0000318833-22-000079 | 10-Q | XBRL Viewer

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Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2022	Aug. 10, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
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
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		43,223,879
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000318833
Current Fiscal Year End Date	--12-31
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.30 par value
Trading Symbol	TISI
Security Exchange Name	NYSE
Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock Purchase Rights
Security Exchange Name	NYSE
No Trading Symbol Flag	true

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 67,446	$ 65,315
Accounts receivable, net of allowance of $6,747 and $8,912, respectively	215,408	188,772
Inventory	36,179	35,754
Income tax receivable	4,351	3,349
Prepaid expenses and other current assets	70,424	59,868
Total current assets	393,808	353,058
Property, plant and equipment, net	157,039	161,359
Operating lease right-of-use assets	52,925	60,700
Intangible assets, net	83,216	89,898
Goodwill	24,547	25,243
Defined benefit pension asset	4,798	2,902
Deferred income taxes	54	792
Other assets, net	7,409	10,533
Total assets	723,796	704,485
Current liabilities:
Accounts payable	38,407	46,181
Current portion of long-term debt and finance lease obligations	487,204	669
Current portion of operating lease obligations	14,389	16,176
Other accrued liabilities	128,757	121,099
Total current liabilities	668,757	184,125
Total long-term debt and finance lease obligations, less current portion	4,656	405,191
Operating lease obligations	43,090	49,221
Deferred income taxes	3,265	4,185
Other long-term liabilities	3,479	9,896
Total liabilities	723,247	652,618
Commitments and contingencies
Equity:
Preferred stock, 500,000 shares authorized, none issued	0	0
Common stock, par value $0.30 per share, 60,000,000 shares authorized; 43,223,879 and 31,214,714 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	12,962	9,359
Additional paid-in capital	445,210	444,824
Accumulated deficit	(425,774)	(375,584)
Accumulated other comprehensive loss	(31,849)	(26,732)
Total equity	549	51,867
Total liabilities and equity	$ 723,796	$ 704,485

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowance for credit loss, current	$ 6,747	$ 8,912
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in usd per share)	$ 0.30	$ 0.30
Common stock, shares authorized (in shares)	60,000,000	60,000,000
Common stock, shares issued (in shares)	43,223,879	31,214,714
Common stock, shares, outstanding (in shares)	43,223,879	31,214,714

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Revenues	$ 251,265	$ 238,873	$ 469,841	$ 433,491
Operating expenses	181,312	176,109	344,790	327,026
Gross margin	69,953	62,764	125,051	106,465
Selling, general and administrative expenses	72,733	68,478	144,018	134,602
Restructuring and other related charges, net	0	280	16	2,157
Operating loss	(2,780)	(5,994)	(18,983)	(30,294)
Interest expense, net	(18,480)	(9,598)	(37,085)	(18,994)
Other income (expense)	1,476	(1,044)	4,178	(1,994)
Loss before income taxes	(19,784)	(16,636)	(51,890)	(51,282)
Provision for income taxes	(1,768)	(857)	(2,124)	(502)
Net loss	$ (21,552)	$ (17,493)	$ (54,014)	$ (51,784)
Loss per common share:
Basic (in dollars per share)	$ (0.50)	$ (0.57)	$ (1.34)	$ (1.68)
Diluted (in dollars per share)	$ (0.50)	$ (0.57)	$ (1.34)	$ (1.68)
Weighted-average number of shares outstanding:
Weighted-average number of basic shares outstanding (in shares)	43,179	30,940	40,454	30,909
Weighted-average number of diluted shares outstanding (in shares)	43,179	30,940	40,454	30,909

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net loss	$ (21,552)	$ (17,493)	$ (54,014)	$ (51,784)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment		657	(5,117)	874
Other comprehensive income (loss), before tax	(5,463)	657	(5,117)	874
Tax provision attributable to other comprehensive income (loss)	0	(257)	0	(155)
Other comprehensive income (loss), net of tax	(5,463)	400	(5,117)	719
Total comprehensive loss	$ (27,015)	$ (17,093)	$ (59,131)	$ (51,065)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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Amount before tax, after reclassification adjustments of other comprehensive income (loss).

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Amount after tax and reclassification adjustments of other comprehensive income (loss).

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- Definition

Amount of tax expense (benefit) allocated to other comprehensive income (loss).

