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Impairment and Other Charges

12 Months Ended

Dec. 31, 2020

Note 3: Impairment and Other Charges

The Company recorded the following pre-tax charges during 2020 and 2019 as impairment and other charges in the consolidated statements of operations.


(in thousands)	2020		2019

Long-lived asset impairments ⁽¹⁾	$	204,765	$	—
Abandonment of assets ⁽²⁾		5,976		35,861
Pension settlement loss ⁽³⁾		4,660		—
Severance costs		1,882		5,748
Assets held for sale write down ⁽⁴⁾		192		14,326
Retirement of equipment		—		17,218
Inventory write-downs		—		9,077
Other		18		43
Total	$	217,493	$	82,273

^(1).

Relates solely to the Technical Services segment and primarily includes pressure pumping and coiled tubing assets.

^(2).

Represents the final disposition of assets that were ceased to be used during 2019 and recorded at salvage value. Also includes interest costs related to leased assets that were impaired in 2019.

^(3).

Represents the non-cash settlement loss related to the lump-sum payment window offered to certain participants in connection with the Company’s Retirement Income Plan. See Note 13 for further details.

^(4).

Represents the final settlement on certain real estate properties that were recorded as held for sale. The Company continues to disclose the remaining real estate that are being held for sale at their carrying value on the consolidated balance sheets under the caption Assets held for sale.

During the first half of 2020, the Company experienced drastic declines in oilfield drilling and completion activities, with low levels of revenues not experienced by RPC or the industry for many years. This unprecedented disruption was caused by the substantial decline in global demand for oil caused by the COVID-19 pandemic as well as macroeconomic events such as the geopolitical tensions between the Organization of Petroleum Exporting Countries and Russia, regarding limits on oil production. These factors resulted in a significant drop in oil prices and a substantial deterioration of the Company’s public market capitalization. In response, the Company reduced headcount, furloughed employees and implemented compensation reductions for remaining active employees with the goal of adjusting its cost structure caused by low revenue levels. The Company determined these events constituted a triggering event that required a review of the recoverability of its long-lived assets and performed an interim goodwill impairment assessment as of March 31, 2020.

The Company used both income based and market based approaches to determine the fair value of its long-lived asset groups and its reporting units for goodwill impairment assessment. Under the income approach, the fair value for each of its asset groups and reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used internal forecasts, updated for recent events, to estimate future cash flows and terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on its most recent views of the long-term outlook for each asset group and reporting units. For the market based valuation, the Company used comparable public company multiples. The selection of comparable businesses was based on the markets in which the asset groups and reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. Based on the concluded fair value of the asset groups, the Company measured and recorded an impairment loss that represents the amount by which the asset groups' carrying amounts exceeded their fair value. For purposes of the goodwill impairment assessment, the fair value of each reporting unit exceeded its net book value and therefore, goodwill was deemed to be not impaired.

The Company’s operating losses narrowed in the latter half of 2020 due to revenue increases and increased operational efficiency resulting from expense reduction measures. However, the Company continues its current strategy of minimal capital investment and continued expense scrutiny until financial returns improve. As market conditions evolve and the Company continues to develop its strategy to deal with such conditions, it may be necessary to record further asset impairments, or an impairment of the carrying value of goodwill.