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Item 1. Financial Statements

2021-07-29 compared with 2021-05-06 · 122 added, 97 removed, 270 unchanged (45% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars and shares in millions, except per share amounts) 2021 2020 2021 2020

Products $ 309 $ 450

Services 588 512 1,111 1,277

Products $ 315 $ 309 $ 624 $ 759

Total Revenues 903 821 1,735 2,036

Costs and Expenses:

Cost of Products 280 392

Cost of Services 392 356 748 877

Cost of Products 285 253 565 645

Research and Development 21 23 42 56

Selling, General and Administrative 188 223 376 471

Impairments and Other Charges — 817

Impairments and Other Charges (Credits), Net ( 8 ) 406 ( 8 ) 1,223

Restructuring Charges — 57 — 83

Total Costs and Expenses 878 1,318 1,723 3,355

Operating Loss ( 13 ) ( 822 )

Operating Income (Loss) 25 ( 497 ) 12 ( 1,319 )

Interest Expense, Net

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended March 31,

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars in millions) 2021 2020 2021 2020

10 unchanged sentences

Restricted Cash 170 167

Accounts Receivable, Net of Allowance for Credit Losses of $ 32 at March 31, 2021 and $ 32 at December 31, 2020

Accounts Receivable, Net of Allowance for Credit Losses of $ 38 at June 30, 2021 and $ 32 at December 31, 2020

Inventories, Net 662 717

1 unchanged sentence

Total Current Assets 3,126 3,177

Property, Plant and Equipment, Net of Accumulated Depreciation of $ 430 at March 31, 2021 and $ 367 at December 31, 2020

Intangible Assets, Net of Accumulated Amortization of $ 212 at March 31, 2021 and $ 173 at December 31, 2020

Property, Plant and Equipment, Net of Accumulated Depreciation of $ 505 at June 30, 2021 and $ 367 at December 31, 2020

Intangible Assets, Net of Accumulated Amortization of $ 251 at June 30, 2021 and $ 173 at December 31, 2020

Operating Lease Right-of-Use Assets 126 138

1 unchanged sentence

Total Assets $ 5,160 $ 5,434

Short-term Borrowings and Current Portion of Long-term Debt 11 13

Short-term Borrowings and Current Portion of Finance Leases 10 13

Accounts Payable 348 325

10 unchanged sentences

Ordinary Shares - Par Value $ 0.001 ;

Authorized 1,356 shares, Issued and Outstanding 70 shares at March 31, 2021 and December 31, 2020

Authorized 1,356 shares, Issued and Outstanding 70 shares at June 30, 2021 and December 31, 2020

Capital in Excess of Par Value 2,899 2,897

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions) 2021 2020

6 unchanged sentences

Inventory Charges 39 138

Asset Write-Downs and Other Charges — 6

(Gain) Loss on Disposition of Assets ( 13 ) 4

Deferred Income Tax Provision 6 21

9 unchanged sentences

Other Investing Activities — 3

Net Used in Investing Activities ( 3 ) ( 35 )

Net Cash Used in Investing Activities ( 2 ) ( 62 )

Cash Flows From Financing Activities:

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Please refer to “Note 1 – Summary of Significant Accounting Policies” of our Consolidated Financial Statements from our 2020 Annual Report for the discussion on our significant accounting policies.

Certain reclassifications of the financial statements and accompanying footnotes for the three months ended March 31, 2020 have been made to conform to the presentation for the three months ended March 31, 2021.

Impairments and Other Charges

We recorded the following in “Impairments and Other Charges” on the accompanying Condensed Consolidated Statements of Operations:

Three Months Ended

Certain reclassifications of the financial statements and accompanying footnotes for the three and six months ended June 30, 2020 have been made to conform to the presentation for the three and six months ended June 30, 2021.

Impairments and Other Charges (Credits), Net

We recorded the following in “Impairments and Other Charges (Credits), Net” on the accompanying Condensed Consolidated Statements of Operations:

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars in millions) 2021 2020 2021 2020

1 unchanged sentence

Goodwill Impairment — 72 — 239

Other Charges, Net — 10

Total Impairment and Other Charges $ — $ 817

We recognized long-lived asset and goodwill impairments as further described in “Note 4 – Long-Lived Asset Impairments” and “Note 5 – Goodwill and Intangible Assets”.

