What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-16 compared with 2021-03-12 · 443 added, 277 removed, 1198 unchanged (38% of the section changed)

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FINANCIAL TABLE OF CONTENTS

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

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Notes to Consolidated Financial Statements

Quarterly Financial Data (Unaudited)

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Report of Independent Registered Public Accounting Firm

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March 16, 2022

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Report of Independent Registered Public Accounting Firm

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 11 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842 (ASC 842), Leases .

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Realizability of deferred tax assets

As discussed in Notes 1 and 9 to the consolidated financial statements, the Company had gross deferred tax assets of $90.5 million, of which $57.4 million related to net operating loss carryforwards, and a related valuation allowance of $53.4 million as of December 31, 2020.

The assessment of the realizability of these deferred tax assets is based on the Company’s evaluation of available evidence to determine whether sufficient future taxable income will be generated to allow for the realization of such deferred tax assets.

The Company records a valuation allowance to reduce its deferred tax assets to an amount that is more than 50% likely of being realized.

We identified the evaluation of the realizability of deferred tax assets as a critical audit matter.

A high degree of auditor judgment was necessary to assess the evidence used by the Company to evaluate the realizability of deferred tax assets relating to the net operating loss carryforwards.

Specifically, assessing the Company’s determination of the reversal of existing taxable temporary differences, cumulative pre-tax losses and the relevance of such losses to forecasted future taxable income required subjective auditor judgment.

In addition, specialized skills were required to evaluate the Company’s application of income tax regulations.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s income tax process.

This included controls related to the application of income tax regulations and the Company’s consideration of available evidence to determine whether sufficient future taxable income will be generated to allow for the realization of existing deferred tax assets.

We involved income tax professionals with specialized skills and knowledge, who assisted in evaluating the Company’s application of income tax regulations used in its realizability analysis.

This included evaluating the scheduling of the reversal of existing taxable temporary differences to assess the utilization of net operating loss carryforwards in each tax jurisdiction before their scheduled expiration.

We evaluated the Company’s consideration of cumulative pre-tax losses and the net deferred tax position in assessing whether deferred tax assets were more than 50% likely of being realized.

Goodwill impairment analysis of the Inspection and Heat Treating (“IHT”) reporting unit

Goodwill impairment analysis of the Quest Integrity reporting unit

As discussed in Note 8 to the consolidated financial statements, the Company has three reporting units and performs a goodwill impairment test at a reporting unit level on an annual basis on December 1 and whenever there are sufficient indicators that the carrying value of a reporting unit exceeds its fair value.

This involves estimating the fair value of the reporting unit using both a discounted cash flow model analysis and a market approach for comparable companies.

The COVID-19 pandemic and subsequent mitigation efforts, such as closures of businesses and manufacturing facilities, the promotion of social distancing, the adoption of working from home by companies and institutions, travel restrictions, and declines in oil and gas prices, caused disruption to the Company’s business.

Such disruption resulted in a decline in forecasts, and a deterioration of the Company’s market capitalization during the first quarter of 2020.

Accordingly, the Company determined that a triggering event occurred and performed an interim goodwill impairment assessment.

As a result, the carrying amount of the IHT reporting unit exceeded its fair value and the Company recorded a goodwill impairment charge to the IHT reporting unit of $191.8 million, fully impairing the reporting unit.

We identified the evaluation of the goodwill impairment analysis of the IHT reporting unit as a critical audit matter.

Evaluating the estimated fair value of the IHT reporting unit derived from assumptions used in a discounted cash flow model analysis required a high degree of auditor judgment.

Specifically, the forecasted revenue, revenue growth rates, and the discount rate assumptions used in the assessment of the fair value of the reporting unit required subjective auditor judgment as they are sensitive to variation based on future market and economic conditions and could have an effect on the Company’s assessment of the impairment charge.

This involves estimating the fair value of the reporting units using discounted cash flow model analyses and market approaches for comparable companies.

The Company experienced forecasted revenue and earnings declines due to lower activity and pricing pressure for its products and services and sustained declines in their stock price.

Accordingly, the Company performed a quantitative goodwill impairment assessment on December 1, 2021.

The carrying amount of the Quest Integrity reporting unit exceeded its fair value and the Company recorded a partial goodwill impairment charge to the Quest Integrity reporting unit (“Quest”) of $8.8 million.

We identified the evaluation of the goodwill impairment analysis of Quest as a critical audit matter.

Evaluating the assumptions used in the discounted cash flow model analysis used to estimate the fair value of Quest required the involvement of valuation professionals and a high degree of auditor judgment.

Specifically, the forecasted revenue, revenue growth rates, and the discount rate assumptions used in the assessment of the fair value of Quest required

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subjective auditor judgment as they are sensitive to variation based on future market and economic conditions and could have an effect on the Company’s determination of the impairment charge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment process.

This included controls related to the determination of the fair value of the IHT reporting unit and the forecasted revenue, revenue growth rates, and discount rate assumptions.

To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasted revenue related to the IHT reporting unit to actual results.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment process.

This included controls related to the determination of the forecasted revenue, revenue growth rates, and discount rate assumptions used to determine the fair value of Quest.

To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasted revenue and revenue growth rates related to Quest to actual results.

We performed sensitivity analyses related to forecasted revenue assumptions to assess the impact of changes in those assumptions on the Company’s determination of fair value.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s forecasted revenue growth rates for the IHT reporting unit, by comparing them to revenue growth rates of comparable companies

• evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable companies

• performing sensitivity analysis related to discount rate to assess the impact of changes to discount rate on the Company’s determination of fair value.

Extinguishment of Convertible Debt

As described in Note 10 to the consolidated financial statements, the Company retired $136.9 million par value of its Convertible Senior Notes due 2023 (referred to as the “Notes”) for $135.5 million in December 2020 and allocated the fair value of consideration transferred at settlement between the debt and equity components of the Notes.

The amounts allocated to the debt and equity components of the Notes were $121.8 million and $13.7 million, respectively, and the Company recognized a gain on extinguishment of $2.2 million.

We identified the evaluation of the accounting for the consideration and the valuation of the debt component of the Notes as a critical audit matter.

Evaluating the appropriate accounting for the Notes required complex auditor judgment.

Additionally, a high degree of auditor judgment and the involvement of valuation specialists was required to evaluate the fair value of the debt component of the Notes.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data.

Assessment of the Company’s ability to continue as a going concern

As discussed in Note 1 to the consolidated financial statements, the Company prepares its consolidated financial statements on a going concern basis.

The Company has incurred recurring operating losses as a result of the COVID-19 pandemic, related economic repercussions, and difficult market conditions.

The Company has incurred losses of $186 million for the year ended December 31, 2021 and presented an accumulated deficit of $375 million as of December 31, 2021.

Management evaluated the Company’s liquidity within one year after the date of issuance of the 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 the liquidity assessment, management 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 levels under the Company’s existing debt arrangements.

The cash flow projections were based on known or planned cash requirements for operating and financing costs.

Management believes, based on the Company’s forecast, that current working capital and capital expenditure financing is sufficient to fund operations and satisfy the Company’s obligations as they come due within one year after the date of issuance of the consolidated financial statements.

We identified the assessment of the Company’s ability to continue as a going concern and related disclosures as a critical audit matter.

There was a high degree of subjectivity and significant auditor judgment involved in assessing management’s cash flow forecast, specifically forecasted revenue and operating costs, and excess availability levels under the Company’s existing debt arrangements due to the uncertainty in the estimate of cash inflows and outflows.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to this critical audit matter.

This included controls related to the Company’s evaluation of the appropriate accounting guidance and the valuation of the debt component of the Notes.

To assess the Company’s accounting for the extinguishment of the Notes, we evaluated the Company’s analysis of relevant accounting guidance, established accounting policies, and key terms and features of the Notes.

Such analysis included the determination of the allocation of the fair value of consideration between the debt and equity components of the Notes.

We involved valuation professionals with specialized skills and knowledge to assist in evaluating the fair value of the debt component of the Notes.

We evaluated the design and tested the operating effectiveness of certain internal controls related to management’s assessment of the Company’s ability to continue as a going concern, including controls related to the cash flow forecast and review of excess availability levels under the Company’s existing debt arrangements.

We assessed management’s ability to forecast revenue and operating costs by comparing prior years’ forecasts to actual results.

We performed sensitivity analyses over management’s forecasted revenue and operating costs used in the cash flow forecast and excess availability levels under various scenarios to assess the impact of changes in those assumptions on the Company’s assessment of its ability to continue as a going concern.

We compared management’s forecasts to the actual results of operations and excess availability levels for the available period after year-end.

We examined the related debt agreements to identify terms that may impact availability of funds.

We assessed the adequacy of the disclosures related to the application of the going concern assessment.

We have served as the Company’s auditor since 2002.