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+ Details

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings (Deficit)	Retained Earnings (Deficit) Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Loss
Beginning balance (in shares) at Dec. 31, 2020			30,874
Beginning balance at Dec. 31, 2020	$ 214,603		$ 9,257	$ 422,589		$ (189,565)		$ (27,678)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
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 awards (in shares)			19
Net settlement of vested stock awards	(101)		$ 6	(107)
Ending balance (in shares) at Mar. 31, 2021			30,893
Ending balance at Mar. 31, 2021	182,860		$ 9,263	424,812		(223,856)		(27,359)
Beginning balance (in shares) at Dec. 31, 2020			30,874
Beginning balance at Dec. 31, 2020	214,603		$ 9,257	422,589		(189,565)		(27,678)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(51,784)
Ending balance (in shares) at Jun. 30, 2021			30,979
Ending balance at Jun. 30, 2021	167,905		$ 9,289	426,924		(241,349)		(26,959)
Beginning balance (in shares) at Dec. 31, 2020			30,874
Beginning balance at Dec. 31, 2020	214,603		$ 9,257	422,589		(189,565)		(27,678)
Ending balance (in shares) at Dec. 31, 2021			31,215
Ending balance at Dec. 31, 2021	$ 51,867	$ (1,827)	$ 9,359	444,824	$ (5,651)	(375,584)	$ 3,824	(26,732)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Adjustments for prior periods from adopting ASU 2020-06	ASU 2020-06 (ASC 470-20)
Beginning balance (in shares) at Mar. 31, 2021			30,893
Beginning balance at Mar. 31, 2021	$ 182,860		$ 9,263	424,812		(223,856)		(27,359)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
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 awards (in shares)			86
Net settlement of vested stock awards	0		$ 26	(26)
Ending balance (in shares) at Jun. 30, 2021			30,979
Ending balance at Jun. 30, 2021	167,905		$ 9,289	426,924		(241,349)		(26,959)
Beginning balance (in shares) at Dec. 31, 2021			31,215
Beginning balance at Dec. 31, 2021	51,867	(1,827)	$ 9,359	444,824	(5,651)	(375,584)	3,824	(26,732)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)			11,905
Issuance of common stock	9,768		$ 3,572	6,196
Net loss	(32,462)					(32,462)
Foreign currency translation adjustment, net of tax	346							346
Non-cash compensation (in shares)			2
Non-cash compensation	(624)			(624)
Net settlement of vested stock awards	2			2
Ending balance (in shares) at Mar. 31, 2022			43,122
Ending balance at Mar. 31, 2022	27,070		$ 12,931	444,747		(404,222)		(26,386)
Beginning balance (in shares) at Dec. 31, 2021			31,215
Beginning balance at Dec. 31, 2021	51,867	$ (1,827)	$ 9,359	444,824	$ (5,651)	(375,584)	$ 3,824	(26,732)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(54,014)
Ending balance (in shares) at Jun. 30, 2022			43,224
Ending balance at Jun. 30, 2022	549		$ 12,962	445,210		(425,774)		(31,849)
Beginning balance (in shares) at Mar. 31, 2022			43,122
Beginning balance at Mar. 31, 2022	27,070		$ 12,931	444,747		(404,222)		(26,386)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)			102
Issuance of common stock	(71)		$ 31	(102)
Net loss	(21,552)					(21,552)
Foreign currency translation adjustment, net of tax	(5,463)							(5,463)
Non-cash compensation	565			565
Ending balance (in shares) at Jun. 30, 2022			43,224
Ending balance at Jun. 30, 2022	$ 549		$ 12,962	$ 445,210		$ (425,774)		$ (31,849)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows (used in) provided by operating activities:
Net loss	$ (54,014)	$ (51,784)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	19,609	21,306
Write-off of deferred financing costs	2,748	0
Amortization of deferred financing costs, debt issuance costs, and debt warrant discounts	12,077	4,154
Paid-in-kind interest	9,962	0
Allowance for credit losses	30	965
Foreign currency losses	569	2,341
Deferred income taxes	(357)	(2,318)
(Gain) loss on asset disposals	(3,532)	309
Non-cash compensation (credits) costs	(59)	4,468
Other, net	(2,382)	(2,451)
Changes in operating assets and liabilities:
Accounts receivable	(29,595)	(24,811)
Inventory	(1,620)	(743)
Prepaid expenses and other current assets	(3,305)	5,612
Accounts payable	(5,889)	3,379
Other accrued liabilities	3,367	4,484
Income taxes	(1,000)	290
Net cash used in operating activities	(53,391)	(34,799)
Cash flows (used in) provided by investing activities:
Capital expenditures	(14,001)	(9,220)
Proceeds from disposal of assets	5,119	49
Net cash used in investing activities	(8,882)	(9,171)
Cash flows (used in) provided by financing activities:
Borrowings under ABL Credit Facility (Eclipse)	104,641	0
Payments under ABL Credit Facility (Eclipse)	(1,588)	0
Borrowings under Corre Delayed Draw Term Loans (ABL Credit Facility (Corre))	25,000	0
Borrowings under ABL Facility (Citibank), net	0	49,300
Borrowings under ABL Facility (Citibank), gross	10,300	95,200
Payments under ABL Facility (Citibank), gross	(72,300)	(104,200)
Payments for debt issuance costs	(10,640)	(2,326)
Issuance of common stock	9,696	0
Taxes paid related to net share settlement of share-based awards	0	(102)
Other	(323)	(206)
Net cash provided by financing activities	64,786	37,666
Effect of exchange rate changes on cash and cash equivalents	(382)	73
Net increase (decrease) in cash and cash equivalents	2,131	(6,231)
Cash and cash equivalents at beginning of period	65,315	24,586
Cash and cash equivalents at end of period	$ 67,446	$ 18,355

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

6 Months Ended

Jun. 30, 2022

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 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 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: 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 scaling 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, and pipeline integrity management services, and field 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. IHT also provides advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.

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 two 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; and (2) advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support.

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.

Ongoing Effects of COVID-19. The COVID-19 pandemic has impacted our workforce and operations, as well as the operations of our clients, suppliers and contractors. We continue to be affected by the direct and indirect impact of the pandemic and global economic conditions on operating expenses, staffing and supply chain management.

Under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we qualified to defer the employer portion of social security taxes incurred through the end of calendar 2020. As of December 31, 2021 we had $14.1 million of deferred employer payroll taxes outstanding and we paid $7.0 million of the deferred payroll taxes in January 2022, the

remaining balance at June 30, 2022 of $7.1 million is due at the end of 2022. Additionally, other governments in jurisdictions where we operate passed legislation to provide employers with relief programs, which include wage subsidy grants, 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. We recognized no reduction to either our operating expenses or our selling, general and administrative expenses during the three months ended June 30, 2022, compared to $1.8 million and $0.3 million, respectively, during three months ended June 30, 2021. We recognized a reduction of $0.6 million and $0.1 million to our operating expenses and our selling, general and administrative expenses, respectively, during the six months ended June 30, 2022, and $3.8 million and $0.7 million, respectively during the six months ended June 30, 2021.