Inventory Charges 6 134 7 134

Other Charges (Credits) ( 14 ) 22 ( 15 ) 32

Total Impairments and Other Charges (Credits), Net $ ( 8 ) $ 406 $ ( 8 ) $ 1,223

Accounts Receivable Factoring

From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions.

Our factoring transactions in the three and six months ended June 30, 2021 and 2020 were recognized as sales of accounts receivable, and the proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows.

The loss on sale of accounts receivable sold was immaterial for the three and six months of 2021 and 2020.

The following table presents accounts receivable sold and cash proceeds from the sale of accounts receivable, net of discount and hold-back amounts:

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

Accounts Receivable Sold $ 34 $ 17 $ 40 $ 23

Cash Proceeds from Sale of Accounts Receivable $ 29 $ 15 $ 34 $ 21

Inventories, Net

Inventories, net of reserves of $ 137 million and $ 119 million as of March 31, 2021 and December 31, 2020, respectively by category in the table below.

During the three months ended March 31, 2021 and 2020, we recognized excess and obsolete inventory charges of $ 17 million and $ 2 million, respectively, recorded in “Cost of Products” on our Condensed Consolidated Statements of Operations.

Inventories, net of reserves of $ 147 million and $ 119 million as of June 30, 2021 and December 31, 2020, respectively, are presented by category in the table below:

(Dollars in millions) 6/30/2021 12/31/2020

2 unchanged sentences

Inventories, Net $ 662 $ 717

In the three and six months ended June 30, 2021 and 2020, we recognized inventory charges, including excess and obsolete inventory charges, in the following captions on our Condensed Consolidated Statements of Operations:

Three Months Ended Six Months Ended

June 30, June 30,

(Dollars in millions) 2021 2020 2021 2020

Inventory Charges in “Impairments and Other Charges” $ 6 $ 134 $ 7 $ 134

Inventory Charges in “Cost of Products” 16 2 32 4

Total Inventory Charges $ 22 $ 136 $ 39 $ 138

Long-lived Asset Impairments

We did not recognize any long-lived asset impairments in the three months ended March 31, 2021.

During the three months ended March 31, 2020, the global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as impairment indicators.

As a result, we performed interim impairment assessments as of March 31, 2020, of our property, plant and equipment, definite-lived intangible assets, goodwill and right of use assets with the assistance of third-party valuation advisors.

Based on our impairment test, we determined the carrying amount of certain long-lived assets exceeded their respective fair values and recognized $ 640 million of long-lived asset impairments in “Long-lived Asset Impairments” on the accompanying Condensed Consolidated Statements of Operations during the three months ended March 31, 2020.

See the impairment to goodwill and intangible assets at “Note 5 – Goodwill and Intangible Assets.”

The fair values of our long-lived assets were determined using discounted cash flow under the income approach or Level 3 fair value analyses.

We did not recognize any long-lived asset impairments in the three and six months ended June 30, 2021.

During the first half of 2020, the global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as impairment indicators.

As a result, we performed interim impairment assessments of our property, plant and equipment, definite-lived intangible assets, and right of use assets with the assistance of third-party valuation advisors.

Based on our impairment tests, we determined the carrying amount of certain long-lived assets exceeded their respective fair values and recognized long-lived asset impairments presented in the table below.

The fair values of our long-lived assets were determined using discounted cash flows under the income approach, a Level 3 fair value analysis.

The income approach required significant assumptions to determine the fair value of an asset or asset group including the estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins and the discount rate.

The table below details the long-lived asset impairments by asset and segment recognized.

Three Months Ended March 31, 2020

(Dollars in millions) Western Hemisphere Eastern Hemisphere Total

The table below details the long-lived asset impairments by asset class and segment recognized for the three and six months ended June 30, 2020:

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

(Dollars in millions) Western Hemisphere Eastern Hemisphere Total Western Hemisphere Eastern Hemisphere Total

Property, Plant and Equipment $ 94 $ 47 $ 141 $ 316 $ 255 $ 571

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Right of Use Assets 7 8 15 56 32 88

Total Impairment Charges $ 302 $ 338 $ 640

Total Long-Lived Asset Impairments $ 114 $ 64 $ 178 $ 416 $ 402 $ 818

Goodwill and Intangible Assets

We have no goodwill as of December 31, 2020 and March 31, 2021.