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March 16, 2022

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AND SUBSIDIARIES

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Goodwill 25,243 91,351

Defined benefit pension asset 2,902 —

Other assets, net 10,533 11,642

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Additional paid-in capital 444,824 422,589

Retained earnings (accumulated deficit) ( 189,565 ) 48,673

Accumulated deficit ( 375,584 ) ( 189,565 )

Accumulated other comprehensive loss ( 26,732 ) ( 27,678 )

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See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

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Restructuring and other related charges, net (see Note 17) 2,916 3,365 1,676

Gain on revaluation of contingent consideration — — ( 202 )

Goodwill impairment charge (see Note 8) 64,632 191,788 —

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Interest expense, net ( 46,308 ) ( 29,818 ) ( 29,713 )

Loss on convertible debt embedded derivative (see Note 10) — — ( 24,783 )

Loss on warrants ( 59 ) — —

Loss on debt extinguishment and modification — ( 2,224 ) ( 279 )

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Loss before income taxes ( 174,810 ) ( 251,918 ) ( 32,853 )

Benefit for income taxes (see Note 9) 14,715 436 31,063

Benefit (provision) for income taxes (see Note 10) ( 11,209 ) 14,715 436

Net loss $ ( 186,019 ) $ ( 237,203 ) $ ( 32,417 )

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See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

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Settlement cost during period 67 — 226

Prior service cost arising during period — — ( 669 )

Amortization of prior service cost 33 — 33

Amortization of net actuarial (gain) loss — — ( 78 )

Other comprehensive income (loss), before tax 1,935 2,499 3,985

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See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

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Capital Retained

Earnings (Deficit) Accumulated

Earnings (Accumulated Deficit) Accumulated

Comprehensive

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Balance at December 31, 2018 30,184 9,053 $ 400,989 $ 81,450 $ ( 34,392 ) $ 457,100

Adoption of new accounting principles — — — 9,110 ( 2,330 ) 6,780

Adoption of new accounting principles, net of tax — — — ( 360 ) — ( 360 )

Net loss — — — ( 32,417 ) — ( 32,417 )

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Defined benefit pension plans, net of tax — — — — ( 269 ) ( 269 )

Reclassification of convertible debt embedded derivative, net of tax

— — 37,698 — — 37,698

Non-cash compensation — — 10,055 — — 10,055

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Net settlement of vested stock awards 355 104 ( 1,093 ) — — ( 989 )

Extinguishment of convertible debt — — ( 14,044 ) — — ( 14,044 )

Issuance of warrant, net — — 22,383 — — 22,383

Balance at December 31, 2020 30,874 9,257 $ 422,589 $ ( 189,565 ) $ ( 27,678 ) $ 214,603

Adoption of new accounting principles, net of tax — — — ( 1,035 ) — ( 1,035 )

Net loss — — — ( 186,019 ) — ( 186,019 )

Foreign currency translation adjustment, net of tax — — — — ( 2,214 ) ( 2,214 )

Foreign currency hedge, net of tax — — — — ( 904 ) ( 904 )

Defined benefit pension plans, net of tax — — — — 3,160 3,160

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Net settlement of vested stock awards 340 102 ( 342 ) — — ( 240 )

Extinguishment of convertible debt — — ( 14,044 ) — — ( 14,044 )

Issuance of warrant, net — — 15,564 — — 15,564

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See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

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Loss on debt extinguishment and modification 415 2,224 279

Amortization of debt issuance costs and debt discount 8,829 7,695 7,022

Loss on Warrants 59 — —

Amortization of debt issuance costs and debt discounts 13,784 8,829 7,695

Allowance for credit losses 1,943 1,612 ( 2,573 )

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(Gain) loss on asset disposal ( 2,981 ) 1,161 ( 187 )

Loss on convertible debt embedded derivative — — 24,783

Goodwill impairment charge 191,788 — —

Goodwill impairment charges 64,632 191,788 —

Non-cash compensation cost 7,013 6,307 10,055

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Income taxes 605 ( 2,275 ) 1,540

Net cash provided by operating activities 52,764 58,836 41,859

Net cash (used in) provided by operating activities ( 35,453 ) 52,764 58,836

Cash flows from investing activities:

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Proceeds from disposal of assets 3,528 2,645 934

Other 25 — ( 443 )

Net cash used in investing activities ( 14,077 ) ( 18,301 ) ( 28,101 )

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Net payments under Credit Facility revolver — ( 76,638 ) ( 82,396 )

Borrowings under ABL Facility 44,000 — —

Payments under ABL Facility ( 35,000 ) — —

Borrowings under ABL Facility, net 62,000 — —

Borrowings under ABL Facility, gross 128,000 44,000 —

Payments under ABL Facility, gross ( 137,000 ) ( 35,000 ) —

Net borrowings under Subordinated Term Loan 50,000 — —

Borrowings (payments) under Credit Facility term loan, net of debt discount — ( 50,000 ) 49,745

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Other ( 453 ) ( 272 ) ( 291 )

Net cash used in financing activities ( 23,461 ) ( 36,805 ) ( 23,041 )

Net cash provided by (used in) financing activities 91,850 ( 23,461 ) ( 36,805 )

Effect of exchange rate changes on cash ( 1,591 ) 1,409 ( 43 )

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_____________

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

1 Excludes accrued capital expenditures for the years ended December 31, 2021, 2020 and 2019.

See accompanying notes to consolidated financial statements.

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AND SUBSIDIARIES

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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.

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(1) highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software;

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

and (3) advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.

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:

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• Aerospace and Defense.

Recent Developments.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States and the rest of the world.

The COVID-19 pandemic and related economic repercussions created significant volatility and uncertainty in domestic and international markets over the past year.

Additionally, oil demand significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus.

These negative factors created significant volatility and uncertainty in the markets in which we operate and, as a result, certain clients have responded with

capital spending budget cuts, cost cutting measures, personnel layoffs, limited facility access, and facility closures among other actions.

Though the impact of COVID-19 and the decline in crude oil prices on our operations has varied by geographic conditions, the applicable government mandates have adversely affected our workforce and operations, as well as the operations of our clients, suppliers and contractors.

The ultimate duration and impact on our global operations remains unclear.

We expect that our results of operations in future periods may continue to be adversely impacted due to the factors noted above.

To successfully navigate through this unprecedented period, we continue to focus on the following key priorities:

• the safety of our employees and business continuity;

• decisive and aggressive actions taken to reduce costs, preserve capacity and manage margins to align our business with the near-term decrease in demand for our services;

Recent Financing Transactions.

On February 11, 2022, we entered into a 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 the Company under the ABL Credit Facility, 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 “Delayed Draw Term Loans”) to be provided by Corre (as defined below).

The ABL Credit Facility matures and all outstanding amounts become due

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and payable on February 11, 2025, however, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $ 10 million or more outstanding 120 days prior to their maturity date (the “Trigger Date”), the ABL Credit Facility will be terminated as of the Trigger Date.

The proceeds of the loans under the ABL Credit Agreement were used to, among other things, pay off the amounts owed under the existing credit agreement (as defined in Note 11 - Long-Term Debt) dated as of December 18, 2020 (as amended from time to time), among the Company, the lenders party thereto and Citibank, N.A.

as agent, which was repaid and terminated in full on February 11, 2022.

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 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 (as defined below)) 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 (the “Corre Holders”) at a price of $ 0.84 per share (the “Equity Issuance”).

Ongoing Effects of COVID-19.

The impact of the COVID-19 pandemic continues to affect our workforce and operations, as well as the operations of our clients, suppliers, and contractors.

During this period, we have continued to focus on the following key priorities:

• the health and safety of our employees and business continuity;

• the alignment of our business to the near term market dynamics and demand for our services;

• our end market revenue diversification strategy.

To respond to the economic downturn resulting from the COVID-19 pandemic and the drop in oil prices, we initiated a cost reduction and efficiency program during the second quarter of 2020.

All named executive officers have voluntarily taken temporary salary reductions ranging from 15 % to 20 % of their base salary.

In addition, we instituted a reduction for certain other salaried employees, at lower percentages, and suspended our voluntary match under the executive deferred compensation retirement plan and our 401(k) plan.

Further, our board of directors voluntarily agreed to a 20 % reduction of their cash compensation.

These reductions continue into 2021.

Under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we are qualified to defer the employer portion of social security taxes incurred through the end of calendar 2020.

As of December 31, 2020, we have deferred employer payroll taxes of $ 14.2 million with approximately half of the deferral due in each of 2021 and 2022.

We may defer additional future employer payroll taxes under the CARES Act.

The ultimate duration and economic impact of the COVID-19 pandemic remains unclear.

However, we believe the increased availability and administration of COVID-19 vaccines, easing of pandemic related restrictions, reopening of economies, and increasing commodity prices are positive signs of broader economic recovery.

The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), impact of the new COVID-19 variants and the continued rollout and acceptance of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

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 have deferred employer payroll taxes of $ 14.1 million.

We paid $ 7.0 million of the deferred payroll taxes in January 2022 with the remaining balance 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 and deferral of certain payroll related expenses and tax payments and other benefits.

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As a result, we recognized $ 6.2 million and $ 1.5 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2021.

As of December 31, 2020, we also deferred certain payroll related expenses and tax payments of $ 4.6 million under other foreign government programs which will be due in 2021 and 2022.

As of December 31, 2021, we also deferred certain payroll related expenses and tax payments of $ 3.2 million under other foreign government programs which will be due starting in 2022.

Consolidation.

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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 herein) 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,

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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.

Going Concern.

These consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

We have suffered recurring operating losses related to the COVID-19 pandemic, related economic repercussions, and difficult market conditions and prior to the Recent Financing Transactions discussed below, the Company required additional liquidity to continue its operations over the next twelve months.

During the year, revenues and margins continued to decline against forecast along with margin pressures from inflationary costs including labor, materials, and transportation resulting in further operating losses.

As of December 31, 2021, we are in compliance with our debt covenants;

however, our financial forecasts as of December 31, 2021 indicated insufficient cash flows from operations to address our near-term liquidity needs and maintain compliance with our debt covenants within one year following the date that our financial statements are issued.

As discussed in Note 1 – Recent Financing Transactions, on February 11, 2022, the Company successfully closed on financing transactions that provided improved liquidity and runway to execute our business turnaround, support working capital needs and pursue potential strategic alternatives.

Following the Recent Financing Transactions, we evaluated the Company’s liquidity within one year after the date of issuance of these 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.

We believe, based on the Company’s forecast, that current working capital and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants, and satisfy the Company’s obligations as they come due within one year after the date of issuance of these financial statements.

While the Recent Financing Transactions provide us with additional funding to meet our near-term liquidity needs and included a waiver of our debt covenants through March 31, 2023, there can be no assurance that (i) our lenders will provide additional waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default that could happen, or (ii) that we will generate adequate liquidity to fund our operations, or to satisfy the obligations under our convertible debt and potential acceleration of debt maturities that may become due on April 3, 2023 related to the Trigger Date.