Inflation. Inflation rates and currency exchange rates continue to have an effect on worldwide economies and, consequently, on the way the Company operates. The Company continues to monitor these situations and take appropriate actions. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases. We are carefully monitoring impacts from inflation, supply chain challenges and slowing economic conditions. For further information regarding the risks we face relating to inflation, see "Risk Factors - We may experience inflationary pressures in our operating costs and cost overruns on our projects" in our Annual Report on Form 10-K for the year ended December 31, 2021. For further information regarding the risks we face relating to inflation, see "Risk Factors - We may experience inflationary pressures in our operating costs and cost overruns on our projects" in our Annual Report on Form 10-K for the year ended December 31, 2021.

Ukraine Conflict. The Company does not have employees or operations in Russia or Ukraine. Sanctions and other trade controls imposed by the United States and other governments in response to Russia’s military operations in Ukraine could impact our supply chain in future periods. While it is difficult to estimate the impact of current or future sanctions on the Company’s business and financial position, these sanctions could adversely impact the Company’s sales, cost of procuring raw materials, or distribution costs in future periods.

Basis for presentation. These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In the opinion of management, these unaudited 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 condensed consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission.

Consolidation. The condensed 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.

Related Party Transactions. A related party transaction is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the Company or any of its subsidiaries is a participant, and (2) any Related Party (as defined below) has or will have a direct or indirect material interest.

A Related Party is any person who is, or, at any time since the beginning of the Company’s last fiscal year, was (1) an executive officer, director or nominee for election as a director of the Company or any of its subsidiaries, (2) a person with greater than five percent (5%) beneficial interest in the Company, (3) an immediate family member of any of the individuals or entities identified in (1) or (2) of this paragraph, and (4) any firm, corporation or other entity in which any of the foregoing individuals or entities is employed or is a general partner or principal or in a similar position or in which such person or entity has a five percent (5%) or greater beneficial interest. Immediate family members includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home, other than a tenant or employee.

Liquidity and Going Concern. These condensed consolidated financial statements have been prepared in accordance with GAAP and assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issue date of these unaudited condensed consolidated financial statements. Our ability to continue as a going concern is dependent on many factors, including among other things, our ability to comply with the covenants in our debt agreements, our ability to cure any defaults that occur under our debt agreements, or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as defaults occur or as interest and principal payments come due. Liquidity risk is the risk that we will be unable to meet our financial obligations as they become due. Our liquidity may be affected by improvements and declines in commodity prices, our segments operational performance, and our ability to access capital and credit markets.

We evaluated the Company’s liquidity within one year after the date of issuance of these unaudited condensed consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern. In the preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following: (i) projected cash outflows, (ii) projected cash inflows, and (iii) excess availability level under the Company’s existing debt arrangements. The cash flow projections were based on known or planned cash requirements for operating and financing costs and include management’s best estimate regarding future customer activity levels, pricing for its services and for its supplies and other factors. Actual results could vary significantly from those projections. We do not believe, based on the Company’s forecast that current working capital, cash flow from operations, and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations as they come due within one year after the date of issuance of these condensed consolidated financial statements.

Our 5.00% Convertible Senior Notes are due on August 1, 2023 (the "Notes") and have a principal balance of $95.2 million. We are exploring alternatives to reduce or refinance the Notes outstanding balance, including extending the maturity. However, there is no assurance that we will be able to execute a reduction, extension, or refinancing of the Notes or that the terms of any replacement financing would be as favorable as the terms of the Notes prior to the maturity date. Under the terms of our amended financing arrangements that were entered into during 2022, the Maturity Reserve Trigger Date, as defined in the ABL Credit Agreement (as defined herein), and the Maturity Trigger Date as defined in the Term Loan Credit Agreement (as defined herein), collectively referred to as the “Trigger Date” is now May 18, 2023. Therefore, the Notes balance must be paid down to $10.0 million by May 18, 2023, or the Company must have equivalent cash on hand to pay down the Notes to $10.0 million.

The failure to pay down the Notes by the Trigger Date would be an event of default under our Term Loan Credit Agreement (as defined herein), Subordinated Term Loan Credit Agreement, ABL Credit Facility, and Corre Delayed Draw Term Loan (as defined herein) since these instruments contain cross default provisions, resulting in these debt instruments becoming payable on demand. Refer to Note 11 - Debt for more information on the terms and maturity dates of our debt that may affect our future liquidity.

As of June 30, 2022, we are in compliance with our debt covenants. However, without the consummation of a refinancing transaction or agreement to extend the Notes maturity date, there is a risk that the Company could be, among other things, unable to make principal payments on the Notes to satisfy the Trigger Date provision. Failure to pay down the principal on the Notes to $10.0 million by May 18, 2023 will result in an event of default and the associated cross defaults noted above under the Company’s other debt instruments.

As a result of our current financial resources and no guarantee that we will be able to obtain an extension or amend the financial covenants contained therein, we intend to refinance the Notes. Any such refinancing may include the issuance of additional notes, common or preferred stock or a combination thereof. However, there is no assurance that we will be able to execute this refinancing or repayment prior to the Trigger Date, and as such, substantial doubt exists that we have the ability to continue as a going concern. We are evaluating and will continue to explore strategic alternatives to a refinancing transaction or the reduction of the debt, including negotiating amendments to our credit facilities and the financial covenants contained therein, the sale of assets, or other alternative financing transactions. While our lenders agreed on an extension and amended the financial covenants in prior periods, there can be no assurance that our lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default. The unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

On August 15, 2022, Team announced it has executed a definitive purchase and sale agreement with Baker Hughes to sell Quest Integrity for $280.0 million, before customary post-closing adjustments. Post-closing of this transaction Team’s expects its liquidity and debt profile to be significantly improved, refer to Note 20 - Subsequent Events for additional details regarding this transaction.

