Note

– Organization, Nature of Business and Summary of Significant Accounting Policies

C&J Energy Services, Inc., a Delaware corporation (the "Successor" and together with its consolidated subsidiaries and for periods subsequent to the Plan Effective Date as defined below, “C&J” or the “Company”) is a leading provider of

well construction, well completion, well support and other complementary oilfield services to oil and gas exploration and production companies in North America. The Company offers a comprehensive, vertically-integrated suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing, directional drilling, coiled tubing, service rigs, fluids management and other support services. The Company is headquartered in Houston, Texas and operates in all active onshore basins in the continental United States and Western Canada.

C&J's business was founded in Texas in

1997

as a partnership and converted to a Delaware corporation ("Old C&J") in

2010

in connection with an initial public offering that was completed in

July

2011

with a listing on the New York Stock Exchange ("NYSE") under the symbol "CJES." In

2015,

Old C&J combined with the completion and production services business (the "C&P Business") of Nabors Industries Ltd. ("Nabors") in a transaction (referred to herein as the "Nabors Merger") that nearly tripled the Company's size, significantly expanding the Company's Completion Services business and adding Well Support Services to the Company's service offering. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&J Energy Services Ltd. (the "Predecessor" and shares of common stock of Old C&J were converted into common shares of the Predecessor on a

-for-

basis. Due to the severe industry downturn, on

July

20,

2016,

the Predecessor and certain other subsidiaries of the Company (the "Debtors" or the "Reorganized Debtors") filed voluntary petitions for reorganization seeking relief under the provisions of Chapter

with the United States Bankruptcy Court in the Southern District of Texas, Houston Division ("Bankruptcy Court"). These Chapter

cases were being administered under the caption "

In re: CJ Holding Co., et al., Case No.

33590

", and the Predecessor commenced ancillary proceedings in Canada on behalf of the Canadian Entities and a provisional liquidation proceeding in Bermuda on behalf of the Bermudian Entities (collectively, the "Chapter

Proceeding"). Throughout the Chapter

Proceeding, the Debtors continued operations and management of their assets in the ordinary course as debtors-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the United States Bankruptcy Code and orders of the Bankruptcy Court.

January

2017

(the "Plan Effective Date"), the Predecessor substantially consummated the plan of reorganization (the "Restructuring Plan") and emerged from the Chapter

cases, as part of the transactions undertaken pursuant to the Restructuring Plan, the Predecessor equity was canceled and the Predecessor transferred all of its assets and operations to the Successor. As a result, the Company became the Successor issuer to the Predecessor. See Note

- Chapter

Proceeding and Emergence for additional information about the Chapter

Proceeding and emergence from the Chapter

bankruptcy.

C&J was listed on the New York Stock Exchange ("NYSE") under the symbol "CJES". Contemporaneously with the commencement of the Chapter

Proceeding, trading in the Predecessor's common shares on the NYSE was suspended and such shares were ultimately delisted from the NYSE. On

July

21,

2016,

the Predecessor's common shares began trading on the OTC Markets Group Inc.'s ("OTC") Pink® Open Market under the symbol "CJESQ." On

January

12,

2017,

trades in the Successor's common stock began trading on the OTC "Grey marketplace" under the symbol "CJJY".

Basis of Presentation and Principles of Consolidation

. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all of the accounts of C&J and its consolidated subsidiaries. All significant inter-company transactions and account balances have been eliminated upon consolidation.

The Company’s results for the year ended

2015

include results from the C&P Business from the closing of the Nabors Merger on

March

24,

2015

through

December

31,

2015.

Results for periods prior to

March

24,

2015

reflect the financial and operating results of Old C&J, and do not include the financial and operating results of the C&P Business.

Correction of Immaterial Errors

. During the

fourth

quarter of

2015,

the Company recorded out-of-period adjustments to correct the overstatement from the over-accrual of direct costs related to periods from

2008

through

December

31,

2014,

resulting in a

$9.8

million increase to net income. In evaluating whether these errors, individually and in the aggregate, and the corrections of the errors had a material impact to the periods such errors and corrections related to, the Company evaluated both the quantitative and qualitative impact to its consolidated financial statements for such periods. In assessing the quantitative impact, the Company considered the errors in each impacted period relative to the amount of reported direct costs, net income or loss, and current and total liabilities. The Company considered a number of qualitative factors, including, among others, that the errors and the correction of the errors (i) did not change a net loss into net income or vice versa, (ii) did not have an impact on the Company's debt covenant compliance and (iii) did not result in a change in the Company's earnings trends when considering the overall competitive and economic environment within which it operated from

2008

through

December

31,

2014.