Use of estimates.

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We are able to classify fair value balances based on the observability of those inputs.

ASC 820 establishes a

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

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

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observable through corroboration with observable market data, including quoted market prices for similar assets, and “Level 3” measurements include those that are unobservable and of a highly subjective measure.

Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations.

The carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments.

The fair value of our ABL Facility and Term Loan (defined below) is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt.

The fair value of our ABL Facility and Term Loans (defined below) is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt.

The fair value of our 5.00 % Convertible Senior Notes due 2023 (the “Notes”) as of December 31, 2021 and 2020 was $ 84.0 million and $ 91.9 million, respectively, (inclusive of the fair value of the conversion option) and are a “Level 2” measurement, determined based on the observed trading price of these instruments.

For additional information regarding our ABL Facility, Term Loan and Notes, see Note 10.

Long-Term Debt, Derivatives and Letters of Credit.

For additional information regarding our ABL Facility, Atlantic Park Term Loan, Subordinated Term Loan and Notes, see Note 11- Long-Term Debt.

Cash and cash equivalents .

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Goodwill and intangible assets acquired in a business combination determined to have an indefinite useful life are not amortized, but are instead tested for impairment, and assessed for potential triggering events, at least annually in accordance with the provisions of the ASC 350 Intangibles—Goodwill and Other (“ASC 350”).

Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350.

Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in

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accordance with ASC 350.

We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments.

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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.

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.

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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.

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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.

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Foreign currency transaction gains and losses are included in our statements of operations.

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

Pound, Euro, Malaysian Ringgit and Mexican Peso.

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

The impact from these swap contracts were not material as of December 31, 2021 or 2020 or for the years ended December 31, 2021, 2020 and 2019.

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 primary assumptions include factors such as discount rates, expected investment return on plan assets,

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mortality rates and retirement rates.

These rates are reviewed annually and adjusted to reflect current conditions.

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Newly Adopted Accounting Standards

Topic 326 - Credit Losses.

In June 2016, the FASB issued Accounting Standard Update (“ASU”) No.

2016-13, Financial Instruments-Credit Losses , which established ASC Topic 326, Credit Losses (“ASC 326”).

Along with subsequent ASUs to clarify certain provisions, ASC 326 introduced a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses.

The new impairment model applies to most financial assets measured at amortized cost, including trade accounts receivable.

We adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost.

Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts are reported in accordance with previously applicable GAAP based on incurred credit losses.

The cumulative effect of our adoption of ASC 326 on January 1, 2020 resulted in a $ 1.0 million decrease, net of tax, to beginning retained earnings on our consolidated balance sheet.

Refer to Note 3 for further discussion of ASC 326.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Topic 350):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), that requires implementation costs incurred in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized in a software licensing arrangement under the internal-use software guidance in Topic 350.

ASU 2018-15 requires an entity to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class.

Our adoption of ASU No.

2018-15 as of January 1, 2020 resulted in a reduction of $ 4.9 million from property, plant, and equipment with $ 0.9 million reclassified to prepaid expenses and other current assets and $ 4.0 million reclassified to other assets, net on our consolidated balance sheet.

Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , that simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes as well as clarifies aspects of existing guidance to promote more consistent application.

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

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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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.

Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require

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advance customer payment.

Our contracts do not include significant financing components since the contracts typically span less than one year.

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The warranty period typically is twelve months or less from the date of service.

Warranty expenses were not material for the twelve months ended December 31, 2020, 2019 and 2018.

Revenue is recognized as (or when) the performance obligations are satisfied by transferring control over a service or product to the customer.

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Total $ 405,560 $ 375,352 $ 60,661 $ 32,980 $ 874,553

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Twelve Months Ended December 31, 2020

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_________________

1 Includes billed and unbilled amounts, net of allowance for credit losses.

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

The $ 0.5 million decrease in our contract assets from December 31, 2019 to December 31, 2020 is due to fewer fixed price contracts in progress at December 31, 2020 as compared to December 31, 2019, consistent with lower activity levels in the fourth quarter of 2020 compared to the same quarter in 2019.

The $ 0.6 million decrease in contract liabilities is due to our completion of performance obligations during the year ended December 31, 2021 associated with contracts under which customers had paid for all or a portion of the consideration in advance of the work being performed.

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We recognize the incremental costs of obtaining contracts as selling, general and administrative expenses when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs 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 recognized as assets primarily consist of labor and materials costs and generally relate to engineering and set-up costs incurred prior to the satisfaction of performance obligations begins.

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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.

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A summary of accounts receivable as of December 31, 2021 and 2020 is as follows (in thousands):

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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.

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.

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In determining the current expected credit losses, we review macroeconomic conditions, market specific conditions, and internal forecasts to identify potential changes in our assessment.

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

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Total $ 35,754 $ 36,854

PREPAID AND OTHER CURRENT ASSETS

A summary of p repaid and other current assets as of December 31, 2021 and 2020 is as follows (in thousands):

Insurance receivable $ 39,000 $ —

Prepaid expenses 12,645 12,936

Other current assets 8,223 13,816

Total $ 59,868 $ 26,752

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.

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 and other accounts receivables.

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PROPERTY, PLANT AND EQUIPMENT

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Amortization expense on intangible assets for the years ended December 31, 2021, 2020 and 2019 was $ 13.9 million, $ 14.0 million and $ 14.3 million, respectively.

Amortization expense for current intangible assets is forecast to be approximately $ 13 million per year from 2021 through 2024.

The decline in amortization expense in 2019 is primarily due to a change in the estimated useful life of an intangible asset associated with the Furmanite trade name in 2018.

Management determined that, as a result of initiatives to consolidate our branding, the useful life of this intangible asset was not expected to extend beyond December 31, 2018.

In accordance with ASC 350, we accounted for the change in useful life prospectively effective January 1, 2018 and amortized the remaining balance over 2018, which resulted in incremental amortization expense in 2018 of $ 12 million which did not recur in 2019.

Amortization expense for intangible assets is forecast to be approximately $ 13 million per year from 2022 through 2025.

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

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GOODWILL AND IMPAIRMENT CHARGES

The COVID-19 pandemic and subsequent mitigation efforts, which included global business and societal shutdowns and the implementation of mandatory social distancing requirements, created an unprecedented disruption to our business during 2020.

These mitigation efforts coupled with the negative economic impacts to the oil and gas industry caused by the substantial decline in the global demand for oil and the concurrent surplus in the supply of oil resulting from geopolitical tensions between OPEC regarding limits on production of oil significantly impacted our business.

Even though our services are primarily related to infrastructure support, the oil and gas industry is one of the key industries we serve and our clients have been significantly impacted as a result of these events.

As our clients continue to adjust spending levels in response to the lower commodity prices, we have experienced activity reductions and pricing pressure for our products and services, primarily in our IHT and MS reporting units, which we expect to continue.

In line with these changing market conditions, our market capitalization also deteriorated during the first quarter of 2020 and most significantly in late March 2020.

In response to these events and the related decline in our forecasts from the COVID-19 pandemic, we announced cost-cutting measures to offset the expected impact to our business.

We determined the totality of these events constituted a triggering event that required us to perform an interim goodwill impairment assessment as of March 31, 2020.

Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350.

We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments.

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 for impairment of our reporting units annually on December 1, and between annual tests if we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

We performed our annual impairment test as of December 1, 2020 and concluded that there was no impairment based upon a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair values of the reporting units were less than their respective carrying values as of the reporting date.

As a result of forecasted revenue and earnings declines and sustained declines in our stock price through September 30, 2021, we determined that a triggering event had occurred as it was more likely than not that the carrying values of our reporting units exceeded their fair values.

Our revenue growth and profitability are influenced by several industry trend factors, including end markets capital spending levels, supply and demand levels and technology.

With oil prices and demand increasing, refiners (represents approximately 40 % of our customers) are recovering;

however, as capital expenditures have not fully recovered resulting in lower current activity and pricing pressure for our products and services, primarily in our IHT and MS reporting units, accordingly, we performed a quantitative assessment of the fair value of goodwill as of September 30, 2021.

We determined the fair value for each reporting unit in our goodwill impairment assessment using both a discounted cash flow analysis and a multiples-based market approach for comparable companies.

We utilized third-party valuation advisors to assist us with these valuations.

These analyses included significant judgment, including forecasted revenue, short-term and long-term forecast of operating performance, discount rates based on our weighted average cost of capital, revenue growth rates, profitability margins, capital expenditures and the timing of future cash flows.

These analyses included significant judgment, including short-term and long-term forecast of operating performance, discount rates based on our weighted average cost of capital, revenue growth rates, profitability margins, capital expenditures and the timing of future cash flows.

These impairment assessments incorporate inherent uncertainties, including supply and demand for our services, utilization forecasts, pricing forecasts and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the assumptions utilized in our forecasts.

Based upon our impairment assessment, we determined the carrying amount of our IHT reporting unit exceeded the fair value.

As a result, we recorded $ 191.8 million in goodwill impairment charges on our IHT reporting unit during the three months ended March 31, 2020.

The fair value of the MS and Quest Integrity reporting units exceeded their respective carrying values.

We have three reporting units and perform a goodwill impairment test at a reporting unit level on an annual basis on December 1 and whenever there are sufficient indicators that the carrying value of a reporting unit exceeds its fair value.

For our annual goodwill impairment test as of December 1, 2020, we elected to perform a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair values of our reporting units were less than their respective carrying values as of the test date.

Our qualitative assessment for December 1, 2020 considered relevant events and circumstances occurring since the quantitative assessment performed on March 31, 2020.

Specifically, we considered changes in our stock price, industry and market conditions, our internal forecasts of future revenue and expenses, any significant events affecting us and actual changes in the carrying value of our net assets.