Use of estimates. Our accounting policies conform to GAAP. The preparation of condensed 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 condensed 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 inputs 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 Credit Facility and Term Loans 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 Notes as of June 30, 2022 and December 31, 2021 is $95.2 million and $84.0 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 Credit Facilities, Atlantic Park Term Loan, Subordinated Term Loan and Notes, see Note 11 - Debt.

Cash and cash equivalents. Cash and cash equivalents consist of all 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 finite lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 360-10 Impairment or Disposal of Long-Lived Assets (“ASC 360”). There was no impairment recorded for long-lived assets as of June 30, 2022.

We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments. As of June 30, 2022, the only Company segment with goodwill was Quest Integrity, which goodwill is related to historical 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. We test our goodwill for impairment annually on December 1 of each year and whenever we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired. There was no goodwill impairment recorded for the six-month period ended June 30, 2022.

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 condensed 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 in which we operate. 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 can be 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.

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.

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 $2.0 million per occurrence. For general liability claims, we have an effective self-insured retention of $6.0 million per occurrence. For medical claims, our self-insured retention is $0.4 million 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 if converted method. Our current intent is to settle the principal amount of our Notes in cash upon maturity. 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.

For the three and six months ended June 30, 2022 and 2021, 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, for the three and six months ended June 30, 2022 and 2021, potential shares issuable upon the conversion of the Notes were 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 regarding our Notes and our share-based compensation awards, refer to Note 11 - Debt and Note 14 - Employee Benefit Plans, respectively.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Assets acquired under finance lease	$	77	$	384	$	100	$	406

Also, we had $3.0 million and $1.5 million of accrued capital expenditures as of June 30, 2022 and June 30, 2021, respectively, which are excluded from the condensed 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 have historically executed a foreign currency hedging program to mitigate the foreign currency risk in countries where we have significant assets and liabilities denominated in currencies other than the functional currency. There were no foreign currency swap contracts outstanding during the three and six months ended June 30, 2022.

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. The discount rates, expected investment return on plan assets, mortality rates and retirement rates are determined based on reference to yields, and are reviewed annually and considered for adjustment to reflect current market conditions. 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

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. On January 1, 2022, we adopted the ASU using the modified retrospective method. We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening accumulated deficit balance. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. Refer to Note 11 - Debt for impact on the adoption of this ASU as of January 1, 2022.

Accounting Standards 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 ASUs to have a significant impact on our consolidated financial position, results of operations, and cash flows. We do not expect our adoption of these ASUs to have a significant impact on our consolidated financial position, results of operations, and cash flows.

REVENUE

6 Months Ended

Jun. 30, 2022

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 contract 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.

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. 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 June 30, 2022						Three Months Ended June 30, 2021
	(unaudited)						(unaudited)
	United States and Canada		Other Countries		Total		United States and Canada		Other Countries		Total
Revenue:
IHT	$	111,541	$	2,583	$	114,124	$	114,834	$	2,628	$	117,462
MS	77,683		29,733		107,416		65,303		31,864		97,167
Quest Integrity	18,634		11,091		29,725		16,480		7,764		24,244
Total	$	207,858	$	43,407	$	251,265	$	196,617	$	42,256	$	238,873



	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	(unaudited)						(unaudited)
	United States and Canada		Other Countries		Total		United States and Canada		Other Countries		Total
Revenue:
IHT	$	204,919	$	4,802	$	209,721	$	204,059	$	4,542	$	208,601
MS	141,614		59,243		200,857		125,349		59,214		184,563
Quest Integrity	33,324		25,939		59,263		25,535		14,792		40,327
Total	$	379,857	$	89,984	$	469,841	$	354,943	$	78,548	$	433,491

Operating segment and service type:


	Three Months Ended June 30, 2022
	(unaudited)
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	91,701	$	115	$	15,787	$	6,521	$	114,124
MS	—		106,731		56		629		107,416
Quest Integrity	29,725		—		—		—		29,725
Total	$	121,426	$	106,846	$	15,843	$	7,150	$	251,265


	Three Months Ended June 30, 2021
	(unaudited)
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	92,291	$	207	$	17,267	$	7,697	$	117,462
MS	—		97,149		8		10		97,167
Quest Integrity	24,244		—		—		—		24,244
Total	$	116,535	$	97,356	$	17,275	$	7,707	$	238,873



	Six Months Ended June 30, 2022
	(unaudited)
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	168,152	$	139	$	29,626	$	11,804	$	209,721
MS	—		198,501		113		2,243		200,857
Quest Integrity	59,263		—		—		—		59,263
Total	$	227,415	$	198,640	$	29,739	$	14,047	$	469,841



	Six Months Ended June 30, 2021
	(unaudited)
	Non-Destructive Evaluation and Testing Services		Repair and Maintenance Services		Heat Treating		Other		Total
Revenue:
IHT	$	163,820	$	288	$	30,722	$	13,771	$	208,601
MS	—		183,125		697		741		184,563
Quest Integrity	40,327		—		—		—		40,327
Total	$	204,147	$	183,413	$	31,419	$	14,512	$	433,491

For additional information on our reportable operating segments and geographic information, refer to Note 17 - Segment and Geographic Disclosures.

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 Note 1 - Summary of Significant Accounting Policies and Practices and Note 3 – Receivables 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 June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022		December 31, 2021		Change
	(unaudited)
Trade accounts receivable, net1	$	215,408	$	188,772	$	26,636
Contract assets2	$	1,120	$	1,602	$	(482)
Contract liabilities3	$	1,341	$	313	$	1,028

_________________

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

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

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

The $0.5 million decrease in our contract assets from December 31, 2021 to June 30, 2022 is due to less fixed price contracts in progress at June 30, 2022 as compared to December 31, 2021. Contract liabilities increased by $1.0 million as of June 30, 2022. The increase is associated with contracts under which customers have paid 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, 2021 was recognized as revenue by the six months ended June 30, 2022.

