Weatherford International plc 10-Q

Item 1. Financial Statements. WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, (Dollars and shares in millions, except per share amounts) 2021 2020 2021 2020 Revenues: 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 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 (Credits), Net ( 8 ) 406 ( 8 ) 1,223 Restructuring Charges — 57 — 83 Total Costs and Expenses 878 1,318 1,723 3,355 Operating Income (Loss) 25 ( 497 ) 12 ( 1,319 ) Interest Expense, Net ( 72 ) ( 59 ) ( 142 ) ( 117 ) Reorganization Items — — — ( 9 ) Other Expense, Net ( 11 ) ( 11 ) ( 15 ) ( 36 ) Loss Before Income Taxes ( 58 ) ( 567 ) ( 145 ) ( 1,481 ) Income Tax Provision ( 15 ) ( 12 ) ( 38 ) ( 56 ) Net Loss ( 73 ) ( 579 ) ( 183 ) ( 1,537 ) Net Income Attributable to Noncontrolling Interests 5 2 11 10 Net Loss Attributable to Weatherford $ ( 78 ) $ ( 581 ) $ ( 194 ) $ ( 1,547 ) Basic & Diluted Loss per Share $ ( 1.11 ) $ ( 8.30 ) $ ( 2.77 ) $ ( 22.10 ) Basic & Diluted Weighted Average Shares Outstanding 70 70 70 70 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, (Dollars in millions) 2021 2020 2021 2020 Net Loss $ ( 73 ) $ ( 579 ) $ ( 183 ) $ ( 1,537 ) Foreign Currency Translation Adjustments 15 29 11 ( 66 ) Comprehensive Loss ( 58 ) ( 550 ) ( 172 ) ( 1,603 ) Comprehensive Income Attributable to Noncontrolling Interests 5 2 11 10 Comprehensive Loss Attributable to Weatherford $ ( 63 ) $ ( 552 ) $ ( 183 ) $ ( 1,613 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars and shares in millions, except par value) 6/30/2021 12/31/2020 (Unaudited) Assets: Cash and Cash Equivalents $ 1,217 $ 1,118 Restricted Cash 170 167 Accounts Receivable, Net of Allowance for Credit Losses of $ 38 at June 30, 2021 and $ 32 at December 31, 2020 782 826 Inventories, Net 662 717 Other Current Assets 295 349 Total Current Assets 3,126 3,177 Property, Plant and Equipment, Net of Accumulated Depreciation of $ 505 at June 30, 2021 and $ 367 at December 31, 2020 1,108 1,236 Intangible Assets, Net of Accumulated Amortization of $ 251 at June 30, 2021 and $ 173 at December 31, 2020 734 810 Operating Lease Right-of-Use Assets 126 138 Other Non-Current Assets 66 73 Total Assets $ 5,160 $ 5,434 Liabilities: Short-term Borrowings and Current Portion of Finance Leases 10 13 Accounts Payable 348 325 Accrued Salaries and Benefits 287 297 Income Taxes Payable 140 185 Current Portion of Operating Lease Liabilities 68 71 Other Current Liabilities 390 471 Total Current Liabilities 1,243 1,362 Long-term Debt 2,605 2,601 Operating Lease Liabilities 149 177 Other Non-Current Liabilities 404 357 Total Liabilities $ 4,401 $ 4,497 Shareholders’ Equity: Ordinary Shares - Par Value $ 0.001 ; 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 Retained Deficit ( 2,141 ) ( 1,947 ) Accumulated Other Comprehensive Loss ( 32 ) ( 43 ) Weatherford Shareholders’ Equity 726 907 Noncontrolling Interests 33 30 Total Shareholders’ Equity 759 937 Total Liabilities and Shareholders’ Equity $ 5,160 $ 5,434 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, (Dollars in millions) 2021 2020 Cash Flows From Operating Activities: Net Loss $ ( 183 ) $ ( 1,537 ) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 225 270 Goodwill Impairment — 239 Long-lived Asset Impairments — 818 Inventory Charges 39 138 (Gain) Loss on Disposition of Assets ( 13 ) 4 Deferred Income Tax Provision 6 21 Share-Based Compensation 9 — Changes in Operating Assets and Liabilities, Net: Accounts Receivable 41 277 Inventories 15 ( 33 ) Accounts Payable 16 ( 197 ) Other Assets and Liabilities, Net ( 35 ) 61 Net Cash Provided by Operating Activities 120 61 Cash Flows From Investing Activities: Capital Expenditures for Property, Plant and Equipment ( 24 ) ( 73 ) Proceeds from Disposition of Assets 22 8 Other Investing Activities — 3 Net Cash Used in Investing Activities ( 2 ) ( 62 ) Cash Flows From Financing Activities: Repayments of Long-term Debt ( 5 ) ( 5 ) Repayments of Short-term Debt, Net ( 4 ) 7 Deferred Consideration Payment — ( 24 ) Other Financing Activities ( 6 ) ( 14 ) Net Cash Used in Financing Activities ( 15 ) ( 36 ) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 1 ) ( 7 ) Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 102 ( 44 ) Cash, Cash Equivalents and Restricted Cash at Beginning of Period 1,285 800 Cash, Cash Equivalents and Restricted Cash at End of Period $ 1,387 $ 756 Supplemental Cash Flow Information: Interest Paid $ 141 $ 112 Income Taxes Paid, Net of Refunds $ 32 $ 40 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company,” or “Weatherford”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Therefore, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Annual Report”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from our estimates. In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary by management to fairly state the results of operations, financial position and cash flows of Weatherford and its subsidiaries for the periods presented and are not necessarily indicative of the results that may be expected for a full year. Our financial statements have been prepared on a consolidated basis. Under this basis, our financial statements consolidate all wholly owned subsidiaries and controlled joint ventures. All intercompany accounts and transactions have been eliminated. Summary of Significant Accounting Policies 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 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. 