After considering all positive and negative evidence for the assessments as of this date, we concluded that it was not more likely than not that our carrying values exceeded fair values and, as such, no additional impairment was indicated.

Based upon our impairment assessment, we determined the carrying amount of our MS reporting unit exceeded the fair value.

As a result, we recorded $ 55.8 million in goodwill impairment charges on our MS reporting unit during the three months ended September 30, 2021.

The fair value of the Quest Integrity reporting unit exceeded its carrying value at September 30, 2021.

Our IHT reporting unit has no goodwill associated as it was determined to be fully impaired on March 31, 2020.

For our annual goodwill impairment test as of December 1, 2021, we elected to perform a quantitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit was less than its carrying value as of the test date.

Based on the quantitative assessment, we concluded that the carrying amount of our Quest Integrity reporting unit exceeded the fair value.

As a result, we recorded $ 8.8 million in goodwill impairment charges on our Quest Integrity reporting unit during the three months ended December 31, 2021.

We will continue to evaluate our goodwill and long-lived assets for potential triggering events as conditions warrant.

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There was $ 25.2 million and $ 91.4 million of goodwill at December 31, 2021 and 2020, respectively.

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FX Adjustments ( 1,428 ) — ( 1,428 ) 1,211 — 1,211 854 — 854 637 — 637

Impairment charge — ( 191,788 ) ( 191,788 ) — — — — — — — ( 191,788 ) ( 191,788 )

Additions — — — — — — 496 — 496 496 — 496

Balance at December 31, 2020 $ 212,928 $ ( 212,928 ) $ — $ 110,721 $ ( 54,101 ) $ 56,620 $ 34,731 $ — $ 34,731 $ 358,380 $ ( 267,029 ) $ 91,351

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Total $ 121,099 $ 73,144

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 15.

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.

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.

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For the year ended December 31, 2021, our income tax provision resulted in an effective tax rate of 6.4 %.

For the years ended December 31, 2020 and 2019, our income tax benefit on the loss from continuing operations resulted in an effective tax rate of 5.8 % and 1.3 %, respectively.

Our income tax benefit on continuing operations for the years ended December 31, 2020, 2019 and 2018 was $ 14.7 million, $ 0.4 million and $ 31.1 million, respectively, and includes federal, state and foreign taxes.

The components of our tax benefit on continuing operations were as follows (in thousands):

Our income tax provision for the year ended December 31, 2021 was $ 11.2 million, and an income tax benefit for December 31, 2020 and 2019 was $ 14.7 million and $ 0.4 million, respectively, and includes federal, state and foreign taxes.

The components of our tax provision and benefit on continuing operations were as follows (in thousands):

Current Deferred Total

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$ ( 174,810 ) $ ( 251,918 ) $ ( 32,853 )

The income tax benefit attributable to the loss from continuing operations differed from the amounts computed by applying the U.S.

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The income tax provision in 2021 and benefit in 2020 and 2019 attributable to the loss from continuing operations differed from the amounts computed by applying the U.S.

Federal income tax rate ( 21 % in 2021, 2020 and 2019) to pre-tax loss from continuing operations as a result of the following (in thousands):

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State income taxes, net of federal benefit 561 ( 114 ) ( 820 )

( 114 ) ( 820 ) ( 974 )

Foreign tax rate differential 613 404 ( 300 )

Non-cash compensation 842 926 323

Deferred taxes on investment in foreign subsidiaries ( 1,939 ) 525 18

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Foreign withholding 1,708 1,063 670

1,063 670 1,615

Prior year tax adjustments 993 707 954

Convertible debt — ( 2,949 ) —

( 2,949 ) — 2,865

Other tax credits — — ( 1,995 )

Deemed repatriation tax — — ( 1,751 )

Goodwill impairment 9,892 12,586 —

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Rate change ( 186 ) ( 551 ) 684

927 1,312 ( 8,222 )

Total benefit for income tax on continuing operations $ ( 14,715 ) $ ( 436 ) $ ( 31,063 )

Other 906 ( 706 ) 35

Total expense (benefit) for income tax on continuing operations $ 11,209 $ ( 14,715 ) $ ( 436 )

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1 Compared to our previously filed 2018 Annual Report on Form 10-K, $ 1.4 million was reclassified from “Other” to “State income taxes, net of federal benefit” for the twelve months ended December 31, 2018.

Additionally, “Non-deductible compensation”, “Convertible debt “and “Foreign withholding tax” were moved from “Other” to separate line disclosures.

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

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Property, plant and equipment ( 20,267 ) ( 23,783 )

Goodwill and intangible costs — ( 28,655 )

Unremitted earnings of foreign subsidiaries ( 3,944 ) ( 5,918 )

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The amount of deferred tax asset considered realizable could be adjusted if there are changes to net operating loss carryforward periods or there is a change to the weight assessed on various sources of positive and negative evidence.

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

At December 31, 2020, we had net operating loss carry forwards for U.S.

The current year increase in the valuation allowance is primarily attributable to our U.S.

In the previous quarter, we did record a significant increase in the valuation allowance on certain foreign subsidiaries that historically were profitable.

In the current quarter, we were able to release $ 0.9 million of valuation allowance based on all available evidence, including forecasted income for these entities.

The release of the valuation allowance is primarily attributable to our UK, Germany and Canada subsidiaries.

At December 31, 2021, we had net operating loss carryforwards for U.S.

federal income tax purposes of $ 221.9 million.

Of this amount, $ 93.4 million expires in various dates through 2037 and $ 81.5 million has an indefinite carry forward period.

Of this amount, $ 96.2 million expires in various dates through 2037 and $ 125.7 million has an indefinite carryforward period.

These carryforwards are available, subject to certain limitations, to offset future taxable income.

Further, we have state net operating loss carryforwards of $ 212.7 million with $ 178.9 million expiring on various dates through 2041 and $ 33.8 million with an indefinite carryforward period.

As of December 31, 2019, we had alternative minimum tax credits of approximately $ 2.1 million which can be used to offset regular income tax or is refundable.

Pursuant to a provision of the CARES Act, we filed for and received the full refund of these alternative minimum tax credits in 2020.

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As of December 31, 2021, we had interest expense carryforward for U.S.

income tax purposes of $ 92.7 million.

The entire $92.7 million has an indefinite carryforward period.

These carryforwards are available, subject to certain limitations, to offset future taxable income.

The Company has $ 3.3 million of tax credits that will expire on various dates through 2037 if not utilized.

As of December 31, 2020, we had foreign net operating loss carry forwards totaling $ 47.8 million.

Of this amount, $ 26.1 million will expire in various dates through 2030 and $ 21.7 million has an unlimited carry forward period.

As of December 31, 2021, we had foreign net operating loss carryforwards totaling $ 37.9 million.

Of this amount, $ 4.4 million will expire in various dates through 2030 and $ 33.5 million has an unlimited carryforward period.

At December 31, 2021, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas.

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We file income tax returns in the U.S.

with federal and state jurisdictions as well as various foreign jurisdictions.

federal and state jurisdictions as well as various foreign jurisdictions.

With few exceptions, we are no longer subject to U.S.

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income tax examinations by tax authorities for years prior to 2016.

We are currently under federal audit for the tax year ended December 31, 2017 and under state audit in one of the taxing jurisdictions in which we do substantial business.

We are currently under audit in one of the states in which we do substantial business.

We have recorded a $ 0.5 million tax liability in our uncertain positions related to this audit due to retroactive changes included in final regulations issued by the state this quarter.

Certain Netherlands entities are also under audit.

We do not anticipate any material adjustments related to these examinations.

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1 2018 revised figures were not considered material.

Penalties and interest were excluded in 2019, therefore 2018 amounts were revised for consistency.

We have recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets.

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There were approximately $ 0.2 million, $ 0.1 million and $( 0.1 ) million, respectively, of interest and penalties related to unrecognized tax benefits that are recorded in income tax expense for the periods ended December 31, 2021, 2020 and 2019.

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LONG-TERM DEBT

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Term Loan 214,191 213,809

Credit Facility revolver — 73,876

Credit Facility term loan — 49,735

Subordinated Term Loan 36,358 —

Total 312,549 222,809

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See Convertible Debt section below for additional information.

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

Thereafter 250,000

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

Total $ 455,345

For information on our finance lease obligations, see footnote 12.

On December 18, 2020, we entered into an asset-based credit agreement (the “ABL Facility”) led by Citibank, N.A., as agent, which provides for available borrowings up to $ 150 million.

On December 18, 2020, we entered into an asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) led by Citibank, N.A.

(“Citibank”), as agent, which provides for available borrowings up to $ 150 million (the “ABL Facility”).

The ABL Facility matures and all outstanding amounts become due and payable on December 18, 2024.

However, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $ 50 million or more outstanding 120 days prior to their maturity date (the “Trigger Date”), or if there are Notes in an aggregate principal amount of less than $ 50 million outstanding and we do not have sufficient availability of more than 20% under the ABL Facility on the Trigger Date, the ABL Facility will terminate on the Trigger Date.

However, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $ 10 million (updated from $ 50.0 million to $ 10.0 million as part of the Third Amendment to the Term Loan) or more outstanding 120 days prior to their maturity date (the “Trigger Date”), or if there are Notes in an aggregate principal amount of less than $ 10 million outstanding and we do not have sufficient availability of more than 20 % under the ABL Facility on the Trigger Date, the ABL Facility will terminate on the Trigger Date.

The ABL Facility includes a $ 50 million sublimit for letters of credit issuance and $ 35 million sublimit for swingline borrowings.

Additionally, subject to certain conditions, including obtaining additional commitments, the ABL Facility may be increased by an amount not to exceed $ 50 million.

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On December 7, 2021, the Company entered into Amendment No.