Based upon the Company's quantitative and qualitative evaluation, it determined that the errors and the correction of such errors did not have a material impact to prior periods, individually or in the aggregate, and were not material to the year ending

December

31,

2015.

Reclassifications

. Certain reclassifications have been made to prior period amounts to conform to current period financial statement presentation, including changes in accounting principle from the adoption of Accounting Standards Update ("ASU") No.

2015

03,

Interest - Imputation of Interest (Subtopic

835

30):

Simplifying the Presentation of Debt Issuance Costs

which requires deferred financing costs to be presented on the balance sheet as a direct deduction from the carrying amount of a debt liability, consistent with debt discounts. Because ASU

2015

was applied on a retrospective basis, deferred financing costs of

$34.0

million related to the Company's Term Loan B facility have been reclassified to long-term debt and capital lease obligations as of

December

31,

2015.

These reclassifications had no effect on the consolidated financial position, results of operations or cash flows of the Company.

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 financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are used in, but are not limited to, determining the following: allowance for doubtful accounts, valuation of long-lived assets and intangibles, useful lives used in depreciation and amortization, inventory reserves, income taxes and liabilities subject to compromise. The accounting estimates used in the preparation of the consolidated financial statements

may

change as new events occur, as more experience is acquired, or as additional information is obtained and as the Company’s operating environment changes.

Cash and Cash Equivalents.

For purposes of the consolidated statement of cash flows, cash is defined as cash on-hand, demand deposits, and short-term investments with initial maturities of

three

months or less. The Company maintains its cash and cash equivalents in various financial institutions, which at times

may

exceed federally insured amounts. Management believes that this risk is not significant. Cash balances related to the Company's captive insurance subsidiaries, which totaled

$16.1

million and

$18.3

million at

December

31,

2016

and

December

31,

2015,

respectively, are included in cash and cash equivalents in the consolidated balance sheets, and the Company expects to use these cash balances to fund the operations of the captive insurance subsidiaries and to settle future anticipated claims.

Accounts Receivable and Allowance for Doubtful Accounts

. Accounts receivable are generally stated at the amount billed to customers. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments at either the contractual due dates or in the future. At

December

31,

2016

and

2015,

the allowance for doubtful accounts totaled

$3.0

million and

$7.9

million, respectively. Bad debt expense of

$1.7

million,

$8.1

million and

$0.7

million was included in selling, general, and administrative expenses on the consolidated statements of operations for the years ended

December

31,

2016,

2015

and

2014,

respectively.

Inventories

. Inventories for the Completion Services segment consist of finished goods, including equipment components, chemicals, proppants, supplies and materials for the segment’s operations. Inventories for the Other Services segment consists of raw materials, work-in-process and finished goods, including equipment components, supplies and materials.

Inventories are stated at the lower of cost or market (net realizable value) on a

first

-in,

first

-out basis and appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. As a result of unfavorable oil and gas industry market conditions that have continued to deteriorate, the Company determined that the market values of certain inventory items were below their cost basis and recorded expense of

$35.4

million and

$31.1

million to direct costs for the years ended

December

31,

2016

and

2015

respectively.

Inventories consisted of the following (in thousands):

	As of December 31,
	2016			2015
Raw materials	$	16,367		$	34,720
Work-in-process		5,022			13,574
Finished goods		38,091			58,657
Total inventory		59,480			106,951
Inventory reserve		(5,009	)		(4,694	)
Inventory, net	$	54,471		$	102,257

Property, Plant and Equipment

. Property, plant and equipment (PP&E) are reported at cost less accumulated depreciation. Maintenance and repairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the value of the equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operating income.