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 are to 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 a contract 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. Assets recognized for costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the condensed consolidated balance sheets and were not material as of June 30, 2022 and December 31, 2021. 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 June 30, 2022 and 2021, 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 https://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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

RECEIVABLES

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

RECEIVABLES

A summary of accounts receivable as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Trade accounts receivable	$	178,174	$	161,751
Unbilled receivables	43,981		35,933

Allowance for credit losses	(6,747)		(8,912)
Total	$	215,408	$	188,772

ASC 326, Credit Losses, 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 (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Balance at beginning of period	$	8,912	$	9,918

Provision for expected credit losses	30		2,193
Write-offs	(2,087)		(3,143)
Foreign exchange effects	(108)		(56)
Balance at end of period	$	6,747	$	8,912

INVENTORY

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

INVENTORY

A summary of inventory as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Raw materials	$	8,233	$	7,641
Work in progress	2,801		2,725
Finished goods	25,145		25,388
Total	$	36,179	$	35,754

PREPAID AND OTHER CURRENT ASSETS

6 Months Ended

Jun. 30, 2022

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID AND OTHER CURRENT ASSETS

A summary of prepaid and other current assets as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Insurance receivable	$	39,000	$	39,000
Prepaid expenses	16,225		12,645
Other current assets	15,199		8,223
Total	$	70,424	$	59,868

The insurance receivable relates to the receivable from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 9 - Other Accrued Liabilities. These receivables will be covered by our third-party insurance providers for a litigation matter that has been settled, or are pending settlements where the deductibles have been satisfied. The prepaid expenses primarily relate to prepaid insurance and other expenses that have been paid in advance of the coverage period. The other current assets primarily include items such as contract assets, receivables from third parties, and other accounts receivables.

As of June 30, 2022 the other current assets also includes the deferred financing cost amounting to $6.6 million due to all long term debts now classified as current (see Note 11 - Debt for additional details), and a portion of the MS segment’s land, building and leasehold improvement assets held for sale with a net book value of $0.9 million with anticipated sale closing prior to December 31, 2022. Historically these assets were presented in the other assets, net, and property, plant and equipment section respectively of the balance sheet, and comparative periods were not adjusted.

PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Land	$	4,552	$	5,743
Buildings and leasehold improvements	55,085		58,972
Machinery and equipment	300,166		306,366
Furniture and fixtures	11,344		11,642
Capitalized ERP system development costs	45,917		45,917
Computers and computer software	22,454		22,243
Automobiles	4,312		4,356
Construction in progress	25,477		16,565
Total	469,307		471,804
Accumulated depreciation	(312,268)		(310,445)
Property, plant and equipment, net	$	157,039	$	161,359

Included in the table above are assets under finance leases of $6.2 million and $6.7 million, and accumulated amortization of $1.8 million and $1.6 million as of June 30, 2022 and December 31, 2021, respectively. Depreciation expense for the three months ended June 30, 2022 and 2021 was $6.2 million and $6.8 million, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 was $12.8 million and $14.3 million, respectively.

INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

A summary of intangible assets as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022						December 31, 2021
	(unaudited)
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	174,774	$	(94,627)	$	80,147	$	175,156	$	(88,783)	$	86,373
Non-compete agreements	5,411		(5,411)		—		5,503		(5,503)		—
Trade names	24,614		(22,432)		2,182		24,743		(22,252)		2,491
Technology	7,809		(6,966)		843		7,843		(6,885)		958
Licenses	837		(793)		44		850		(774)		76
Total	$	213,445	$	(130,229)	$	83,216	$	214,095	$	(124,197)	$	89,898

Amortization expense of intangible assets for the three months ended June 30, 2022 and June 30, 2021 was $3.4 million and $3.6 million, respectively. Amortization expense of intangible assets for the six months ended June 30, 2022 and June 30, 2021 was $6.8 million and $7.0 million, respectively. Amortization expense for intangible assets is forecast to be approximately $13.1 million per year from 2022 through 2025.

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of June 30, 2022 and December 31, 2021.

GOODWILL

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOOWILL

GOODWILL

The following table presents a rollforward of goodwill for the six months ended June 30, 2022 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, 2021	$	212,928	$	(212,928)	$	—	$	109,938	$	(109,938)	$	—	$	34,038	$	(8,795)	$	25,243	$	356,904	$	(331,661)	$	25,243
FX Adjustments	—		—		—		—		—		—		(696)		—		(696)		(696)		—		(696)


Balance at June 30, 2022	$	212,928	$	(212,928)	$	—	$	109,938	$	(109,938)	$	—	$	33,342	$	(8,795)	$	24,547	$	356,208	$	(331,661)	$	24,547

See Note 1 - Summary of Significant Accounting Policies and Practices for further information.

OTHER ACCRUED LIABILITIES

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of June 30, 2022 and December 31, 2021 is as follows (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
Legal and professional accruals	$	46,334	$	46,762
Payroll and other compensation expenses	50,289		44,284
Insurance accruals	6,121		7,314
Property, sales and other non-income related taxes	6,833		8,018
Accrued commission	2,014		1,111
Accrued interest	8,495		6,469
Other	8,671		7,141



Total	$	128,757	$	121,099

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 16 - Commitments and Contingencies. Certain legal claims are covered by insurance and the related insurance receivable

for these claims is recorded in prepaid expenses and other current assets, refer to Note 5 - Prepaid and Other Current Assets. Payroll and other compensation expenses include all payroll related accruals including, among others, accrued vacation, severance, and bonuses. Insurance accruals primarily relate to accrued medical and workers compensation costs. Property, sales and other non-income related taxes includes accruals for items such as sales and use tax, property tax and other related tax accruals. Accrued interest relates to the interest accrued on our long-term debt. Other accrued liabilities includes items such as contract liabilities and other accrued expenses.