2 (the “ABL Amendment No.

2”) to the Credit Agreement.

ABL Amendment No.

2, among other things, (i) revises the applicable margin to 4.25 % for LIBOR rate advances, (ii) provides that at all times beginning on the effective date of the ABL Amendment No.

2 and ending on the date Citibank shall have received and approved the borrowing base certificate for the calendar month ending December 31, 2021, the borrowing base shall not exceed the lesser of (a) the borrowing base calculated as set forth in the borrowing base certificate for the calendar month ending December 31, 2021 and (b) $ 108,500,000 , (iii) establishes an interest reserve account for certain payments due under the Term Loan Credit Agreement, (iv) provides that after giving effect to any borrowing and any disbursements to be made by the Company with the proceeds of such borrowing, within one business day of such borrowing, the Company and its U.S.

subsidiaries may not have more than $ 5 million cash on hand, (v) provides for weekly variance testing to be delivered to Citibank, (vi) requires the Company to have used all of the proceeds borrowed under the Subordinated Term Loan Credit Agreement prior to borrowing under the Credit Agreement, and (vii) increases the amount of subordinated debt available to be incurred by the Company to account for (a) the additional $ 27.5 million borrowed under the Subordinated Term Loan Credit Agreement, (b) any additional amount borrowed under the Subordinated Term Loan Credit Agreement not to exceed $ 75 million in the aggregate, and (c) the payment of interest in the form of payment-in-kind interest with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement).

Our obligations under the ABL Facility are guaranteed by certain of our direct and indirect subsidiaries, as set forth in the ABL Facility agreement.

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Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin.

The Base Rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii) Citibank, N.A.’s prime rate, and (iii) the one-month LIBOR rate plus 1.00 %.

Depending on the amount of average excess availability, the applicable margin is between 1.75 % to 2.25 % for Base Rate borrowings with a 1.75 % Base Rate floor and between 2.75 % and 3.25 % for LIBOR rate

borrowings with a 0.75 % LIBOR rate floor.

The Base Rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii) Citibank’s prime rate, and (iii) the one-month LIBOR rate plus 1.00 %.

The applicable margin for LIBOR borrowings is 4.25 % and for Base Rate borrowings is 3.25 %.

The all-in Base Rate floor is 1.75 % and for LIBOR rate borrowings, the LIBOR rate, exclusive of spread, has a 0.75 % LIBOR rate floor.

Interest is payable either (i) monthly for Base Rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the ABL Facility agreement.

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Upon the occurrence of certain events of default, an additional 2.0 % interest maybe required on the outstanding loans under the ABL Facility.

At December 31, 2020, we had $ 24.6 million of cash on hand and approximately $ 59.5 million of available borrowing capacity under the ABL Facility.

At December 31, 2021, we had $ 65.3 million of cash on hand, of which, $ 4.1 million was restricted for interest due on the Term Loan and about $ 4.0 million of cash is located in countries where currency restrictions exist.

We had approximately $ 4.2 million of available borrowing capacity under the ABL Facility.

Direct and incremental costs associated with the issuance of the ABL Facility were approximately $ 4.8 million and were capitalized as debt issuance costs.

These costs are being amortized on a straight-line basis over the term of the ABL Facility.

On February 11, 2022, we entered into the ABL Credit Agreement.

Available funding commitments to us under the ABL Credit Agreement, subject to certain conditions, include the Revolving Credit Loans in an amount of up to $ 130.0 million, with a $ 35.0 million sublimit for swingline borrowings and a $ 26.0 million sublimit for issuances of letters of credit, and incremental Delayed Draw Term Loans of up to $ 35.0 million to be provided by Corre.

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.

The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under the Credit Agreement, which was repaid and terminated in full on February 11, 2022.

Our obligations under the ABL Credit Agreement are guaranteed by certain of our direct and indirect subsidiaries (other than certain excluded subsidiaries) (the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”).

Our obligations under the ABL Credit Facility are secured on a first priority basis by, among other things, accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties and are secured on a second priority basis by substantially all of the other assets of the ABL Loan Parties.

Availability under the revolving credit line under ABL Credit Facility is based on the percentage of the value of accounts receivable and inventory, as reduced by certain reserves.

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Revolving Credit Loans under the ABL Credit Facility bear interest through maturity at a variable rate based upon an annual rate of a LIBOR Rate (or a Base Rate (as defined below) if the LIBOR Rate is unavailable for any reason), plus an applicable margin (“LIBOR Rate Loan” and “Base Rate Loan”, respectively).

The “Base Rate” is defined as a fluctuating interest rate equal to the greatest of (1) the federal funds rate plus 0.50 %, (2) Wells Fargo Bank, National Association’s prime rate, and (3) the one-month LIBOR Rate.

The “applicable margin” is defined as a rate of 3.15 %, 3.40 % or 3.65 % for Base Rate Loans with a 2.00 % Base Rate floor and a rate of 4.15 %, 4.40 % or 4.65 % for LIBOR Rate Loans with a 1.00 % LIBOR floor, in each case depending on the amount of EBITDA as of the most recent measurement period, as reported in a monthly compliance certificate.

The Delayed Draw Term Loans shall bear interest through maturity at a rate of the LIBOR Rate plus 10.0 %, with a 1.00 % LIBOR floor.

The fee for undrawn revolving amounts is 0.50 % and the fee for undrawn Delayed Draw Term Loan amounts is 3.00 %.

Interest under the ABL Credit Facility is payable monthly.

The Company will also be required to pay customary letter of credit fees, as necessary.

The Company may make voluntary prepayments of the loans under the ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loans, to certain conditions.

Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the ABL Credit Facility to the sum of the delayed draw term loans plus revolving facility usage outstanding is less than 130 %.

Amounts repaid may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the ABL Credit Agreement, subject, in the case of the Delayed Draw Term Loan s to a maximum of four such borrowings in any 12-month period.

Certain permanent repayments of the ABL Credit Facility loans are subject to the payment of a premium of 2.00 % during the first year of the facility, 1.00 % during the second year of the facility, and 0.50 % in the last year of the facility.

The ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt.

The ABL Credit Agreement also requires that we will not exceed $ 20.0 million in unfinanced capital expenditures in any calendar year;

provided that this requirement will not apply if we maintain 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.

In addition, the ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.0 % interest on the outstanding loans under the ABL Credit Agreement.

Atlantic Park Term Loan

On December 18, 2020, we also entered into a credit agreement with Atlantic Park Strategic Capital Fund, L.P., as agent, and APSC Holdco II, L.P.

(“APSC”), as lender, pursuant to which we borrowed a $ 250.0 million term loan (the “Term Loan”).

On December 18, 2020, we also entered that certain Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), pursuant to which we borrowed a $ 250.0 million term loan (the “Term Loan”).

The Term Loan was issued with a 3 % original issuance discount (“OID”), such that total proceeds received were $ 242.5 million.

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However, certain conditions could result in an earlier maturity, including if the Notes have an aggregate principal amount outstanding of $ 10 million or more on the Trigger Date, in which case the Term Loan will terminate on the Trigger Date.

As set forth in the Term Loan agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the ABL Facility, and we may increase the Term Loan by an amount not to exceed $ 100 million.

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 Facility, and we may increase the Term Loan by an amount not to exceed $ 100 million.

The Term Loan bears an interest through maturity at a variable rate based upon, at our option, an annual rate of either a Base rate or a LIBOR rate, plus an applicable margin.

The Base rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii), the prime rate as specified in the Term Loan agreement, and (iii) one-month LIBOR rate plus 1.00%.

The Base rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii), the prime rate as specified in the Term Loan Credit Agreement, and (iii) one-month LIBOR rate plus 1.00 %.

The applicable margin is defined as a rate of 6.50 % for Base rate borrowings with a 2.00 % Base rate floor and 7.50 % for LIBOR rate borrowings with a 1.00 % LIBOR rate floor.

Interest is payable either (i) monthly for Base rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Term Loan agreement.

The loans under the Term Loan were issued with an original issue discount of 3.00 %, and are, in whole or in part, prepayable any time and from time to time, at a prepayment premium (including a make whole during the first two years) specified in the Term Loan agreement (subject to certain exceptions), plus accrued and unpaid interest.

Interest is payable either (i) monthly for Base rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Term Loan Credit Agreement.

The loans under the Term Loan were issued with an original issue discount of 3.00 %, and are, in whole or in part, prepayable any time and from time to time, at a prepayment premium (including a make whole during the first two years ) specified in the Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest.

The effective interest rate on the Term Loan at December 31, 2021 was 20.90 %.

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

Commencing with the fiscal quarter ending March 31, 2022, we are also required to maintain a net leverage ratio of less than or equal to 7.00 to 1.00, calculated quarterly on a trailing twelve-month basis.

In addition, our capital expenditures may not exceed $ 33.0 million during any four fiscal quarter period, provided that this covenant will not apply if the total net leverage ratio is less than or equal to 4.00 to 1.00 at the end of the second and fourth quarter of each year.

Our ability to maintain compliance with the financial covenants is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

The effects of the COVID-19 pandemic and the decline in oil and gas end markets could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers.

Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our ABL Facility.

On October 19, 2021, we entered into Amendment No.

1 (the “First Amendment”) to the Term Loan Credit Agreement with the financial institutions party thereto from time to time (the “Lenders”) and APSC, as agent.

The First Amendment, among other things, (i) deferred an October 19, 2021 interest payment until October 29, 2021;

(ii) required that the Company use commercially reasonable efforts to appoint an additional independent director to our Board of Directors who is acceptable

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to the agent;

(iii) provided the Lenders with additional information rights;

and (iv) tightened certain negative covenants included in the Term Loan Credit Agreement until the deferred interest is made current.

On October 29, 2021, we entered into Amendment No.

2 (the “Second Amendment”) to the Term Loan Credit Agreement with the Lenders and ASPC, as agent.