The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets, which range from

three

years. Depreciation expense was

$206.7

million,

$261.8

million, and

$97.2

million for the years ended

December

31,

2016,

2015

and

2014,

respectively. Major classifications of property, plant and equipment and their respective useful lives were as follows (in thousands):

	Estimated Useful Lives (in years)			As of December 31,
				2016			2015
Land	Indefinite			$	46,000		$	44,592
Building and leasehold improvements	5	-	25		121,915			153,320
Office furniture, fixtures and equipment	3	-	5		29,435			28,709
Machinery and equipment	3	-	10		1,219,645			1,225,505
Transportation equipment	5				179,426			224,057
					1,596,421			1,676,183
Less: accumulated depreciation					(683,189	)		(499,894	)
					913,232			1,176,289
Construction in progress					37,579			34,152
Property, plant and equipment, net				$	950,811		$	1,210,441

PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain PP&E

may

not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interest expense. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be at the service line level, which consists of the well services, hydraulic fracturing, coiled tubing, wireline, pumpdown, directional drilling, cementing, artificial lift applications, international coiled tubing, equipment manufacturing and repair services and data acquisition and control instruments provider service lines as well as the research and technology ("R&T") service line. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the related assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group's major classifications.

The Company concluded that the sharp fall in commodity prices during the

second

half of

2014

constituted a triggering event that resulted in a significant slowdown in activity across the Company’s customer base, which in turn has increased competition and put pressure on pricing for its services throughout

2015

and

2016.

Although the severity and extent of this continued downturn is uncertain, absent a significant recovery in commodity prices, activity and pricing levels

may

continue to decline in future periods. As a result of the triggering event during the

fourth

quarter of

2014,

PP&E recoverability testing was performed throughout

2015

and

2016

on the asset groups in each of the Company’s service lines. For the

2016

year, the recoverability testing for the coiled tubing, directional drilling, cementing, artificial lift applications and international coiled tubing asset groups yielded an estimated undiscounted net cash flow that was less than the carrying amount of the related assets. The estimated fair value for each respective asset group was compared to its carrying value, and impairment expense of

$61.1

million was recognized during

2016

and allocated across each respective asset group's major classification. The impairment charge was primarily related to underutilized equipment in the Completion Services and Other Services segments. The fair value of these assets was based on the projected present value of future cash flows that these assets are expected to generate. Should industry conditions not significantly improve or worsen, additional impairment charges

may

be required in future periods.

June

29,

2016,

the Company sold a majority of the assets comprising their specialty chemicals supply business, including PP&E, for approximately

$9.3

million of net cash.

PP&E impairment expense for the years ended

December

31,

2016

and

2015

were recognized across each asset group as follows (in thousands):

	Years Ended December 31,
	2016		2015
Hydraulic Fracturing	$	-	$	255,283
Coiled Tubing		36,130		94,546
Cementing		11,814		-
Directional Drilling		1,933		6,625
International Coiled Tubing		4,663		6,931
Equipment Manufacturing and Repair Services		3,238		13,847
Specialty Chemicals		-		3,070
Artificial lift		2,784		-
Research and Technology		518		12,777
Total PP&E impairment expense	$	61,080	$	393,079

Goodwill, Indefinite-Lived Intangible Assets and Definite-Lived Intangible Assets.

Goodwill is allocated to the Company’s

three

reporting units: Completion Services, Well Support Services and Other Services, all of which are consistent with the presentation of the Company’s

three

reportable segments. At the reporting unit level, the Company tests goodwill for impairment on an annual basis as of

October

of each year, or when events or changes in circumstances, referred to as triggering events, indicate the carrying value of goodwill

may

not be recoverable and that a potential impairment exists.

