CJ 2017 Annual Report

Successor Predecessor Years Ended December 31, 2017 2016 Amended Credit Facility $ 1,779 $ — DIP Facility — 2,087 Original Credit Agreement — 53,596 Capital leases 471 1,206 Accretion of original issue discount — 4,193 Amortization of deferred financing costs 608 4,590 Original issue discount accelerated amortization — 48,221 Deferred financing costs accelerated amortization — 43,720 Interest income and other (1,331) (148) Interest expense, net $ 1,527 $ 157,465 C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 95 Note 5 - Goodwill and Other Intangible Assets On November 30, 2017, the Company acquired all of the outstanding equity interests of O-Tex Holdings, Inc., and its operating subsidiaries ("O-Tex"). See Note 12 - Mergers and Acquisitions for further discussion on the O-Tex transaction. As of December 31, 2017, all off the goodwill reported in the Company's consolidated balance sheet is related to the O-Tex acquisition. During the first quarter of 2016, utilization and commodity price levels continued to fall towards unprecedented levels and the resulting negative impact on the Company’s results of operations, coupled with the sustained decrease in the Company’s stock price, were deemed triggering events that led to an interim period test for goodwill impairment. The Company chose to bypass a qualitative approach and instead opted to employ the detailed Step 1 impairment testing methodologies discussed below. Income approach The income approach impairment testing methodology is based on a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. For the Completion Services and Well Support Services reporting units, the future cash flows were projected based on estimates of projected revenue growth, fleet and rig count, utilization, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. For the Other Services reporting unit, the future cash flows were projected based primarily on estimates of future demand for manufactured and refurbished equipment as well as parts and service, gross profit rates, SG&A rates, working capital fluctuations, and capital expenditures. Forecasted cash flows for the three reporting units took into account known market conditions as of March 31, 2016, and management’s anticipated business outlook, both of which had been impacted by the sustained decline in commodity prices. A terminal period was used to reflect an estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 2.5% for all three reporting units, including an estimated inflation factor. The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital (“WACC”) of 14.5% for Completion Services, 14.0% for Well Support Services, and 16.0% for Other Services reporting units. These assumptions were derived from unobservable inputs and reflect management’s judgments and assumptions. Market approach The market approach impairment testing methodology is based upon the guideline public company method. The application of the guideline public company method was based upon selected public companies operating within the same industry as the Company. Based on this set of comparable competitor data, price-to-earnings multiples were derived and a range of price-to-earnings multiples was determined for each reporting unit. Selected market multiples were 10.6x for Completion Services, 10.5x for Well Support Services and 11.0x for Other Services reporting units. The fair value determined under the market approach is sensitive to these market multiples, and a decline in any of