The Second Amendment, among other things, (i) further deferred an October 29, 2021 interest payment until November 15, 2021;

(ii) contained certain milestones;

(iii) provided the Lenders with a ten-day right of first refusal regarding any refinancing of the Company’s obligations under the ABL Facility;

(iv) obligated the Company to establish, pursuant to a charter to be adopted by the our Board of Directors and reasonably acceptable to the Agent, a special committee that shall have exclusive responsibility and authority to make recommendations to our Board of Directors regarding certain transactions;

and (v) provided that the Company will not permit a covenant trigger event under the ABL Facility to occur.

On November 8, 2021, we entered into Amendment No.3 (the “Third Amendment”) to the Term Loan Credit Agreement.

The Third Amendment, among other things, (i) waived certain covenants until September 30, 2022 and modifies covenants thereafter to provide us with more flexibility and (ii) required us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC, providing for the purchase of an aggregate of 1,417,051 shares of our common stock (the “APSC Warrants”), and to amend the warrants issued in December 2020 to APSC 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”), to provide for, an exercise price of $ 1.50 per share.

The Third Amendment also reduced the amount of principal outstanding on the Notes on the Trigger Date from $ 50 million to $ 10 million.

On December 2, 2021, and December 7, 2021, respectively, we entered into Amendment No.

4 (the “Fourth Amendment”) to the Term Loan Credit Agreement and Amendment No.

5 (the “Fifth Amendment”) to the Term Loan Credit Agreement, respectively.

The Fourth Amendment extended the date upon which the Company must issue the APSC Warrants to December 7, 2021, and the Fifth Amendment extended the date upon which the Company must issue the APSC Warrants to December 8, 2021.

The business purpose of these amendments was to further extend the Company’s liquidity runway while asset based lending field audit exams were completed in connection with the refinancing transactions completed on February 11, 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) permits the entry into the ABL Credit Agreement, (ii) permits certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permits certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amends the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will 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 this unfinanced capital expenditures requirement 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.

Subordinated Term Loan Credit Agreement

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”).

Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $ 22.5 million on November 9, 2021, and an additional $ 27.5 million on December 8, 2021.

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 %.

Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders Corre Warrants (described below), (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom will include our Chief Executive Officer, and (iii) reconstitute our Board of Directors.

The Subordinated Term Loan Credit Agreement also contains other customary prepayment provisions, events of default and covenants.

On November 30, 2021, we entered into Amendment No.

1 (the “Corre Amendment 1”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 1 (i) extended the payment date for interest in the form of payment-in-kind interest (“PIK Interest”)with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement), , (ii) extended the date upon which the Company must deliver a fully executed ABL Consent (as defined in the Subordinated Term Loan Credit Agreement) to, in each case, 11:59 P.M.

on December 6, 2021 and (iii) extended the date upon which we must issue the Corre Warrants to 11:59 P.M.

on December 7, 2021.

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On December 6, 2021, we entered into Amendment No.

2 (the “Corre Amendment 2”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 2 (i) extended the payment date in the form of PIK Interest with respect to the Initial Term Loans, and (ii) extended the date upon which we must deliver a fully executed ABL Consent to, in each case, 11:59 P.M.

on December 7, 2021.

On December 7, 2021, we entered into Amendment No.

3 (the “Corre Amendment 3”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 3, among other things, (i) extended the payment date for interest in the form of PIK Interest with respect to the Initial Term Loans, (ii) extended the date upon which we must deliver a fully executed ABL Consent and (iii) extended the date upon which we must issue the Corre Warrants to, in each case, 11:59 P.M.

on December 8, 2021.

The business purpose of the Corre Amendments was to further extend the liquidity runway of the Company and support ongoing negotiations of the financing transactions completed on February 11, 2022.

On December 8, 2021, we entered into Amendment No.

4 (the “Corre Amendment 4”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 4 appointed Cantor Fitzgerald Securities as successor Agent.

In connection with the transactions contemplated by the ABL Credit Agreement on February 11, 2022, Corre, agreed to provide the Company with the Incremental Financing, totaling approximately $ 55.0 million, consisting of (i) $ 35.0 million Delayed Draw Term Loans under the ABL Credit Facility;

(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 the PIPE Shares to the Corre Holders at a price of $ 0.84 per share.

On February 11, 2022, we entered into Amendment No.

5 (the “Corre Amendment 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.

The Corre Amendment 5, among other things, (i) provides for an additional commitment of $ 10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until July 1, 2022, (ii) permits the entry into the ABL Credit Facility, (iii) permits certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amends the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will 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;

Our ability to maintain compliance with the financial covenants contained in the ABL Credit Agreement, the Term Loan Credit Agreement and the Subordinated Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

The effects of the COVID-19 pandemic and the resulting economic repercussions could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers.

In addition to our current sources of funding our business, the effects of such events may impact our liquidity or our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change our business strategy.

Although the COVID-19 pandemic and decline in the oil and gas end markets could have a broad range of effects on our liquidity sources, the effects will depend on future developments and cannot be predicted at this time.

Although the COVID-19 pandemic and resulting economic repercussions could have a broad range of effects on our liquidity sources, the effects will depend on future developments and cannot be predicted at this time.

In order to secure our casualty insurance programs, we are required to post letters of credit generally issued by a bank as collateral.

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We were contingently liable for outstanding stand-by letters of credit totaling $ 23.5 million at December 31, 2021 and $ 19.5 million at December 31, 2020.

Outstanding letters of credit reduce amounts available under our ABL Facility and are considered as having been funded for purposes of calculating our financial covenants under the ABL Facility.

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC a warrant to purchase up to 3,582,949 shares of our common stock (the “Warrant”), which is exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $ 7.75 per share.

The exercise price and the number of share of common stock issuable on exercise of the Warrant are subject to certain antidilution adjustments, including stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.

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

Recognition, Use of Proceeds and Debt Issuance Costs

ASC 470 requires that proceeds from the sale of a debt instrument with stock purchase warrants should be allocated between the two elements based on the relative fair values of (i) the debt instrument without the warrants and (ii) the warrants themselves at time of issuance.

We determined the fair value of the Warrant at time of issuance was $ 23.8 million and the fair value of the Term Loan was $ 218.7 million.

The fair value of the Warrant was recognized in additional paid in capital and treated as discount to the face value of the Term Loan.

Direct and incremental costs associated with the issuance of the Term Loan were approximately $ 5.1 million and were capitalized as debt issuance costs.

Issuance costs allocated to the Warrant based on the comparable cost method were $ 1.4 million and were recorded as a reduction to additional paid in capital.

The debt issuance costs, the discount associated with the Warrant and the OID will be amortized using the effective interest method over the term of the Term Loan.

We used a portion of the proceeds from the Term Loan, totaling approximately $ 128.8 million, to repay all borrowings, including accrued interest, outstanding under our prior credit facility (the “Credit Facility”).

The Credit Facility, which was comprised of a revolver and term loan, was retired.

Unamortized costs associated with the Credit Facility were $ 2.2 million at time of repayment and were expensed as loss on debt extinguishment.

We retired $ 136.9 million par value of our Notes for $ 135.5 million, excluding accrued interest, using proceeds from the Term Loan and borrowings under the ABL Facility.

ASC 470 requires that the fair value of consideration transferred at settlement be allocated between the debt component and equity component of the Notes.

To determine the fair value of the debt component of the Notes, we measured the fair value of a similar debt instrument without an associated conversion feature.

The remaining fair value was allocated to the equity component of the Notes.

The amounts allocated to the debt and equity components were in accordance with ASC 470 and ASC 815, Derivatives and Hedging (“ASC 815”).

We determined the fair value of the retired Notes was $ 121.8 million at extinguishment, with the remaining consideration of $ 13.7 million allocated to the equity component.

The carrying amount of the retired Notes at extinguishment, net of unamortized discount and debt issuance costs was $ 124.0 million.

Therefore, in connection with the retirement of the Notes, we recognized a gain on extinguishment of $ 2.2 million.

Additionally, we incurred approximately $ 2.6 million in third-party fees in connection with the retirement of the Notes, of which $ 2.2 million were expensed as loss on debt extinguishment and $ 0.4 million recorded as equity reacquisition costs.

Outstanding letters of credit reduced amounts available under our ABL Facility and are considered as having been funded for purposes of calculating our financial covenants.

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC 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

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to 4,082,949 shares of Company common stock (which includes 500,000 of the shares of common stock issuable pursuant to the APSC Warrant) and to reduce the exercise price to $ 1.50 per share.

In connection with execution of the Subordinated Term Loan Credit Agreement and the amendments to the Term Loan Credit Agreement, on December 8, 2021 we entered into the Second Amended and Restated Common Stock Purchase Warrant No.

1 (the “Second A&R Warrant”) with APSC Holdco, pursuant to which the A&R Warrant was amended and restated to provide for the purchase of up to 5,000,000 shares of our common stock (including 4,082,949 shares of Common Stock issuable pursuant to the A&R Warrant) exercisable at the holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $ 1.50 per share, and (ii) entered into the Common Stock Purchase Warrants (together with the Second A&R Warrant, the “Warrants”) with each of Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon Fund II, LP providing for the purchase of an aggregate of 5,000,000 shares of our common stock, exercisable at such holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $ 1.50 per share.

The exercise price and the number of shares of our common stock issuable on exercise of the Warrants are subject to certain antidilution adjustments, including for stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.

In connection with the Subscription Agreement discussed below, on February 11, 2022, the Company, the Corre Holders and APSC Holdco entered into those certain Team, Inc.

Waivers of Anti-Dilution Adjustments and Cash Transaction Exercise (collectively, the “Warrant Waivers”) with respect to each of the Warrants.