The cumulative impairment loss for goodwill was $ 239 million.

For the three months ended March 31, 2020, based on our goodwill impairment assessment that determined the fair value of our reporting units were less than their carrying values, we recognized goodwill impairment of $ 167 million in our Eastern Hemisphere segment, included in “Impairments and Other Charges” on the accompanying Condensed Consolidated Statements of Operations.

We identified the impairment indicators as discussed in “Note 4 – Long-Lived Asset Impairments” that triggered interim quantitative goodwill assessments as of March 31, 2020.

As of June 30, 2021 and December 31, 2020, we had no goodwill.

The cumulative impairment loss for goodwill was $ 239 million, all of which was fully impaired in the first half of 2020.

During 2020, based on our interim goodwill impairment assessments that determined the fair value of our reporting units were less than their carrying values, we recognized goodwill impairment charges presented in “Note 2 – Impairments and Other Charges (Credits), Net.” We identified impairment indicators as discussed in “Note 5 – Long-lived Asset Impairments” that triggered these interim quantitative goodwill assessments.

The fair values of our reporting units were determined using a combination of the income approach and the market approach for comparable companies in our industry, a Level 3 fair value analysis.

Determining the fair value of the reporting units requires management to develop significant judgments, including estimating and discounting future cash flows by reporting unit, specifically forecasted revenue, forecasted operating margins and discount rates.

See goodwill impairment charges presented in “Note 2 – Impairments and Other Charges (Credits), Net.”

Intangible Assets

1 unchanged sentence

(Dollars in millions) 6/30/2021

Developed and Acquired Technology $ 427 $ 456

Trade Names 344 354

Totals $ 771 $ 810

We did not recognize any impairment of intangible assets in the three months ended March 31, 2021.

For the three months ended March 31, 2020, based on our impairment test, we recognized intangible asset impairments of $ 137 million of our developed and acquired technology.

Amortization expense was $ 39 million and $ 46 million for the three months ended March 31, 2021 and 2020, respectively, and is reported in Selling, General and Administrative on our Condensed Consolidated Statements of Operations.

Accumulated amortization as of March 31, 2021 and December 31, 2020, was $ 161 million and $ 132 million, respectively, for Developed and Acquired Technology and $ 51 million and $ 41 million, respectively, for Trade Names.

Developed and Acquired Technology, Net of Accumulated Amortization of $ 190 at June 30, 2021 and $ 132 at December 31, 2020

Trade Names, Net of Accumulated Amortization of $ 61 at June 30, 2021 and $ 41 at December 31, 2020

Intangible Assets, Net of Accumulated Amortization of $ 251 at June 30, 2021 and $ 173 at December 31, 2020

Amortization expense was $ 39 million and $ 78 million in the three and six months ended June 30, 2021, respectively, and $ 40 million and $ 86 million in the three and six months ended June 30, 2020, respectively, and is reported in “Selling, General and Administrative” on our Condensed Consolidated Statements of Operations.

Restructuring Charges

During the three months ended March 31, 2021 and 2020, we incurred restructuring charges of zero and $ 26 million, respectively, in “Restructuring Charges” on the accompanying Condensed Consolidated Statements of Operations.

The following table presents restructuring charges in the three and six months ended June 30, 2021 and 2020 in “Restructuring Charges” on the accompanying Condensed Consolidated Statements of Operations.

Additional charges with respect to our ongoing cost reduction actions may be recognized in subsequent periods.

The following table presents restructuring charges for the first quarter of 2021 and 2020.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

2 unchanged sentences

Total Restructuring Charges $ — $ 57 $ — $ 83

The following table presents total restructuring charges by reporting segment and Corporate for the first quarter of 2021 and 2020.

Three Months Ended March 31,

The following table presents total restructuring charges by reporting segment and Corporate in the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

3 unchanged sentences

Total Restructuring Charges $ — $ 57 $ — $ 83

The following table presents total restructuring accrual activity for the three months ended March 31, 2021.

