(2) Reduction in Value of Assets and Other Charges

For the three and nine months ended September 30, 2016 and 2015, the Company recorded $0, $462.5 million, $755.6 million and $1,563.3 million in expense related to the reduction in value of assets, respectively. The components of the reduction in value of assets are as follows (in thousands):



	Three Months Ended September 30,
	2016		2015
Reduction in value of goodwill	$	-	$	740,000
Reduction in value of long-lived assets		-		15,632
Total reduction in value of assets	$	-	$	755,632


	Nine Months Ended September 30,
	2016		2015
Reduction in value of goodwill	$	330,500	$	1,315,389
Reduction in value of long-lived assets		105,859		165,888
Retirements of long-lived assets		26,102		42,545
Reduction in value of assets related to sale of a business		-		39,447
Total reduction in value of assets	$	462,461	$	1,563,269

Reduction in Value of Goodwill

Goodwill is tested for impairment annually as of October 1st or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value. Due to the prolonged downturn in the oil and gas industry and the impact it has had on the Company’s activity levels, the Company’s goodwill impairment evaluation as of June 30, 2016, indicated that the carrying values of the Onshore Completion and Workover Services and Production Services segments exceeded their fair values so that goodwill was potentially impaired. The Company then performed the second step of the goodwill impairment test, which involved calculating the implied fair value of the segments’ goodwill by allocating the fair values of the Onshore Completion and Workover Services and Production Services segments to all of their assets and liabilities (other than goodwill) and comparing them to the carrying amounts of the goodwill. To estimate the fair value of the reporting unit (which is consistent with the reported business segment), the Company used a weighting of the discounted cash flow method and the public company guideline method of determining fair value of the reporting unit. The Company weighted the discounted cash flow method 80% and the public company guideline method 20% due to differences between the Company’s reporting unit and peer companies’ size, profitability and diversity of operations.

During the second quarter of 2016, the Company recorded a $330.5 million reduction in value of goodwill relating to its Onshore Completion and Workover Services and Production Services segments. The Company determined that the implied fair value of its goodwill for the Onshore Completion and Workover Services segment was less than its carrying value and recorded a $140.0 million impairment of the Onshore Completion and Workover Services segment’s goodwill. In addition, the Company determined that the implied fair value of its goodwill for the Production Services segment was less than its carrying value and recorded a $190.5 million impairment of the Production Services segment’s goodwill. The reduction in values of goodwill in the Onshore Completion and Workover Services and Production Services segments was primarily driven by further deterioration of market conditions during the period and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying values of the goodwill.

During the three and nine months ended September 30, 2015, the Company recorded $740.0 million and $1,315.4 million in expense related to the reduction in value of goodwill, respectively. During the three months ended June 30, 2015, the Company recorded a $575.4 million reduction in the value of goodwill relating to its Production Services segment. The Company determined that the implied fair value of its goodwill for the Production Services segment was less than its carrying value and recorded a $575.4 million impairment of the Production Services segment’s goodwill. The reduction in the value of goodwill in the Production Services segment was primarily driven by the decline in demand for coiled tubing services and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying value of the goodwill.

During the three months ended September 30, 2015, the Company recorded a $740.0 million reduction in the value of goodwill relating to its Onshore Completion and Workover Services segment. The Company determined that the implied fair value of its goodwill for the Onshore Completion and Workover Services segment was less than its carrying value and recorded a $740.0 million impairment of the segment’s goodwill. The reduction in the value of goodwill in the Onshore Completion and Workover Services segment was primarily driven by deterioration of market conditions during the period and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying value of the goodwill.

At September 30, 2016 and December 31, 2015, the Company’s accumulated reduction in value of goodwill was $1,748.2 million and $1,417.7 million, respectively.

Reduction in Value of Long-Lived Assets

Long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of such assets to their fair value calculated, in part, by the estimated undiscounted future cash flows expected to be generated by the assets. Cash flow estimates are based upon, among other things, historical results adjusted to reflect the best estimate of future market rates, utilization levels, and operating performance. Estimates of cash flows may differ from actual cash flows due to, among other things, changes in economic conditions or changes in an asset’s operating performance. The Company’s assets are grouped by line of business or division for the impairment testing, which represent the lowest level of identifiable cash flows. If the asset grouping’s fair value is less than the carrying amount of those items, impairment losses are recorded in the amount by which the carrying amount of such assets exceeds the fair value. The estimate of fair value represents the Company’s best estimate based on industry trends and reference to market transactions and is subject to variability.

During the three and nine months ended September 30, 2016, the Company recorded $0 and $105.9 million, respectively, in connection with the reduction in value of its long-lived assets. The reduction in value of assets was comprised of $2.9 million related to equipment and $45.9 million related to intangibles in the fluid management business in the Onshore Completion and Workover Services segment and $12.4 million related to equipment and $21.0 million related to intangibles, primarily relating to the cementing business in the Production Services segment. In addition, the Company recorded $23.7 million related to the reduction in carrying values of certain accommodation units included in the Drilling Products and Services segment. The reduction in value of assets recorded during the second quarter of 2016 was primarily driven by the decline in demand for these services.

During the three and nine months ended September 30, 2015, the Company recorded $15.6 million and $166.0 million in connection with the reduction in value of its long-lived assets. The reduction in value of assets was comprised of $78.5 million related to equipment and $58.8 million related to intangibles in the coiled tubing and pressure control tools businesses in the Production Services segment and $12.9 million related to mechanical drilling rigs included in the Onshore Completion and Workover Services segment. In addition, the Company recorded $15.8 million related to reduction in carrying values of certain international accommodation units included in the Drilling Products and Services segment.

Retirements of Long-Lived Assets

During the second quarter of 2016, the Company recorded $23.9 million in the Drilling Products and Services segment for retirement and abandonment of excess and inoperable and/or functionally obsolete long-lived assets that would require a significant cost to refurbish.

During the second quarter of 2015, the Company recorded $42.5 million for retirement and abandonment of inoperable and/or functionally obsolete long-lived assets that would require a significant cost to refurbish. The total amount recorded includes $27.3 million for the Onshore Completion and Workover Services segment and $15.2 million for the Production Services segment.

Reduction in Value of Assets Related to Sale of Coiled Tubing Business in Mexico

During the second quarter of 2015, the Company sold its Mexico based coiled tubing business and related assets. The Company received proceeds in the form of cash and a note receivable. The Company recorded a full valuation allowance on the note receivable in the amount of $16.8 million because its collectability was not reasonably assured. In connection with the sale, the Company recorded a $39.4 million reduction in value of assets, primarily related to property, plant and equipment and intangible assets.

Other Charges

During the three and nine months ended September 30, 2016, the Company recorded a $2.3 million and $22.8 million expense, respectively, primarily for severance and facility closures. At September 30, 2016, the accrued lease termination liability balances were $6.0 million and $9.0 million, included in accrued expenses and other long-term liabilities, respectively, on the consolidated balance sheet. At December 31, 2015, the accrued lease termination liability balances were $7.2 million and $11.1 million, included in accrued expenses and other long-term liabilities, respectively, on the consolidated balance sheet.