2. 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 Long-lived Asset Impairments $ — $ 178 $ — $ 818 Goodwill Impairment — 72 — 239 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 6 Table of Contents 3. 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 4. Inventories, Net 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 Finished Goods $ 593 $ 655 Work in Process and Raw Materials, Components and Supplies 69 62 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 5. Long-lived Asset Impairments 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. 7 Table of Contents 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 Intangible Assets 13 9 22 44 115 159 Right of Use Assets 7 8 15 56 32 88 Total Long-Lived Asset Impairments $ 114 $ 64 $ 178 $ 416 $ 402 $ 818 6. Goodwill and Intangible Assets Goodwill 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 The components of definite-lived intangible assets, net of accumulated amortization, were as follows: (Dollars in millions) 6/30/2021 12/31/2020 Developed and Acquired Technology, Net of Accumulated Amortization of $ 190 at June 30, 2021 and $ 132 at December 31, 2020 $ 400 $ 456 Trade Names, Net of Accumulated Amortization of $ 61 at June 30, 2021 and $ 41 at December 31, 2020 334 354 Intangible Assets, Net of Accumulated Amortization of $ 251 at June 30, 2021 and $ 173 at December 31, 2020 $ 734 $ 810 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. 8 Table of Contents 7. Restructuring Charges 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. Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2021 2020 2021 2020 Severance Charges $ — $ 55 $ — $ 78 Facility Exit Charges — 2 — 5 Total Restructuring Charges $ — $ 57 $ — $ 83 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 Western Hemisphere $ — $ 26 $ — $ 41 Eastern Hemisphere — 11 — 17 Corporate — 20 — 25 Total Restructuring Charges $ — $ 57 $ — $ 83 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 Table of Contents 8. Borrowings and Other Obligations (Dollars in millions) 6/30/2021 12/31/2020 Finance Lease Current Portion $ 10 $ 9 Other Short-term Financing Arrangements — 4 Short-term Borrowings $ 10 $ 13 11.00% Exit Notes due 2024 $ 2,098 $ 2,098 8.75% Senior Secured Notes due 2024 460 455 Finance Lease Long-term Portion 47 48 Long-term Debt $ 2,605 $ 2,601 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 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 (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 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 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 The carrying value of our short-term borrowings approximates their fair value due to their short maturities. These short-term borrowings are classified as Level 2 in the fair value hierarchy. 10 Table of Contents 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. 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. The table below presents the fair value and carrying value of the Exit Notes and Senior Secured Notes. 6/30/2021 12/31/2020 (Dollars in millions) Carrying Value Fair Value Carrying Value Fair Value 11.00% Exit Notes due 2024 $ 2,098 $ 2,190 $ 2,098 $ 1,628 8.75% Senior Secured Notes due 2024 460 524 455 507 9. Disputes, Litigation and Legal Contingencies We are subject to lawsuits and claims arising out of the nature of our business. We have certain claims, disputes and pending litigation for which we do not believe a negative outcome is probable or for which we can only estimate a range of liability. It is possible, however, that an unexpected judgment could be rendered against us, or we could decide to resolve a case or cases, that would result in a liability that could be uninsured and beyond the amounts we currently have reserved and in some cases those losses could be material. If one or more negative outcomes were to occur relative to these cases, the aggregate impact to our financial condition could be material. 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. GAMCO Shareholder Litigation On September 6, 2019, GAMCO Asset Management, Inc. (“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 (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. GAMCO’s lawsuit was filed in the United States District Court for the Southern District of Texas, Houston Division, and it is captioned GAMCO Asset Management, Inc. v. McCollum, et al., Case No. 4:19-cv-03363. The District Court Judge appointed Utah Retirement Systems (“URS”) as Lead Plaintiff, and on March 16, 2020, URS filed its Amended Complaint. URS added the Company as a defendant but dropped the claims against non-officer board members and all the claims under the Securities Act. The defendants filed their motion to dismiss on May 18, 2020, and plaintiffs filed their response on July 3, 2020. The defendants filed a reply brief on August 3, 2020. 