(Dollars in millions) Accrued Balance at December 31, 2020 Charges Cash Payments Other

Accrued Balance at March 31, 2021

The following table presents total restructuring accrual activity in the six months ended June 30, 2021:

(Dollars in millions) Accrued Balance at December 31, 2020 Charges Cash Payments (Credits)/Other

Accrued Balance at June 30, 2021

Restructuring Reserve $ 53 $ — $ ( 21 ) $ ( 5 ) $ 27

9 unchanged sentences

Long-term Debt $ 2,605 $ 2,601

Upon our emergence from bankruptcy on December 13, 2019, we entered into an indenture with Deutsche Bank Trust Company Americas, as trustee and issued unsecured 11.00 % Exit Notes in an aggregate principal amount of $ 2.1 billion maturing on December 1, 2024 (the “Exit Notes”).

Upon our emergence from bankruptcy on December 13, 2019, we entered into an indenture and issued unsecured 11.00 % Exit Notes in an aggregate principal amount of $ 2.1 billion maturing on December 1, 2024 (the “Exit Notes”).

Interest on the Exit Notes accrues at the rate of 11.00 % per annum and is payable semiannually in arrears on June 1 and December 1, which commenced on June 1, 2020.

Senior Secured Notes

On August 28, 2020, we entered into an indenture with Wilmington Trust, National Association, as trustee and collateral agent, and issued the 8.75 % Senior Secured Notes in an aggregate principal amount of $ 500 million maturing September 1, 2024 (the “Senior Secured Notes”).

Interest on the Senior Secured Notes accrues at the rate of 8.75 % per annum and is payable semiannually in arrears on March 1 and September 1, commencing on March 1, 2021.

On August 28, 2020, we entered into an indenture and issued the 8.75 % Senior Secured Notes in an aggregate principal amount of $ 500 million maturing September 1, 2024 (the “Senior Secured Notes”).

Interest on the Senior Secured Notes accrues at the rate of 8.75 % per annum and is payable semiannually in arrears on March 1 and September 1, which commenced on March 1, 2021.

LC Credit Agreement

On December 13, 2019, we entered into the senior secured letter of credit agreement in an aggregate amount of $ 195 million maturing on June 13, 2024 with the lenders party thereto and Deutsche Bank Trust Company Americas as administrative agent (the “LC Credit Agreement”).

On December 13, 2019, we entered into the senior secured letter of credit agreement in an aggregate amount of $ 195 million maturing on June 13, 2024 (the “LC Credit Agreement”).

The LC Credit Agreement is used for the issuance of bid and performance letters of credit of the Company and certain of its subsidiaries.

On August 28, 2020, we amended the LC Credit Agreement to, among other things, increase the aggregate commitments to $ 215 million, modify the maturity date to May 29, 2024 and reduce the minimum liquidity covenant to $ 175 million.

At March 31, 2021, we had approximately $ 160 million in outstanding letters of credit under the LC Credit Agreement and availability of $ 55 million.

As of March 31, 2021, we had $ 328 million of letters of credit outstanding, consisting of the $ 160 million mentioned above under the LC Credit Agreement and another $ 168 million under various uncommitted facilities (of which there was $ 163 million in cash collateral held and recorded in “Restricted Cash” on our Condensed Consolidated Balance Sheets).

At June 30, 2021, we had approximately $ 160 million in outstanding letters of credit under the LC Credit Agreement and availability of $ 55 million.

As of June 30, 2021, we had $ 331 million of letters of credit outstanding, consisting of the $ 160 million mentioned above under the LC Credit Agreement and another $ 171 million under various uncommitted facilities (of which there was $ 165 million in cash collateral held and recorded in “Restricted Cash” on our Condensed Consolidated Balance Sheets).

Accrued Interest

As of March 31, 2021 and December 31, 2020, we had approximately $ 80 million and $ 34 million, respectively in “Other Current Liabilities” primarily related to the Exit Notes and Senior Secured Notes.

As of June 30, 2021 and December 31, 2020, we had accrued interest primarily related to the Exit Notes and Senior Secured Notes of $ 34 million in both periods, respectively, in “Other Current Liabilities” on our Condensed Consolidated Balance Sheets.

Fair Value of Short and Long-term Borrowings

2 unchanged sentences

The fair value of our long-term debt fluctuates with changes in applicable interest rates among other factors.

Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued

and will be less than the carrying value when the market rate is greater than the interest rate at which the debt was originally issued.

Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued and will be less than the carrying value when the market rate is greater than the interest rate at which the debt was originally issued.

The fair value of our long-term debt is classified as Level 2 in the fair value hierarchy and is established based on observable inputs in less active markets.

6 unchanged sentences

460 524 455 507

Total $ 2,555 $ 2,542 $ 2,553 $ 2,135

Disputes, Litigation and Legal Contingencies

4 unchanged sentences

Due to the COVID-19 pandemic, many of the Company’s litigation matters and other disputes have been delayed due to court closures or other mandated accommodations.

Accrued litigation and settlements recorded in “Other Current Liabilities” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 were $ 44 million and $ 43 million, respectively.

GAMCO Shareholder Litigation

1 unchanged sentence

(“GAMCO”), purportedly on behalf of itself and other similarly situated shareholders, filed a lawsuit asserting violations of the federal securities laws against certain then-current and former officers and directors of the Company.

GAMCO alleges violations of Sections 10(b) and 20(b) of the Securities Exchange Act of 1934, and violations of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) based on allegations that the Company and certain of its officers made false and/or misleading statements, and alleged non-disclosure of material facts, regarding our business, operations, prospects and performance.

GAMCO alleges violations of Sections 10(b) and 20(b) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”), and violations of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) based on allegations that the Company and certain of its officers made false and/or misleading statements, and alleged non-disclosure of material facts, regarding our business, operations, prospects and performance.

GAMCO seeks damages on behalf of purchasers of the Company’s ordinary shares from October 26, 2016 through May 10, 2019.

6 unchanged sentences

The defendants filed a reply brief on August 3, 2020.

Their motion to dismiss is pending before the Court.

On May 14, 2021, the District Court dismissed the case with prejudice for failure to state a claim.

On June 11, 2021, the plaintiffs filed their Notice of Appeal with the District Court.

The Appellate Court clerk will receive the District Court’s docket and issue a briefing schedule.

We cannot reliably predict the outcome of the claims, including the amount of any possible loss.

Shareholders’ Equity

The following summarizes our shareholders’ equity activity for the three months ended March 31, 2021 and 2020.

The following summarizes our shareholders’ equity activity in the three and six months ended June 30, 2021 and 2020:

(Dollars in millions) Capital in Excess of Par Value Retained

7 unchanged sentences

Balance at March 31, 2021 $ 2,897 $ ( 2,063 ) $ ( 47 ) $ 34 $ 821

Net Income (Loss) — ( 78 ) — 5 ( 73 )

Other Comprehensive Loss — — 15 — 15

Dividends to Noncontrolling Interests — — — ( 4 ) ( 4 )

Equity Awards Granted, Vested and Exercised 2 — — — 2

Other — — — ( 2 ) ( 2 )

Balance at June 30, 2021 $ 2,899 $ ( 2,141 ) $ ( 32 ) $ 33 $ 759

Balance at December 31, 2019 $ 2,897 $ ( 26 ) $ 9 $ 36 $ 2,916

2 unchanged sentences

Balance at March 31, 2020 $ 2,897 $ ( 992 ) $ ( 86 ) $ 44 $ 1,863

The following table presents the changes in our accumulated other comprehensive income (loss) by component for the three months ended March 31, 2021 and 2020:

Net Income (Loss) — ( 581 ) — 2 ( 579 )

Other Comprehensive Loss — — 29 — 29

Dividends to Noncontrolling Interests — — — ( 8 ) ( 8 )

Balance at June 30, 2020 $ 2,897 $ ( 1,573 ) $ ( 57 ) $ 38 $ 1,305

The following table presents the changes in our accumulated other comprehensive income (loss) by component in the six months ended June 30, 2021 and 2020:

(Dollars in millions) Currency Translation Adjustment Defined Benefit Pension Total

1 unchanged sentence

Other Comprehensive Loss $ 11 $ — $ 11

Balance at March 31, 2021 $ ( 35 ) $ ( 12 ) $ ( 47 )

Balance at June 30, 2021 $ ( 20 ) $ ( 12 ) $ ( 32 )

Balance at December 31, 2019 $ 7 $ 2 $ 9

Other Comprehensive Loss ( 66 ) — ( 66 )

Balance at March 31, 2020 $ ( 88 ) $ 2 $ ( 86 )

Balance at June 30, 2020 $ ( 59 ) $ 2 $ ( 57 )

Loss per Share

1 unchanged sentence

Diluted earnings (loss) per share is computed by dividing net income (loss) by our weighted average shares outstanding during the period including potential dilutive ordinary shares.