Judgment is used in assessing whether goodwill should be tested for impairment more frequently than annually. Factors such as unexpected adverse economic conditions, competition, market changes and other external events

may

require more frequent assessments. During the

third

quarter of

2015,

sustained low commodity price levels and the resulting impact on the Company’s results of operations, coupled with the sustained weakness in the Company’s share price were deemed triggering events that led to an interim period test for goodwill impairment. During the

first

quarter of

2016,

commodity price levels remained depressed which materially and negatively impacted the Company's results of operations, and the further declines in the Company's share price led to another interim period test for goodwill impairment. See Note

- Goodwill and Other Intangible Assets for further discussion on impairment testing results

Before employing detailed impairment testing methodologies, the Company

may

first

evaluate the likelihood of impairment by considering qualitative factors relevant to each reporting unit, such as macroeconomic, industry, market or any other factors that have a significant bearing on fair value. If the Company

first

utilizes a qualitative approach and determines that it is more likely than not that goodwill is impaired, detailed testing methodologies are then applied. Otherwise, the Company concludes that no impairment has occurred. Detailed impairment testing, or Step

testing, involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a

second

step is required to measure possible goodwill impairment loss. The

second

step, or Step

testing, includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess, not to exceed the carrying value.

The Company’s Step

impairment analysis involves the use of a blended income and market approach. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes on each reporting unit. Critical assumptions include projected revenue growth, fleet count, utilization, gross profit rates, sales, general and administrative ("SG&A") rates, working capital fluctuations, capital expenditures, discount rates, terminal growth rates, and price-to-earnings multiples. The Company’s market capitalization is also used to corroborate reporting unit valuations.

Similar to goodwill, indefinite-lived intangible assets are subject to annual impairment tests or more frequently if events or circumstances indicate the carrying amount

may

not be recoverable.

Definite-lived intangible assets are amortized over their estimated useful lives. Along with PP&E, these intangibles are reviewed for impairment when a triggering event indicates that the asset

may

have a net book value in excess of recoverable value. In these cases, the Company performs a recoverability test on its PP&E and definite-lived intangible assets by comparing the estimated future net undiscounted cash flows expected to be generated from the use of these assets to the carrying amount of the assets for recoverability. If the estimated undiscounted cash flows exceed the carrying amount of the assets, an impairment does not exist and a loss will not be recognized. If the undiscounted cash flows are less than the carrying amount of the assets, the assets are not recoverable and the amount of impairment must be determined by fair valuing the assets.

For further discussion of the application of this accounting policy regarding impairments, please see Note

- Goodwill and Other Intangible Assets

Deferred Financing Costs

. Costs incurred to obtain term debt financing are presented on the balance sheet as a direct deduction from the carrying amount of the term debt, consistent with debt discounts, and accreted over the term of the loan using the effective interest method. Costs incurred to obtain revolver based financing are capitalized and amortized over the term of the loan using the effective interest method. These costs are classified within interest expense on the consolidated statements of operations and were

$48.3

million,

$10.9

million and

$1.2

million for the years ended

December

31,

2016,

2015

and

2014,

respectively. Accumulated amortization of deferred financing costs was

$58.8

million and

$10.5

million at

December

31,

2016

and

2015,

respectively. As of

December

31,

2016,

and prior to emergence from the Chapter

Proceeding, deferred financing costs were fully amortized to

zero.

Revenue Recognition

. All revenue is recognized when persuasive evidence of an arrangement exists, the service is complete or the equipment has been delivered to the customer, the amount is fixed or determinable and collectibility is reasonably assured, as follows:

Completion Services Segment

Hydraulic Fracturing Revenue.

Through its hydraulic fracturing service line, the Company provides hydraulic fracturing services on a spot market basis or pursuant to contractual arrangements, such as term contracts and pricing agreements. Under either scenario, revenue is recognized and customers are invoiced upon the completion of each job, which can consist of

one

or more fracturing stages. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed and the consumables (such as fluids and proppants) used during the course of service. The field ticket

may

also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables.

Rates for services performed on a spot market basis are based on an agreed-upon hourly spot market rate for a specified number of hours of service.

Pursuant to pricing agreements and other contractual arrangements which the Company

may

enter into from time to time, such as those associated with an award from a bid process, customers typically commit to targeted utilization levels based on a specified number of hours of service at agreed-upon pricing, but without termination penalties or obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review, as specifically defined in the agreement, and

may

be adjusted upon the agreement of both parties.

Casedhole Solutions Revenue

. Through its Casedhole Solutions service line, the Company provides cased-hole wireline, pumpdown services, wireline logging, perforating, pressure pumping, well site make-up and pressure testing and other complementary services, on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates. Revenue is recognized based on a field ticket issued upon the completion of the job.