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. 11 Table of Contents 10. Shareholders’ Equity 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 Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Shareholders’ Equity Balance at December 31, 2020 $ 2,897 $ ( 1,947 ) $ ( 43 ) $ 30 $ 937 Net Income (Loss) — ( 116 ) — 6 ( 110 ) Other — — — ( 2 ) ( 2 ) Other Comprehensive Loss — — ( 4 ) — ( 4 ) 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 Net Income (Loss) — ( 966 ) — 8 ( 958 ) Other Comprehensive Loss — — ( 95 ) — ( 95 ) Balance at March 31, 2020 $ 2,897 $ ( 992 ) $ ( 86 ) $ 44 $ 1,863 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 Balance at December 31, 2020 $ ( 31 ) $ ( 12 ) $ ( 43 ) Other Comprehensive Loss $ 11 $ — $ 11 Balance at June 30, 2021 $ ( 20 ) $ ( 12 ) $ ( 32 ) Balance at December 31, 2019 $ 7 $ 2 $ 9 Other Comprehensive Loss ( 66 ) — ( 66 ) Balance at June 30, 2020 $ ( 59 ) $ 2 $ ( 57 ) 12 Table of Contents 11. Loss per Share Basic earnings (loss) per share for all periods presented equals net income (loss) divided by our weighted average shares outstanding during the period. 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 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 Net Loss Attributable to Weatherford $ ( 78 ) $ ( 581 ) $ ( 194 ) $ ( 1,547 ) Basic and Diluted Weighted Average Shares Outstanding 70 70 70 70 Basic and Diluted Loss Per Share Attributable to Weatherford $ ( 1.11 ) $ ( 8.30 ) $ ( 2.77 ) $ ( 22.10 ) 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 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. 12. Revenues Revenue by Product Line and Geographic Region Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services. Our two product lines are as follows: (1) Completion and Production and (2) Drilling, Evaluation and Intervention. The unmanned equipment that we lease to customers as operating leases consists primarily of drilling rental tools (in the Drilling, Evaluation and Intervention product line) and artificial lift pumping equipment (in the Completion and Production product line). 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 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. 13 Table of Contents Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2021 2020 2021 2020 Product Line Revenue for Western Hemisphere Completion and Production $ 231 $ 165 $ 456 $ 462 Drilling, Evaluation and Intervention 194 145 359 436 Total Western Hemisphere Revenue 425 310 $ 815 $ 898 Product Line Revenue for Eastern Hemisphere Completion and Production 214 240 $ 412 $ 542 Drilling, Evaluation and Intervention 264 271 508 596 Total Eastern Hemisphere Revenue 478 511 $ 920 $ 1,138 Total Revenues $ 903 $ 821 $ 1,735 $ 2,036 Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2021 2020 2021 2020 Revenue by Geographic Areas: North America $ 220 $ 172 $ 434 $ 513 Latin America 205 138 381 385 Western Hemisphere 425 310 $ 815 $ 898 Middle East & North Africa and Asia 289 341 $ 556 $ 744 Europe/Sub-Sahara Africa/Russia 189 170 364 394 Eastern Hemisphere 478 511 $ 920 $ 1,138 Total Revenues $ 903 $ 821 $ 1,735 $ 2,036 Contract Balances 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 12/31/2020 Receivables for Product and Services in Accounts Receivable, Net $ 744 $ 792 Total Accounts Receivables $ 782 $ 826 Contract Liabilities $ 36 $ 37 14 Table of Contents 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 June 30, 2021. (Dollars in millions) 2021 2022 2023 2024 Thereafter Total Service Revenue $ 27 $ 42 $ 39 $ 40 $ 54 $ 202 13. Segment Information Financial information by segment is summarized below. 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 June 30, Six Months Ended June 30, (Dollars in millions) 2021 2020 2021 2020 Revenue: Western Hemisphere $ 425 $ 310 $ 815 $ 898 Eastern Hemisphere 478 511 920 $ 1,138 Total Revenue 903 821 $ 1,735 $ 2,036 Operating Income (Loss): Western Hemisphere 28 ( 23 ) $ 52 $ 6 Eastern Hemisphere 6 15 ( 13 ) 33 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) Credits 17 ( 34 ) 4 ( 13 ) Impairments and Other (Charges) Credits, Net (b) 8 ( 406 ) 8 ( 1,223 ) Restructuring Charges — ( 57 ) — ( 83 ) Total Operating Income (Loss) 25 ( 497 ) $ 12 ( 1,319 ) Interest Expense, Net ( 72 ) ( 59 ) ( 142 ) ( 117 ) Reorganization Items — — — ( 9 ) Other Expense, Net ( 11 ) ( 11 ) ( 15 ) ( 36 ) 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 $ 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. 15 Table of Contents 14. Income Taxes We determined our quarterly tax provision using the year-to-date effective tax rate because small changes in estimated ordinary annual income result in significant changes in our estimated annual effective tax rate. 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. 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 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 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. 16 Table of Contents