The following table presents our basic and diluted weighted average shares outstanding and loss per share for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following table presents our basic and diluted weighted average shares outstanding and loss per share in the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

(Dollars and shares in millions, except per share amounts) 2021 2020 2021 2020

3 unchanged sentences

Our basic and diluted weighted average shares outstanding for the periods presented are equivalent due to the net loss attributable to shareholders.

Diluted weighted average shares outstanding for the three months ended March 31, 2021 and 2020 exclude 9 million and 8 million, respectively, potential ordinary shares for restricted share units, performance share units,

phantom restricted share units, and warrants outstanding as we had net losses for those periods and their inclusion would be anti-dilutive.

Diluted weighted average shares outstanding in the three and six months ended June 30, 2021 and 2020 exclude 10 million and 8 million potential ordinary shares, respectively, for restricted share units, performance share units, phantom restricted share units, and warrants outstanding as we had net losses for those periods and their inclusion would be anti-dilutive.

Revenue by Product Line and Geographic Region

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These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts.

The following tables disaggregate our product and service revenues by major product line and geographic region for the three months ended March 31, 2021 and 2020 and includes equipment revenues recognized under lease accounting standards of $ 28 million for the three months ended March 31, 2021, and $ 57 million for the three months ended March 31, 2020.

Three Months Ended March 31,

The following tables disaggregate our product and service revenues by major product line and geographic region for the three and six months ended June 30, 2021 and 2020 and includes equipment revenues recognized under lease accounting standards of $ 35 million and $ 63 million in the three and six months ended June 30, 2021, respectively, and $ 32 million and $ 89 million for the three and six months ended June 30, 2020, respectively.

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

8 unchanged sentences

Total Revenues $ 903 $ 821 $ 1,735 $ 2,036

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

8 unchanged sentences

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets (including unbilled receivables), and customer advances and deposits (contract liabilities classified as deferred revenues).

Our receivables are primarily derived from contract sales of products and services, which are included in “Accounts Receivable, Net” on the Condensed Consolidated Balance Sheets, and was $ 758 million and $ 792 million at March 31, 2021 and December 31, 2021, respectively.

Total accounts receivable, net was $ 793 million and $ 826 million at March 31, 2021 and December 31, 2020, respectively.

Contract assets were immaterial in both periods ending March 31, 2021 and December 31, 2020.

Contract liabilities totaled $ 43 million and $ 37 million at March 31, 2021 and December 31, 2020.

Revenue recognized for the three months ended March 31, 2021 that were included in the contract liabilities balance at the beginning of 2021 was $ 18 million.

The timing of our revenue recognition, billings and cash collections results in the recording of billed accounts receivable, contract assets (including unbilled receivables), customer advances and deposits (contract liabilities classified as deferred revenues).

Our receivables are primarily derived from contract sales of products and services, which are included in “Accounts Receivable, Net” on the Condensed Consolidated Balance Sheets.

Contract assets were immaterial as of June 30, 2021 and December 31, 2020.

Revenue recognized during the six months ended June 30, 2021 that was included in the contract liabilities balance at the beginning of 2021 was $ 25 million.

The following table summarizes these balances as of June 30, 2021 and December 31, 2020:

(Dollars in millions) 6/30/2021

Receivables for Product and Services in Accounts Receivable, Net $ 744 $ 792

Total Accounts Receivables $ 782 $ 826

Contract Liabilities $ 36 $ 37

Performance Obligations

In the following table, estimated revenue for contracts with original performance obligations greater than twelve months are expected to be recognized in the future related to performance obligations that are either unsatisfied or partially unsatisfied as of March 31, 2021.