Pursuant to the Warrant Waivers, the Corre Holders and APSC Holdco agreed with respect to such holders’ Warrant, subject to certain terms and conditions set forth therein (and for only so long as the applicable provisions remain in effect), among other things, (i) to irrevocably waive certain anti-dilution adjustments set forth in such Warrant in connection with the Proposed Equity Financing (as defined in the Warrant Waivers);

(ii) to not exercise such Warrant, in whole or in part, if the Company determines that such exercise will cause an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (assuming, among other things, that the ownership change threshold is 47% rather than 50%);

and (iii) to only exercise such Warrant in a “cashless” or “net-issue” exercise.

Subscription Agreement

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 the Subscription Agreement, subject to certain exceptions, each of the Corre Holders has agreed not to sell its portion of the PIPE Shares until the earliest to occur of (i) the date that is 180 days from the date of the Subscription Agreement, and (ii) such date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property, without consent of the Company.

Pursuant to and subject to the terms and conditions of the Subscription Agreement, our Board of Directors 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.

For so long as the Corre Holders and their affiliates collectively beneficially own at least 10 % of the outstanding shares of our common stock , pursuant to and subject to the terms and conditions of the Subscription Agreement, we will nominate the initial Board Nominee, or a successor Board Nominee chosen by the Corre Holders, for re-election as a Class II director at the first annual meeting of the Company’s stockholders to be held after the Equity Issuance and at the end of each subsequent term of such Board Nominee.

If at any time, the Corre Holders and their affiliates beneficially own less than 10 % of the outstanding shares of common stock, then, if requested by the Company, the Board Nominee then on the Board will resign from his or her directorship, effective as of our next annual meeting of stockholders or such earlier date reasonably requested by the Company.

Convertible Debt

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As discussed above, in December 2020, we retired $ 136.9 million par value of our Notes, and as of December 31, 2020, the principal amount of Notes outstanding was $ 93.1 million.

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The Notes bear interest at rate of 5.0 % per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2018.

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

We may not redeem the Notes prior to August 5, 2021.

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

As per the agreement, we may not redeem the Notes prior to August 5, 2021.

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

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

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 $ 51,969,000 in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”).

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The Supplemental Indenture amends the Indenture to, among other things:

(i) 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;

(ii) provide for additional changes to the Indenture to allow for the payment of PIK Interest and for the PIK Securities to be issued in denominations of $ 1,000 and integral multiples thereof (or if PIK Interest has been paid with respect to the PIK Securities, in minimum denominations of $ 1.00 and integral multiples of $ 1.00 in excess thereof);

(iii) clarify that the unmodified Notes and PIK Securities will be treated as a single series of Notes for all purposes under the Indenture, other than the option of the Company to pay PIK Interest on the PIK Securities;

and (iv) make certain conforming changes, including conforming modifications to certain definitions and cross-references as a result of such amendments.

Notes held by holders other than the Consenting Holders were not modified and interest on such Notes will continue to be paid in cash at a rate of 5.00 % per annum as set forth in the Indenture.

Accounting Treatment of the Notes

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Losses on the embedded derivative liability recognized in the consolidated statements of operations were $ 24.8 million for the twelve months ended December 31, 2018 (incurred in the first and second quarters of 2018).

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

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Effective interest rate 9.12 % 9.12 %

ASC 815 requires that derivative instruments be recorded at fair value and included in the balance sheet as assets or liabilities.

The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception date of a derivative.

Special accounting for derivatives qualifying as fair value hedges allows derivatives’ gains and losses to offset related results on the hedged item in the statement of operations.

For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income (loss) until the hedged item is recognized in earnings.

Hedge effectiveness is measured at least quarterly based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time.

Credit risks related to derivatives include the possibility that the counter-party will not fulfill the terms of the contract.

We consider counterparty credit risk to our derivative contracts when valuing our derivative instruments.

We previously had borrowings of € 12.3 million under the Credit Facility which served as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the borrowing attributable to the U.S.

Dollar/Euro spot rate to offset translation gains or losses attributable to our investment in our European operations.

In connection with the repayment of the Credit Facility, the economic hedge was terminated, and at December 31, 2020 we had approximately $ 1.2 million in accumulated other comprehensive income, related to the terminated hedge.

We adopted ASC 842 effective January 1, 2019 and elected the modified retrospective transition method.

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Total lease cost $ 34,329 $ 32,632

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

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As of December 31, 2021, we have no material additional operating and finance leases that have not yet commenced.

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As of December 31, 2021, future minimum lease payments under non-cancellable (excluding short-term leases) are as follows (in thousands):

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The exercise price, terms and other conditions applicable to each form of share-based compensation under our plans are generally determined by the Compensation Committee of our Board at the time of grant and may vary.

Our share-based payments consist primarily of stock units, performance awards, common stock and stock options.

In May 2018, our shareholders approved the 2018 Team, Inc.

Equity Incentive Plan (the “2018 Plan”), which replaced the 2016 Team, Inc.

Equity Incentive Plan (the “2016 Plan”) and subsequently amended in May 2019.

The 2018 Plan authorizes the issuance of share-based awards representing up to 1.2 million shares of common stock, plus the number of shares remaining available for issuance under the 2016 Plan, plus the number of shares subject to outstanding awards under specified prior plans that may become available for reissuance in certain circumstances.

In May 2021, our shareholders approved the amendment and restatement to the 2018 Team, Inc.

Equity Incentive Plan (the “2018 Plan”).

The 2018 Plan replaced the 2016 Team, Inc.

Equity Incentive Plan.

The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares of Common Stock.

Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock.

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Transactions involving our stock units and director stock grants for the twelve months ended December 31, 2021 are summarized below:

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Twelve Months Ended

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Compensation expense related to performance awards totaled $ 2.6 million, $ 1.7 million and $ 4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Transactions involving our performance awards during the twelve months ended December 31, 2021 are summarized below:

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The intrinsic value of stock option awards exercised was insignificant for the years ended December 31, 2021, 2020 and 2019.

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EMPLOYEE BENEFIT PLANS

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Salary Deferral Plan (the “Plan”), contributions are made to the Plan by qualified employees at their election and our matching contributions to the Plan are made at specified rates.

Our contributions to the Plan in the years ended December 31, 2020, 2019, and 2018 were approximately $ 2.1 million , $ 9.8 million, $ 11.0 million, respectively.

We did not incur any contribution expense in 2021 as forfeitures were used for the company match.

Our contributions for the plan years ended December 31, 2020 and 2019 were approximately $ 2.1 million and $ 9.8 million, respectively.

The decrease from 2019 to 2020 was due to the suspension of our matching contribution as of March 2020 due to the COVID-19 pandemic.

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Plan”) and the other covering certain Norwegian employees (the “Norwegian Plan”).

As the Norwegian Plan represented approximately 1.0 % of both total pension plan liabilities and total pension plan assets, the schedule of net periodic pension cost (credit) includes combined amounts from the two plans in 2018 only, while assumption and narrative information relates solely to the U.K.

In connection with the sale of our Norwegian operations in 2018, all assets and liabilities associated with the Norwegian Plan were transferred to the buyer.

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1 Not applicable due to plan curtailment.

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The weighted-average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31, 2021 and 2020 are as follows:

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Plan was $ 91.3 million and $ 100.2 million at December 31, 2021 and 2020, respectively.

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At December 31, 2021, expected future benefit payments are as follows for the years ended December 31, (in thousands):

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b) This category includes investments in a diversified portfolio of equity, bonds, alternatives and cash markets that aims to achieve capital growth returns.

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c) This category includes investments in a diversified portfolio of equity, bonds, money markets, alternatives and credit markets to achieve a return with downside protection through monthly put options.

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government indexed-linked securities, global bonds, and corporate bonds.

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COMMITMENTS AND CONTINGENCIES

We are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business.

We cannot predict with certainty the ultimate resolution of lawsuits, investigation and claims asserted against it.

We do not believe that any uninsured losses that might arise from these lawsuits and proceedings will have a materially adverse effect on our consolidated financial statements.

We establish a liability for loss contingencies, when information available to us indicates that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, which will only be resolved when one or more future events occur or fail to occur.

Team’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, Team’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

We accrue for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on our best estimate of the expected liability.

We may increase or decrease our legal accruals in the future, on a matter-by-matter basis, to account for developments in such matter.

Because such matters are inherently unpredictable and unfavorable developments or outcomes can occur, assessing contingencies is highly subjective and requires judgments about future events.

Notwithstanding the uncertainty as to the outcome and while our insurance coverage might not be available or adequate to cover these claims, based upon the information currently available, we do not believe that any uninsured losses that might arise from these lawsuits and proceedings will have a materially adverse effect on our consolidated financial statements.

California Wage and Hour Litigation - On June 24, 2019 and August 26, 2020, two putative class action complaints were filed against Team Industrial Services, Inc.

in the Superior Court for the County of Los Angeles, California.

The plaintiff in the first filed action is Michael Thai (the “Thai action”).

The plaintiff in the second filed action is Alex Esqueda (the “Esqueda action”).

All of the claims pleaded in the Esqueda action were also pleaded in the Thai action.

Each of the plaintiffs assert claims for alleged wage and hour violations under the California Labor Code (for alleged unpaid wages, failure to provide meal and rest breaks, and derivative related claims).

The Thai action also asserts a putative class claim for violation of the Fair Credit Reporting Act.

Both cases were stayed shortly after filing to allow the parties to mediate the claims.

On February 23, 2021, the Los Angeles Superior Court designated the Thai and Esqueda actions as related cases.

While the parties mediated on March 18, 2021, the cases did not settle.

On April 16, 2021, Team Industrial Services, Inc.

moved both the Thai and Esqueda actions to the United States District Court for the Central District of California.

Plaintiff’s motion for remand was denied, and these matters remain in federal court.

In November 2021, the parties agreed in principle to settle all claims in this litigation.