Revenue from Materials Consumed While Performing Certain Completion Services.

The Company generates revenue from consumables used during the course of providing services.

With respect to hydraulic fracturing services, the Company generates revenue from the fluids, proppants and other materials that are consumed while performing a job. For services performed on a spot market basis, the required consumables are typically provided by the Company and the customer is billed for those consumables at cost plus an agreed-upon markup. For services performed on a contractual basis, when the consumables are provided by the Company, the customer typically is billed for those consumables at a negotiated contractual rate. When consumables are supplied by the customer, the Company typically charges handling fees based on the amount of consumables used.

Other Completion Services.

The Company generates revenue from certain smaller well construction service lines, specifically cementing and directional drilling services, and R&T which is primarily engaged in the engineering and production of certain parts and components, such as perforating guns and addressable switches, which are used in the completion process.

With respect to its directional drilling services, the Company provides these services on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few days to multiple weeks. The Company typically charges the customer for these services on a per day basis at agreed-upon spot market rates depending on the level of services required and the complexity of the job. Revenue is recognized and customers are invoiced upon the completion of each job. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed.

With respect to its cementing services, the Company provides these services on a spot market or project basis. Jobs for these services are typically short-term in nature and are generally completed in a few hours. The Company typically charges the customer for these services on a per job basis at agreed-upon spot market rates or agreed-upon job pricing for a particular project. Revenue is recognized and customers are invoiced upon the completion of each job. Once a job has been completed to the customer’s satisfaction, a field ticket is written that includes charges for the service performed and the consumables (such as blended bulk cement and chemical additives) used during the course of service.

Well Support Services Segment

Rig Services Revenue.

Through its rig service line, the Company provides workover and well servicing rigs that are primarily used for routine repair and maintenance of oil and gas wells, re-drilling operations and plugging and abandonment operations. These services are provided on an hourly basis at prices that approximate spot market rates. Revenue is recognized and a field ticket is generated upon the earliest of the completion of a job or at the end of each day. A rig services job can last anywhere from a few hours to multiple days depending on the type of work being performed. The field ticket includes the base hourly rate charge and, if applicable, charges for additional personnel or equipment not contemplated in the base hourly rate.

Fluids Management Services Revenue.

Through its fluids management service line, the Company primarily provides storage, transportation and disposal services for fluids used in the drilling, completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or per load basis, or on the basis of quantities sold or disposed. Revenue is recognized upon the completion of each job or load, or delivered product, based on a completed field ticket.

Coiled Tubing Services Revenue.

Through its coiled tubing service line, the Company provides a range of coiled tubing services primarily used for frac plug drill-out during completion operations and for well workover and maintenance, primarily on a spot market basis. Jobs for these services are typically short-term in nature, lasting anywhere from a few hours to multiple days. Revenue is recognized upon completion of each day’s work based upon a completed field ticket. The field ticket includes charges for the services performed and the consumables (such as stimulation fluids, nitrogen and coiled tubing materials) used during the course of service. The field ticket

may

also include charges for the mobilization and set-up of equipment, the personnel on the job, any additional equipment used on the job, and other miscellaneous consumables. The Company typically charges the customer for the services performed and resources provided on an hourly basis at agreed-upon spot market rates.

In addition, ancillary to coiled tubing services revenue, the Company generates revenue from stimulation fluids, nitrogen, coiled tubing materials and other consumables used during those processes.

Other Special Well Site Services Revenue.

Through its other special well site service line, the Company primarily provides fishing, contract labor, and tool rental services for completion and workover of oil and gas wells. Rates for these services vary and can be on a per job, per hour or on the basis of rental days per month. Revenue is recognized based on a field ticket issued upon the completion of each job or on a monthly billing for rental services provided.

With respect to its artificial lift applications, the Company generates revenue primarily from the sale of manufactured equipment and products. Revenue is recognized upon the completion, delivery and customer acceptance of each order.

Other Services Segment

Revenue within the Other Services Segment is generated from certain of the Company's smaller, non-core service lines that have either been divested or are in the process of being divested, such as, equipment manufacturing and repair operations and the Company's international coiled tubing operations in the Middle East.