(Dollars in millions) 2021 2022 2023 2024 Thereafter Total

3 unchanged sentences

The accounting policies of the segments are the same as those described in the summary of significant accounting policies as presented in our 2020 Annual Report.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in millions) 2021 2020 2021 2020

5 unchanged sentences

Eastern Hemisphere 6 15 ( 13 ) 33

Total Segment Operating Income 5 47

Total Segment Operating Income (Loss) 34 ( 8 ) 39 39

Corporate (a)

( 17 ) ( 26 ) ( 35 ) ( 52 )

Total Operating Income (Loss) Before Impairments, Restructuring and Other Charges ( 13 ) 21

Impairments and Other Charges (b)

Total Operating Income (Loss) Before Impairments, Restructuring and Other (Charges) Credits 17 ( 34 ) 4 ( 13 )

Impairments and Other (Charges) Credits, Net (b)

8 ( 406 ) 8 ( 1,223 )

Restructuring Charges — ( 57 ) — ( 83 )

Total Operating Loss ( 13 ) ( 822 )

Total Operating Income (Loss) 25 ( 497 ) $ 12 ( 1,319 )

Interest Expense, Net ( 72 ) ( 59 ) ( 142 ) ( 117 )

2 unchanged sentences

Loss Before Income Taxes $ ( 58 ) $ ( 567 ) $ ( 145 ) $ ( 1,481 )

(a) Corporate also includes eliminations of intercompany margins associated with transfers of assets and inventory that were nil in the three months ended March 31, 2021 and $ 8 million in the three months ended March 31, 2020.

(b) In the three months ended March 31, 2020, primarily includes the impairment of goodwill, property, plant and equipment, intangibles and right of use assets and other charges.

(a) Corporate also includes eliminations of intercompany margins associated with transfers of assets and inventory that were $ 1 million and $ 10 million in the three months ended June 30, 2021 and 2020, respectively.

The six months ended June 30, 2021 and 2020, included elimination of intercompany margins of $ 1 million and $ 18 million, respectively.

(b) The three and six months ended June 30, 2021 primarily included gains on the disposition of assets, lease terminations and litigation matters, partially offset by the write-down of inventory.

The three and six months ended June 30, 2020, primarily includes the impairment of goodwill, property, plant and equipment, intangibles and right of use assets and other charges.

See “Note 5 – Long-lived Asset Impairments” and “Note 6 – Goodwill and Intangible Assets” for additional information.

1 unchanged sentence

The year-to-date effective tax rate treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis.

For the three months ended March 31, 2021, we recognized tax expense of $ 23 million on a loss before income taxes of $ 87 million compared to tax expense of $ 44 million on a loss before income taxes of $ 914 million for the three months ended March 31, 2020.

Our income tax provisions generally do not correlate to our consolidated income (loss) before tax.

Our income taxes provisions are primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss.

In the three and six months ended June 30, 2021, we recognized tax expense of $ 15 million and $ 38 million, respectively, on a loss before income taxes of $ 58 million and $ 145 million, respectively, compared to the three and six months ended June 30, 2020 where we recognized tax expense of $ 12 million and $ 56 million, respectively, on a loss before income taxes of $ 567 million and $ 1.5 billion, respectively.

Our income tax provisions are primarily driven by income in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss.

Impairments and other charges recognized do not result in significant tax benefit as a result of our inability to forecast realization of the tax benefit of such losses.

Tax expense for the three months ended March 31, 2020 included $ 20 million to recognize valuation allowance in jurisdictions where we are no longer able to forecast taxable income as a result of our liquidity position as of March 31, 2020.

Tax expense in the three and the six months ended June 30, 2021 includes a $ 13 million tax benefit attributed to the reversal of a tax accrual in connection with an internal restructuring transaction completed in the second quarter of 2021.

Tax expense for the six months ended June 30, 2020 included $ 20 million recorded in the first quarter of 2020 to recognize valuation allowance in jurisdictions where we were no longer able to forecast taxable income.

We routinely undergo tax examination in various jurisdictions.

We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements.

As of March 31, 2021, we anticipate that it is reasonably possible that our uncertain tax positions of $ 233 million may decrease by up to $ 3 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

In response to the COVID-19 pandemic, many countries have enacted tax relief measures to provide aid and economic stimulus to companies impacted by the COVID-19 pandemic.

For the three months ended March 31, 2021, there were no material tax impacts to our Condensed Consolidated Financial Statements related to COVID-19 tax relief measures.

As of June 30, 2021, we anticipate that it is reasonably possible that our uncertain tax positions of $ 241 million may decrease by up to $ 13 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

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-Q

Item 1. Financial Statements