if items of variable consideration result in less revenue being recorded than what is billed. Contract assets and contract liabilities are generally classified as current.
Trade accounts receivable, contract assets and contract liabilities consisted of the following (in thousands):
September 30, 2021December 31, 2020
(unaudited)
Trade accounts receivable, net1
$204,294 $194,066 
Contract assets2
$1,475