| Significant Accounting Policies | Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The Consolidated Financial Statements as of December 31, 2018 and 2017 , and for the years ended December 31, 2018 , 2017 , and 2016 , include the accounts of Nine and Beckman and their wholly owned subsidiaries. For additional information on the history of Nine, see Note 1 – Company and Organization . All inter-company balances and transactions have been eliminated in the consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Such estimates include but are not limited to fair value assumptions used in purchase accounting and in analyzing goodwill, other intangible assets, and long-lived assets for possible impairment, useful lives used in depreciation and amortization expense, stock-based compensation fair value, estimated realizable value on excess and obsolete inventories, deferred taxes and income tax contingencies, and losses on accounts receivable. It is at least reasonably possible that the estimates used will change within the next year. Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications relate to the breakout of “Definite-lived intangible assets, net” and “Indefinite-lived intangible assets” in the Company’s Consolidated Balance Sheets . Revenue Recognition The Company recognizes revenue for products and services based upon purchase orders, contracts, or other persuasive evidence of an arrangement with the customer that include fixed or determinable prices and that do not include right of return or other similar provisions or other post-delivery obligations. Revenue is recognized for products upon delivery, customer acceptance, and when collectability is reasonably assured. Revenue is recognized for services when they are rendered and collectability is reasonably assured. Cash and Cash Equivalents The Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. Throughout the year, the Company maintained cash balances that were in excess of their federally insured limits. The Company has not experienced any losses in such accounts. Cash flows from the Company’s Canadian subsidiary are calculated based on its functional currency. As a result, amounts related to changes in assets and liabilities reported in the Company’s Consolidated Statements of Cash Flows will not necessarily agree to changes in the corresponding balances in the Company’s Consolidated Balance Sheets . Foreign Currency The Company’s functional currency is the U.S. Dollar (“USD”). The financial position and results of operations of the Company’s Canadian subsidiary are measured using the local currency as the functional currency. Revenues and expenses of the subsidiary have been translated into USD at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the date of the Company’s Consolidated Balance Sheets . The resulting translation gain and loss adjustments have been recorded as a separate component of other comprehensive income (loss) in the Company’s Consolidated Statements of Income and Comprehensive Income (Loss) and its Consolidated Statements of Changes in Stockholders’ Equity. Accounts Receivable The Company extends credit to customers in the normal course of business. Accounts receivable are carried at their estimated collectible amount. Trade credit is generally extended on a short-term basis; thus receivables do not bear interest, although a finance charge may be applied to amounts past due. The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of its customers to make required payments. Such allowances are based upon several factors including, but not limited to, credit approval practices, industry and customer historical experience, as well as the current and projected financial condition of the specific customer. Accounts receivable outstanding longer than contractual terms are considered past due. The Company writes off accounts receivable to the allowance for doubtful accounts when they become uncollectible. Any payments subsequently received on receivables previously written off are credited to bad debt expense. Bad debt expense recoveries was $0.3 million for the year ended December 31, 2018 , while bad debt expense was $0.2 million for the year ended December 31, 2017 . There was no bad debt expense for the year ended December 31, 2016 . The allowance for doubtful accounts was $0.5 million and $0.6 million at December 31, 2018 and 2017 , respectively. Concentration of Credit Risk The majority of the Company’s customers operate in the oil and gas industry. While current energy prices are important contributors to positive cash flow for the customers, expectations about future prices and price volatility are generally more important for determining future spending levels. Any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development, and production activity as well as the entire health of the oil and natural gas industry and can therefore negatively impact spending by the Company’s customers. No customer accounted for at least 10% of revenues for the years ended December 31, 2018 and 2017 . Revenues for the year ended December 31, 2016 included sales to one customer that individually represented 10% or more of total revenue. Concentration of Supplier Risk Purchases during the years ended December 31, 2018 , 2017 , and 2016 included purchases from one supplier that individually represented more than 10% of total operating purchases. The accounts payable to this vendor totaled 15% and 17% of total accounts payable at December 31, 2018 and 2017 , respectively. Equity Method Investment The Company accounts for investments, which it does not control but has the ability to significantly influence, using the equity method of accounting. Under this method, the investment is carried originally at cost, increased by any allocated share of the investee’s net income and contributions made, and decreased by any allocated share of the investee’s net losses and distributions received. The investee’s allocated share of income and losses is based on the rights and priorities outlined in the equity investment agreement. On March 13, 2017, the Company entered into an agreement to acquire shares of the Series B Preferred Stock of Deep Imaging Technologies (“DIT”) for $1.0 million . DIT provides