INCOME TAXES	6 Months Ended
INCOME TAXES	Jun. 30, 2022
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES We recorded an income tax provision of $1.8 million and $2.1 million for the three and six months ended June 30, 2022 compared to a provision of $0.9 million and $0.5 million for the three and six months ended June 30, 2021. The effective tax rate, inclusive of discrete items, was a provision of 9.0% for the three months ended June 30, 2022, compared to a provision of 5.1% for the three months ended June 30, 2021. For the six months ended June 30, 2022, our effective tax rate, inclusive of discrete items, was a provision of 4.1%, compared to a provision of 1.0% for the six months ended June 30, 2021. Our effective tax rate differed from the statutory tax rate due to an increase in the valuation allowance in certain foreign jurisdictions. The effective tax rate in the prior year was also impacted by the tax benefits recognized related to the CARES Act. The lack of going concern basis applicable for our second quarter financial statements generally requires a valuation allowance for all deferred tax assets that are not realizable through the reversal of existing timing differences or taxable income in carryback years. While several subsidiaries have historically been profitable and for which future income was a material factor in assessing the realizability of their deferred tax assets, the substantial doubt about the Company’s ability to continue as a going concern basis casts doubt on our ability to generate future income. As a result, the Company included a charge of $0.8 million in income tax expense for the valuation allowance required to offset the remaining net deferred tax assets. The $0.8 million charge is primarily attributable to our Germany and Canada subsidiaries. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

- 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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

DEBT

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

DEBT

For the period ended June 30, 2022 debt with original maturities greater than one year are classified as current due to the Trigger Date provision. This provision did not impact classification of debt for the period ended December 31, 2021. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion. Team’s current and long-term debt obligations consisted of the following (in thousands):


	June 30, 2022		December 31, 2021
	(unaudited)
ABL Facilities	$	128,053	$	62,000
Atlantic Park Term Loan	224,473		214,191
Subordinated Term Loan	41,845		36,358


Total	$	394,371	$	312,549
Notes1	92,178		87,662
Finance lease obligations	5,311		5,649
Total debt and finance lease obligations	$	491,860	$	405,860
Current portion of long-term debt and finance lease obligations	(487,204)		(669)
Total long-term debt and finance lease obligations, less current portion	4,656		405,191

_________________

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

ABL Facilities

On February 11, 2022, we entered into a new credit agreement with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (“Eclipse”) (such agreement, the “ABL Credit Agreement”). Available funding commitments to us under the ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $130.0 million to be provided by certain affiliates of Eclipse (the “Revolving Credit Loans”), with a $35.0 million sublimit for swingline borrowings and a $26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $35.0 million (the “Corre Delayed Draw Term Loans”) to be provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “ABL Credit Facility”). The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under that certain asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Citi Credit Agreement”) led by Citibank, N.A. (“Citibank”), as agent, which was repaid and terminated in full on February 11, 2022. The ABL Credit Facility matures, and all outstanding amounts become due and payable on February 11, 2025. However, the ABL Credit Facility is subject to the Trigger Date as noted above in Note 1 - Summary of Significant Accounting Policies and Practices.

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, as defined in the ABL Credit Agreement. The interest rate at June 30, 2022 was 5.71% for Eclipse and 11.06% for the Corre Delayed Draw Term Loans.

Direct and incremental costs associated with the issuance of the ABL Credit Facility were approximately $8.3 million and were capitalized as deferred financing costs. These costs are being amortized on a straight-line basis over the term of the ABL Credit Facility. Unamortized deferred financing cost amounted to $6.6 million and $2.9 million at June 30, 2022 and December 31, 2021, respectively. Additionally, the amortization period for deferred financing costs and debt discounts and issuance cost was updated to reflect the revised maturity date associated with the Trigger date provision and the related reclassification of debt as current. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

At June 30, 2022, Team had $103.1 million outstanding under the Revolving Credit Loans and $25.0 million outstanding under the Corre Delayed Draw Term Loans. As of June 30, 2022, subject to the applicable sublimit and other terms and conditions, the remaining $4.5 million of available commitments under the ABL Credit Facility was available for loans or for issuance of new letters of credit.

Amendments in 2022. On May 6, 2022, we entered into the ABL Credit Agreement Amendment No. 1 which, among other things, modified the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement and Note 1 - Summary of Significant Accounting Policies and Practices) such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the 5.00% Convertible Senior Notes due 2023 (the “Notes”) is 75 days prior to their maturity date rather than 120 days. Under the terms of our amended financing arrangements the “Trigger Date” is now May 18, 2023, by which date, the Notes balance must be paid down to $10.0 million, or the Company must have equivalent cash on hand to pay down the Notes to $10.0 million.

Atlantic Park Term Loan

On December 18, 2020, we entered into certain Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), as lender (the “Term Loan Credit Agreement”), 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, such that total proceeds received were $242.5 million. As set forth in the Term Loan Credit Agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the ABL Credit Facility, and we may under certain conditions, increase the Term Loan by an amount not to exceed $100.0 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 effective interest rate on the Term Loan at June 30, 2022 and December 31, 2021 was 23.85% and 20.90%, respectively. The increase in the effective interest rate of 2.95% for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current. The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $31.7 million and $35.8 million at June 30, 2022 and December 31, 2021, respectively.