All class action settlements of this nature are subject to approval of the court, which can take several months after the final settlement agreement is executed by the parties.

The parties anticipate court approval of the settlement agreement on or before August 31, 2022.

Notice of Potential Environmental Violation - On April 20, 2021, Team Industrial Services, Inc.

received Notices of Potential Violation from the U.S.

Environmental Protection Agency (“EPA”) alleging noncompliance with various waste determination, reporting, training, and planning obligations under the Resource Conservation and Recovery Act at seven of our facilities located in Texas and Louisiana.

The allegations largely relate to spent film developing solutions generated through our mobile radiographic inspection services and that the claims relate to the characterization and quantities of those wastes and related notices, reporting, training, and planning.

On February 9, 2022, TEAM and the EPA agreed to settle all the claims related to this matter.

The parties anticipate finalization of the settlement agreement on or before March 31, 2022.

Kelli Most Litigation - On November 13, 2018, Kelli Most filed a lawsuit against Team Industrial Services, Inc., individually and as a personal representative of the estate of Jesse Henson, in the 268th District Court of Fort Bend County, Texas (the “Most litigation”).

The complaint asserted claims against Team for negligence resulting in the wrongful death of Jesse Henson.

A jury trial commenced on this matter on May 4, 2021.

On June 1, 2021, the jury rendered a verdict against Team for $ 222 million in compensatory damages.

We believe that the jury verdict is not supported by the facts of the case or applicable law, is the result of significant trial error, and there are strong grounds for appeal.

We will seek to overturn the verdict in post-trial motions before the District

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Court and, if necessary, to appeal to the Court of Appeals for the State of Texas.

We intend to vigorously challenge the judgment through all appropriate post-trial motions and appeal processes.

As a result, we believe that the likelihood that the amount of the judgment will be affirmed is not probable.

We have taken into consideration the events that have occurred after the reporting period and before the financial statements were issued.

We currently estimate a range of possible outcomes between $ 13 million and approximately $ 51 million, and we have accrued a liability as of December 31, 2021 which is the amount we believe is the most likely estimate for a probable loss on this matter.

We have also recorded a related receivable from our third-party insurance providers in other current assets with the corresponding liability of the same amount in other accrued liabilities.

Such amounts are treated as non-cash operating activities.

The Most litigation is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly, we believe pending the final settlement, all further claims will be fully funded by our insurance policies.

We will continue to evaluate the possible outcomes of this case in light of future developments and their potential impact on factors relevant to our assessment of any possible loss.

On January 25, 2022, the trial judge entered a Final Judgment in this matter.

TEAM immediately filed a supersedeas bond, to prevent execution on the judgment, while it prepares to file motions to appeal the judgment.

Simon, Vige, and Roberts Matter – On February 19, 2019, a personal injury claim was filed by the plaintiffs against several counterparties including Team Industrial Services Inc., in the 295th District Court of Harris County, Texas.

The plaintiffs filed the action seeking monetary damages for personal injury, and emotional and mental distress.

This matter was settled in July 2021.

This claim is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly this claim has been fully funded by our insurance policies.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 44 million as of December 31, 2021, of which approximately $ 5 million is not covered by our various insurance policies.

In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”).

Management believes that based on its current knowledge and after consultation with legal counsel that the Other Proceedings, individually or in the aggregate, will not have a material effect on our consolidated financial statements.

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SEGMENT AND GEOGRAPHIC DISCLOSURES

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$ 12,997 $ ( 174,638 ) $ 24,084

MS 25,879 55,385 6,323

( 47,728 ) 25,879 55,385

Quest Integrity 3

900 16,474 28,757

Corporate and shared support services ( 92,151 ) ( 85,077 ) ( 110,372 )

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1 Includes goodwill impairment loss of $ 191.8 million for IHT for the year ended December 31, 2020.

2 Includes goodwill impairment loss of $ 55.8 million for MS for the year ended December 31, 2021.

3 Includes goodwill impairment loss of $ 8.8 million for Quest for the year ended December 31, 2021.

Twelve Months Ended

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Totals may vary from amounts presented in the consolidated statements of cash flows due to the timing of cash payments.

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Twelve Months Ended

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2 Excludes goodwill, intangible assets not being amortized that are to be held and used, financial instruments and deferred tax assets.

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RESTRUCTURING AND OTHER RELATED CHARGES

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2021 2020 2019

OneTEAM Program

Operating Group Reorganization and other continuing restructuring measures

Severance and related costs

IHT $ 459 $ — $ —

MS 1,926 418 2,514

Quest Integrity 381 — —

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Grand total $ 2,916 $ — $ —

OneTEAM Program.

In the fourth quarter of 2017, we engaged outside consultants to assess all aspects of our business for improvement and cost saving opportunities.

In the first quarter of 2018, we completed the design phase of the project, known as OneTEAM, for our domestic operations, and entered in the deployment phase starting in the second quarter of 2018.

In the third quarter of 2019, we began the design phase of OneTEAM for our international operations which was deployed in the fourth quarter of 2019.

During the first quarter of 2020, in response to COVID-19 and decline in the oil and gas end markets, we expanded and accelerated the operations and center led pillars from the OneTEAM program in order to implement permanent cost savings and identify further opportunities to optimize our organization.

As part of the OneTEAM Program, we decided to eliminate certain employee positions.

For the twelve months ended December 31, 2020 and 2019, we have incurred severance charges of $ 3.4 million and $ 1.7 million, respectively and the amount we have incurred cumulatively to date is $ 11.8 million.

We expect the program-related expenses to continue through the first quarter of 2021.

A rollforward of our accrued severance liability associated with this program is presented below (in thousands):

Operating Group Reorganization.

In January 2021, we announced a new strategic organizational structure to better position ourselves for the recovery, continue sector diversification, and enhance client value (the “Operating Group Reorganization”).

In connection with the Operating Group Reorganization, we announced certain executive leadership changes and the appointment of experienced new talent to our leadership team.

For the twelve months ended December 31, 2021, we incurred severance charges of $ 2.9 million, which represents all costs cumulatively incurred to date as a result of the Operating Group Reorganization.

A rollforward of our accrued severance liability associated with this reorganization is presented below (in thousands):

Twelve Months Ended

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Balance, end of period $ 712

For the twelve months ended December 31, 2020 and 2019, we also incurred professional fees of $ 3.2 million and $ 12.3 million, respectively, associated with OneTEAM.

For the twelve months ended December 31, 2021, we also incurred professional fees of $ 1.9 million associated with the Operating Group Reorganization.

OneTEAM Program

Beginning in 2017, we undertook a project (“OneTEAM”) to assess all aspects of our business for improvement and cost saving opportunities.

We did not incur any severance costs under OneTEAM during the twelve months ended December 31, 2021.

During the twelve months ended December 31, 2020, we incurred $ 3.4 million in severance charges associated with OneTEAM.

We have incurred $ 11.8 million of OneTEAM severance charges cumulatively to date, and do not expect any further severance costs under this program.

As of December 31, 2021, we had no remaining severance liability outstanding under OneTEAM.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

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Total $ 1,935 $ ( 989 ) $ 946 $ 2,499 $ 13 $ 2,512 $ 3,985 $ 217 $ 4,202

QUARTERLY FINANCIAL DATA (Unaudited)

The following is a summary of selected unaudited quarterly financial data for the years ended December 31, 2020 and 2019 (in thousands, except per share data):

Year Ended December 31, 2020

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Revenues $ 236,839 $ 189,304 $ 219,093 $ 207,303 $ 852,539

Gross margin $ 57,486 $ 57,376 $ 63,705 $ 60,144 $ 238,711

Operating income (loss) $ ( 212,932 ) $ ( 4,366 ) $ 2,297 $ ( 2,361 ) $ ( 217,362 )

Income (loss) from continuing operations $ ( 199,727 ) $ ( 13,528 ) $ ( 9,073 ) $ ( 14,875 ) $ ( 237,203 )

Net income (loss) $ ( 199,727 ) $ ( 13,528 ) $ ( 9,073 ) $ ( 14,875 ) $ ( 237,203 )

Basic and diluted earnings (loss) per share:

Net income (loss) $ ( 6.54 ) $ ( 0.44 ) $ ( 0.30 ) $ ( 0.48 ) $ ( 7.74 )

Year Ended December 31, 2019

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Revenues $ 269,599 $ 315,829 $ 290,079 $ 287,807 $ 1,163,314

Gross margin $ 65,947 $ 94,597 $ 83,035 $ 84,165 $ 327,744

Operating income (loss) $ ( 16,528 ) $ 13,004 $ ( 1,840 ) $ 3,218 $ ( 2,146 )

Income (loss) from continuing operations $ ( 24,228 ) $ 6,102 $ ( 7,057 ) $ ( 7,234 ) $ ( 32,417 )

Net income (loss) $ ( 24,228 ) $ 6,102 $ ( 7,057 ) $ ( 7,234 ) $ ( 32,417 )

Basic and diluted earnings (loss) per share:

Net income (loss) $ ( 0.80 ) $ 0.20 $ ( 0.23 ) $ ( 0.24 ) $ ( 1.07 )

Related Party Transactions

Alvarez & Marsal provides certain consulting services to the Company in connection with our Interim CFO position and other corporate support costs.

The Company paid $ 8.0 million in fees to Alvarez & Marsal for the year ended December 31, 2021.

In connection with the Company’s debt transactions, the Company engaged in transactions with Corre and Atlantic Park to provide funding as described in Note 11.

SUBSEQUENT EVENTS

Refer to Note 1 for information on the Recent Financing Transactions and Note 11 for information on the amendments to the ABL Credit Facility, Incremental Financing and Equity Issuance we entered into on February 11, 2022.

On March 7, 2022, the Company completed a transaction with Superior Plant Rentals (“SPR”) for the sale of certain assets for $ 3.0 million in cash.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data