an advanced electromagnetic fracture monitoring service which allows its customers to make on-site decisions regarding efficiencies. The Company’s investment in DIT is accounted for as an equity method investment, as the Company has a non-controlling interest in DIT but has the ability to exercise significant influence. From the date of the investment through December 31, 2018 , the Company’s share of DIT’s net loss was $0.7 million , and is reported as “Loss on equity method investment” in its Consolidated Statements of Income and Comprehensive Income (Loss) and as a reduction of the investment in DIT, which is reported within “Other long-term assets” in its Consolidated Balance Sheets . Property and Equipment Property and equipment is stated at cost and depreciated under the straight-line method over the estimated useful lives of the asset. Equipment held under capital leases is stated at the present value of its future minimum lease payments and is depreciated under the straight-line method over the shorter of the lease term or the estimated useful life of the asset. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized within operating expenses. Normal repair and maintenance costs are charged to operating expense as incurred. Significant renewals and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows based on expected utilization. Impairment losses are reflected in operating income (loss) in the Company’s Consolidated Statements of Income and Comprehensive Income (Loss). In the fourth quarter of 2018, the Company recorded a property and equipment impairment charge of $45.7 million and a definite-lived customer relationship intangible asset impairment charge of $9.8 million . These impairment charges represent the difference between the carrying value and the estimated fair value of the long-lived assets associated with the Company’s Production Solutions segment and are due to deteriorating conditions attributed to depressed commodity prices towards the end of the fourth quarter of 2018, coupled with customers focusing more on the completions business where there is more technological differentiation and value. For additional information on these impairment charges, see Note 5 – Property and Equipment . Goodwill and Intangible Assets Goodwill has an indefinite useful life and is not subject to amortization. Intangible assets with indefinite useful lives (specifically trademarks and trade names) are also not subject to amortization. For goodwill and intangible assets with indefinite useful lives, an assessment for impairment is performed annually on December 31 or when there is an indication an impairment may have occurred. Goodwill is reviewed for impairment by comparing the carrying value of each of the Company’s reporting unit’s net assets (including allocated goodwill) to the fair value of the reporting unit. The fair value of the reporting unit is determined by using a combination of both the income approach (discounted cash flows of forecasted income) and the market approach (public comparable company multiple of earnings before interest, taxes, depreciation and amortization or “EBITDA”). Intangible assets with indefinite useful lives are reviewed for impairment by comparing the carrying value of the intangible asset to the fair value of the intangible asset. The fair value of intangible assets with indefinite useful lives (specifically trademarks and trade names) is estimated upon acquisition using the relief-from-royalty method of the income approach. This approach is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty in order to exploit the related benefits of this intangible asset. Determining fair value requires the use of estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating profit margins, royalty rates, weighted average costs of capital, a terminal growth rate, and future market conditions, among others. The Company believes that the estimates and assumptions used in impairment assessments are reasonable and appropriate. The Company recognizes a goodwill impairment charge for the amount by which the carrying value of goodwill exceeds the reporting unit’s fair value. The Company recognizes an indefinite-lived intangible asset impairment charge of the amount by which the carrying value of the intangible asset exceeds the fair value of the intangible asset. Any impairment losses are reflected in in operating income (loss) in the Company’s Consolidated Statements of Income and Comprehensive Income (Loss). Intangible assets with definite lives include technology, customer relationships, and non-compete agreements. The fair value of technology and the fair value of customer relationships is estimated upon acquisition using the income approach, specifically the multi-period excess earnings method. The multi-period excess earnings method consists of isolating the cash flows attributed to the intangible asset, which are then discounted to present value to calculate the fair value of the intangible asset. The fair value of non-compete agreements is estimated upon acquisition using a with and without scenario where cash flows are projected through the term of the non-compete agreement assuming the non-compete agreement is in place and compared to cash flows assuming the non-compete agreement is not in place. Intangible assets with definite lives are amortized based on the estimated consumption of the economic benefit over their estimated useful lives. Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicated that their carrying amount may not be recoverable. In the fourth quarter of 2018, in connection with its annual goodwill impairment test, the Company recorded a goodwill impairment charge of $13.0 million , which represents a full write-off of goodwill attributed to its Production Solutions segment. In addition, in the fourth quarter of 2018, in connection with its annual indefinite-lived intangible asset impairment test, the Company recorded an intangible asset impairment charge of $9.3 million associated with indefinite-lived trade names in its Production Solutions segment. As described above in “Property and Equipment” and also in the fourth quarter of 2018, the Company recorded an intangible asset impairment charge of $9.8 million related to definite-lived customer relationship intangible assets associated with its Production Solutions segment. In the fourth quarter of 2017, in connection with its annual goodwill impairment test, the Company recorded a goodwill impairment charge of $31.5 million associated with one reporting unit in its Completion Solutions segment. In the fourth quarter of 2017, the Company recorded an intangible asset impairment charge of $3.8 million related to definite-lived customer relationship intangible assets associated with one reporting unit in its Completion Solutions segment. For additional information on goodwill and both indefinite-lived and definite-lived intangible asset impairment charges, see Note 6 – Goodwill and Intangible Assets . Equity In January 2018, there was an 8.0256 for 1 stock split immediately preceding the IPO. All shares and per share data reflect the effect of the stock split. Stock-based Compensation The Company has stock-based compensation plans for certain of its employees. The Company measures employee stock-based compensation awards at fair value on the date they are granted to employees and recognizes compensation cost in its financial statements over the requisite service period. Compensation expense is recorded for restricted stock over the applicable vesting period based on the Company’s closing stock price as of the grant date. Options are issued with an exercise price equal to the fair value of the stock on the date of grant. Compensation expense is recorded for the fair value of the stock options and is recognized over the period of the underlying security’s vesting schedule. Consideration paid on the exercise of stock options is credited to share capital and additional paid-in capital. For options, fair value of the stock-based compensation is measured by use of the Black-Scholes pricing model. The following discusses the assumptions used related to the Black-Scholes pricing model. Expected Life The expected term of stock options represents the period the stock options are expected to remain outstanding and is based on the simplified method, which is the weighted average vesting term plus the original contractual term, divided by two. Expected Volatility Expected volatility measures the amount that a stock price has fluctuated or is expected to fluctuate during a period. Prior to the Company’s IPO, when its stock was not publicly traded, the Company determined volatility based on an analysis of the PHLX Oil Service Index that tracks publicly traded oilfield service stocks. Subsequent to the IPO and as a publicly traded company, the Company developed its expected volatility based upon a weighted average volatility of its peer group. Dividend Yield At the time of the issuance of the options, the Company did not plan to pay cash dividends in the foreseeable future. Therefore, a zero expected dividend yield was used in the valuation model. Risk-free Interest Rate The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. Forfeitures As a result of the adoption of Accounting Standards Update (‘‘ASU”) No. 2016-09, the Company elected to account for stock-based compensation forfeitures as they occur. Fair Value of Common Stock Prior to the Company’s IPO, the value of the Company’s stock at the time of each option grant used to establish the strike price was estimated by management in accordance with an internal valuation model and approved by the Company’s Board of Directors. The valuation model was based upon an average of cash flow and book value multiples of comparable companies. The comparable companies selected reflect the market’s view on key sector, geographic, and product type exposure that are similar to those that impact the Company’s business. The value was further subject to judgmental factors such as prevailing market conditions, changes in the stock prices of other oilfield service companies, and the overall outlook for the Company and its products in general. After the Company’s IPO, the stock value is the publicly traded share price. Income Taxes The Company accounts for income taxes under ASC 740. Under this method, deferred income tax assets and liabilities are determined based upon temporary differences between the carrying amounts and tax bases of the Company’s assets and liabilities at the balance sheet date and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period in which the change occurs. The Company records a valuation reserve in each reporting period when management believes that it is more likely than not that any deferred tax asset created will not be realized. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than not” recognition criteria, the tax position is measured at the largest amount of benefit greater than 50% likely of being realized upon ultimate settlement. Fair Value of Financial Instruments The carrying amounts for financial instruments classified as current assets and current liabilities approximate fair value, due to the short maturity of such instruments. For financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The established fair value hierarchy divides fair value measurement into three levels: • Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; • Level 2 – inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and • Level 3 – inputs are unobservable for the asset or liability, which reflect the best judgment of management. Financial assets and liabilities that are disclosed at fair value are categorized in one of the above three levels based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The fair value of the Company’s debt obligations is classified as Level 2 in the fair value hierarchy and is established based on observable inputs in less active markets. For additional information on the fair value of the Company’s debt obligations, see Note 8 – Debt Obligations . The fair value of the Company’s contingent consideration is classified as Level 3 in the fair value hierarchy and is established on unobservable markets which reflect the best judgment of management. For additional information on the fair value of the Company’s contingent consideration, see Note 3 – Acquisitions and Combinations and Note 11 – Commitments and Contingencies . Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. The diluted earnings (loss) per share computation is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, taking into effect, if any, shares that would be issuable upon the exercise of outstanding stock options, reduced by the number of shares purchased by the Company at cost, when such amounts are dilutive to the earnings per share calculation. There was no dilutive effect for the year ended December 31, 2018 , 2017 , or 2016 as the Company was in a net loss position for those years. For additional information on earnings (loss) per share, see Note 13 – Earnings (Loss) Per Share . Accounting Pronouncements Recently Adopted In January 2017, the Financial Accounting Standards Board (the ‘‘FASB’’) issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the new standard, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted ASU No. 2017-04 during the fourth quarter of 2018. For additional information on the impact of the Company’s goodwill impairment test in accordance with ASU No. 2017-04, see Note 6 – Goodwill and Intangible Assets . Accounting Pronouncements Not Yet Adopted – Revenue Recognition Background In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the current revenue recognition guidance. The standard is based on the principle that revenue is recognized to depict the transfer of goods and services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and asset recognized from costs incurred to obtain or fulfill a contract. The FASB subsequently issued ASU No. 2016-08, ASU No. 2016-10, and ASU No. 2016-12 which provide additional guidance around Topic 606. These amendments are encompassed in the Company’s reference to ASU No. 2014-09 below. Quantitative Disclosures of Directional Effects of Adoption The Company, as an emerging growth company, will adopt ASU No. 2014-09 on January 1, 2019 utilizing the modified retrospective approach. Under this approach, the Company will recognize the cumulative effect of initially applying ASU 2014-09 as an increase to the opening balance of retained earnings. Although still in process of determining the impact, the Company expects this adjustment to be immaterial to its opening balance of retained earnings. Qualitative Status of Management’s Implementation Efforts During 2018, in preparation for the adoption of ASU No. 2014-09, the Company began a review of the various types of customer contract arrangements for each of its businesses. These reviews include the following: • accumulating all customer contractual arrangements; • identifying the individual performance obligations pursuant to each arrangement; • quantifying the considerations under each arrangement; • allocating the consideration under each arrangement to the identified performance obligation; and • determining the timing of revenue recognition pursuant to each arrangement. The Company has completed the majority of these contract reviews and is currently updating and implementing revised accounting system processes in order to capture information required to be disclosed under ASU No. 2014-09. The Company has begun updating its current accounting policies to align with revenue recognition practices under ASU No. 2014-09. As part of its evaluation of contracts with customers, the Company holds regular meetings with key stakeholders across the organization to determine the impact of ASU No. 2014-09 on its business processes. Additionally, the Company continues to evaluate its internal processes to address risks associated with incorporating ASU No. 2014-09. Upon adoption, the Company will also implement new internal controls associated with incorporating ASU No. 2014-09, which is not expected to result in a material change in its existing control environment. Disclosure Requirements The Company’s disclosures related to revenue recognition will be significantly expanded under ASU No. 2014-09, specifically around the quantitative and qualitative information associated with performance obligations, changes in contract assets and liabilities, and the disaggregation of revenue. As an emerging growth company, the Company will not include these expanded disclosures until its Annual Report on Form 10-K for the year ending December 31, 2019. Currently, the Company is in the process of evaluating these disclosure requirements for future reporting. Accounting Pronouncements Not Yet Adopted – Other In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard, which requires the use of a modified retrospective transition approach, includes a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued a new, optional transition method that will give companies the option to use the effective date as the date of initial application on transition. Based on initial evaluation, the Company expects to include operating leases with durations greater than twelve months on its Consolidated Balance Sheets. The Company is currently in the process of accumulating and evaluating all the necessary information required to properly account for its lease portfolio under the new standard. The Company will provide additional information about the expected financial impact as it progresses through the evaluation and implementation of the standard. Although the standard will be generally effective for fiscal years beginning after December 15, 2018, the Company plans to adopt for the fiscal year beginning after December 15, 2019, as an emerging growth company. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments . This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt the new standard for the fiscal year beginning after December 15, 2018. The Company is currently evaluating the impact of the standard on its Consolidated Financial Statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this standard provide a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not a business. The Company is currently evaluating the impact of the new standard on its Consolidated Financial Statements. Although the standard is generally effective for fiscal years beginning after December 15, 2017, the Company plans to adopt for the fiscal year beginning after December 15, 2018, as an emerging growth company. Entities will be required to apply the guidance prospectively when adopted. |