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

$10.0 million or more on the Trigger Date, in which case the Term Loan will terminate on the Trigger Date. The debt is classified as current due to the Trigger Date noted above.

Amendments in 2022. On February 11, 2022, we entered into Amendment No. 6 (the “Sixth Amendment”) to the Term Loan Credit Agreement. The Sixth Amendment, among other things and subject to the terms thereof, (i) permitted the entry into the ABL Credit Agreement, (ii) permitted certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permitted certain asset sales and required certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants such that the maximum net leverage ratio of 7.00 to 1.00 would not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year; provided, that such unfinanced capital expenditures limitation will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

On May 6, 2022, we entered into Amendment No. 7 (the “Seventh Amendment”) to the Term Loan Credit Agreement. The Seventh Amendment, among other things and subject to the terms thereof, (i) modified the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) such that the date on which the maturity of the Term Loan Credit Agreement is triggered as a result of there being an aggregate principal amount of more than $10.0 million outstanding under the Notes is 75 days prior to their maturity date instead of 120 days prior to their maturity date, and (ii) amends the financial covenants such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 is increased from 7.00 to 1.00 to 12.00 to 1.00.

Subordinated Term Loan

On November 9, 2021, we entered into a credit agreement the (“Subordinated Term Loan Credit Agreement”) with Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto providing for an unsecured $50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”). 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. The stated interest rate on the Subordinated Term Loan is 12%. Effective interest rate at June 30, 2022 and December 31, 2021 was 46.79% and 19.73%, respectively. The increase in the effective interest rate of 27.06% for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current. The unamortized debt issuance cost amounted to $11.6 million and $13.9 million at June 30, 2022 and December 31, 2021, respectively.

Amendments in 2022. On February 11, 2022, we entered into Amendment No. 5 to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, provided for an additional commitment of $10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until October 31, 2022 (as amended by Amendment No. 7 as described further below).

On May 6, 2022, we entered into Amendment No. 6 to the Subordinated Term Loan Credit Agreement (the “Corre Amendment 6”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. The Corre Amendment 6, among other things, amends the financial covenants, such that the maximum net leverage ratio to be tested for the fiscal quarters ending March 31, 2023 will be increased from 7.00 to 1.00 to 12.00 to 1.00.

On June 27, 2022, we entered into Amendment No. 7 to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, extended availability date for additional commitment of $10.0 million in subordinated delayed draw term loans from July 1, 2022 to October 31, 2022.

Warrants

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC warrants to purchase up to 3,582,949 shares of our common stock, which was initially 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 “Existing Warrant”). In connection with execution of the Subordinated Term Loan Credit Agreement and Third Amendment, on November 9, 2021, we entered into an Amended and Restated Common Stock Purchase Warrant (the “A&R Warrant”) with APSC Holdco II, L.P. (“APSC Holdco”) pursuant to which the Existing Warrant was amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock (which includes 500,000 of the shares of common stock issuable pursuant to warrants issued to APSC on November 8,

2021, providing for the purchase of an aggregate of 1,417,051 shares of our common stock) and to reduce the exercise price to $1.50 per share. As of June 30, 2022 no warrants have been exercised.

Subscription Agreement

In connection with the transactions contemplated by the ABL Credit Agreement, Corre Partners Management, LLC and certain of its affiliates (collectively, “Corre”), agreed to provide the Company with incremental financing (the “Incremental Financing”), totaling approximately $55.0 million, consisting of (i) $35.0 million Delayed Draw Term Loans under the ABL Credit Facility as discussed above; (ii) $10.0 million from Corre in the form of the February 2022 Delayed Draw Term Loan (as defined in the Subordinated Term Loan Credit Agreement) on a pari passu basis with the existing loans issued pursuant to the Subordinated Term Loan Credit Agreement; and (iii) $10.0 million through an issuance of 11,904,762 shares (the “PIPE Shares”) of our common stock to Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon II Fund, LP (collectively, the “Corre Holders”) at a price of $0.84 per share (the “Equity Issuance”). In connection with the Incremental Financing and Equity Issuance, on February 11, 2022, we entered into a common stock subscription agreement (the “Subscription Agreement”) with the Corre Holders, pursuant to which the Company issued and sold the PIPE Shares to the Corre Holders on February 11, 2022.

Pursuant to and subject to the terms and conditions of the Subscription Agreement, our Board of Directors (the “Board”) is required to create a vacancy for one qualified nominee of the Corre Holders to the Board, who shall be designated by the Corre Holders and qualify as an independent director (a “Board Nominee”), and the Board is required to appoint such initial Board Nominee as a Class II director within seven business days of the date of the Subscription Agreement. This nominee has been appointed to the Board and this condition will remain active as long as the Subscription Agreements remains outstanding.

Notes

Amendments in 2022. On January 13, 2022, we entered into a supplemental indenture with Truist Bank, as trustee, (the “Supplemental Indenture”) to the indenture (the “Indenture”) governing the Notes to effect certain amendments (the “Amendments”) to the Indenture and to modify the Notes held by consenting holders (the “Consenting Holders”) of $52.0 million in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”). The Supplemental Indenture amends the Indenture to, among other things, allow for interest payable on the PIK Securities on February 1, 2022 to be paid in PIK Interest (as defined in the Supplemental Indenture) and on subsequent interest payment dates to be payable, at the Company’s option, at a rate of 5.00% per annum entirely in cash or at a rate of 8.00% per annum in PIK Interest.

In December 2020, we retired $136.9 million par value of our Notes, and as of June 30, 2022, the principal amount outstanding was $95.2 million. As of June 30, 2022 and December 31, 2021, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):



	June 30, 2022		December 31, 2021
	(unaudited)
Liability component:
Principal	$	95,208	$	93,130
Unamortized issuance costs	(1,170)		(916)
Unamortized discount	(1,860)		(4,552)
Net carrying amount of the liability component1	$	92,178	$	87,662



Equity component:
Carrying amount of the equity component, net of issuance costs2	$	—	$	7,969
Carrying amount of the equity component, net of issuance costs3	$	37,276	$	37,276

_________________

1 Included in the “Current portion of long-term debt and finance lease obligations” line of the condensed 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 condensed 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 condensed consolidated balance sheets.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Coupon interest	$	1,595		$	1,164		$	3,177		$	2,328
Amortization of debt discount and issuance costs	693			768			1,320			1,534
Total interest expense	$	2,288		$	1,932		$	4,497		$	3,862

Effective interest rate	10.24		%	9.12		%	10.24		%	9.12		%

ASU 2020-06 Adoption. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, the ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. On January 1, 2022, we adopted the ASU using the modified retrospective method. We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Accordingly, the cumulative effect of the changes made on our January 1, 2022 condensed consolidated balance sheet for the adoption of the ASU was as follows (in thousands):


	Balances at December 31, 2021		Adjustments from Adoption of ASU 2020-06		Balances at January 1, 2022
Liabilities
Long-term debt and finance lease obligations	$	405,191	$	1,827	$	407,018
Equity
Additional paid-in capital	$	444,824	$	(5,651)	$	439,173
Accumulated deficit	$	(375,584)	$	3,824	$	(371,760)

The impact of adoption on our consolidated statements of operations for the six months ended June 30, 2022 was primarily to decrease net interest expense by $0.6 million. This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the six months ended June 30, 2022 by $0.01. The change in methodology by requiring the use of the if-converted method to determine the denominator used in the calculation of diluted net income per share of common stock attributable to common stockholders did not have an impact on the diluted EPS as the shares of common stock issuable upon conversion were not included in the denominator because of the antidilutive effect.

Deferred Financing Costs, Debt and Warrant Discounts and Debt Issuance Cost

As referenced above, all debt with original maturities greater than one year are classified as current as of June 30, 2022 due to the Trigger Date provisions.

As of June 30, 2022 and December 31, 2021, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to Team’s outstanding debt were $53.0 million and $58.0 million. Due to the Trigger Date provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the accelerated maturity dates. This resulted in additional amortization charges of $4.6 million during the six months ended June 30, 2022. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

Liquidity

At June 30, 2022, we had $41.1 million of unrestricted cash and cash equivalents and $26.3 million of restricted cash held as collateral for letters of credit and commercial card programs. International cash balance at June 30, 2022 was $21.8 million, and approximately $1.5 million of cash is located in countries where currency restrictions exist. We had approximately $24.5 million in additional borrowing capacity, consisting of $4.5 million of available under the ABL Credit Facility, $10.0 million available under the incremental delayed draw term loan (the “Delayed Draw Term Loans”), and $10.0 million available under the Subordinated Term Loan. Internationally we have letters of credit outstanding in the amount of $0.3 million. Additionally, we have $1.5 million in Surety bonds outstanding and an additional $1.2 million in miscellaneous cash deposits securing leases or other required obligations. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion. Refer to Note 20 - Subsequent Events for draw activity occurring subsequent to the period ended June 30, 2022.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI https://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1E
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

LEASES

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

LEASES

We adopted ASC 842, Leases, 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):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Operating lease costs	$	6,334	$	7,021	$	13,021	$	14,260
Variable lease costs	1,442		1,326		2,900		2,602
Finance lease costs:
Amortization of right-of-use assets	67		195		261		312
Interest on lease liabilities	38		90		126		168
Total lease cost	$	7,881	$	8,632	$	16,308	$	17,342

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022	2021
Supplemental cash flow information:	(unaudited)		(unaudited)		(unaudited)	(unaudited)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,095	$	5,990	10,500	11,346
Operating cash flows from finance leases	25		91		115	171
Financing cash flows from finance leases	158		159		320	237
Right-of-use assets obtained in exchange for lease obligations
Operating leases	514		411		1,354	8,583
Finance leases	77		384		100	406

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


	June 30, 2022			December 31, 2021
Operating Leases:	(unaudited)
Operating lease right-of-use assets	$	52,925		$	60,700
Current portion of operating lease obligations	14,389			16,176
Operating lease obligations (non-current)	43,090			49,221



Finance Leases:
Property, plant and equipment, net	$	4,412		$	5,123
Current portion of long-term finance lease obligations	655			669
Long-term finance lease obligations	4,656			4,980



Weighted average remaining lease term:
Operating leases	5.9 years			6.0 years
Finance leases	9.9 years			10.0 years
Weighted average discount rate:
Operating leases	6.9		%	6.8		%
Finance leases	6.5		%	6.4		%

As of June 30, 2022, we have no material additional operating and finance leases that have not yet commenced. As of June 30, 2022, future minimum lease payments under non-cancellable leases (including short-term leases) are as follows (in thousands):


	Operating Leases		Finance Leases
	(unaudited)		(unaudited)
2022 (Remainder of the year)	$	10,647	$	68
2023	15,317		905
2024	11,918		745
2025	8,609		575
2026	6,729		562
Thereafter	18,161		3,925
Total future minimum lease payments	71,381		6,780
Less: Interest	(13,902)		(1,469)
Present value of lease liabilities	$	57,479	$	5,311

LEASES

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Operating lease costs	$	6,334	$	7,021	$	13,021	$	14,260
Variable lease costs	1,442		1,326		2,900		2,602
Finance lease costs:
Amortization of right-of-use assets	67		195		261		312
Interest on lease liabilities	38		90		126		168
Total lease cost	$	7,881