Share-Based Compensation

. The Company’s share-based compensation plans provide the ability to grant equity awards to the Company’s employees, consultants and non-employee directors. As of

December

31,

2016,

only nonqualified stock options and restricted shares had been granted under such plans. The Company values option grants based on the grant date fair value by using the Black-Scholes option-pricing model and values restricted stock grants based on the closing price of C&J’s common shares on the grant date. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for the entire award. Further information regarding the Company’s share-based compensation arrangements and the related accounting treatment can be found in Note

– Share-Based Compensation.

Fair Value of Financial Instruments.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, the DIP Facility (as defined in Note

- Debt and Capital Lease Obligations). The recorded values of cash and cash equivalents, accounts receivable, accounts payable and the DIP Facility approximate their fair values given the short-term nature of these instruments.

Equity Method Investments

. The Company has investments in joint ventures which are accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over operating and financial policies of the joint venture. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings and losses of these investments. The Company eliminates all significant intercompany transactions, including the intercompany portion of transactions with equity method investees, from the consolidated financial results.

The carrying value of the Company's equity method investments at

December

31,

2016

and

December

31,

2015

was

$9.0

million and

$14.3

million, respectively, and is included in other noncurrent assets on the consolidated balance sheets. The Company’s share of the net income (loss) from the unconsolidated affiliates was approximately

($5.7)

million for the year ended

December

31,

2016

and approximately

$0.5

million for each of the years ended

December

31,

2015

and

2014,

and is included in other expense, net, on the consolidated statements of operations.

Income Taxes

We are subject to income and other similar taxes in all areas in which we operate. When recording income tax expense, certain estimates are required because: (a) income tax returns are generally filed months after the close of our annual accounting period; (b) tax returns are subject to audit by taxing authorities and audits can often take years to complete and settle; and (c) future events often impact the timing of when we recognize income tax expenses and benefits.

The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In assessing the likelihood and extent that deferred tax assets will be realized, consideration is given to projected future taxable income and tax planning strategies. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company has

federal, state and international net operating loss carryforwards that will expire in the years

2021

through

2036.

After considering the scheduled reversal of deferred tax liabilities, projected future taxable income, the potential limitation on use of NOLs under Section

382

and tax planning strategies and tax planning strategies, the Company

established a valuation allowance due to the uncertainty regarding the ultimate realization of the deferred tax assets associated with its carryforwards

On the Plan Effective Date, the Company believes it experienced an ownership change for purposes of Internal Revenue Code Section

382

as result of its Restructuring Plan and that its pre-change NOLs are subject to an annual limitation. The ownership change and resulting annual limitation on use of NOLs are not expected to result in the expiration of the Company's NOL carryforwards if it is able to generate sufficient future taxable income within the carryforward periods. However, the limitation on the amount of NOL available to offset taxable income in a specific year

may

result in the payment of income taxes before all NOLs have been utilized. Additionally, a subsequent ownership change

may

result in further limitation on the ability to utilize existing NOLs and other tax attributes.

The Company recognizes the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than

50.0%

likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are reversed in the

first

period in which it is no longer more-likely-than-not that the tax position would be sustained upon examination. Income tax related interest and penalties, if applicable, are recorded as a component of the provision for income tax expense. The Company recorded income tax expense for unrecognized tax benefits equal to

$6.5

million and

zero

for the periods ending

December

31,

2016

and

December

31,

2015

respectively.

Earnings Per Share

. Basic earnings per share is based on the weighted average number of common shares (“common shares”) outstanding during the applicable period and excludes shares subject to outstanding stock options and shares of restricted stock. Diluted earnings per share is computed based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to outstanding stock options and restricted stock.

The following is a reconciliation of the components of the basic and diluted earnings per share calculations for the applicable periods:

	Years Ended December 31,
	2016			2015			2014
	(In thousands, except per share amounts)
Numerator:
Net income (loss) attributed to common shareholders	$	(944,289	)	$	(872,542	)	$	68,823
Denominator:
Weighted average common shares outstanding - basic		118,305			102,853			53,838
Effect of potentially dilutive securities:
Stock options		—			—			2,245
Restricted stock		—			—			430
Weighted average common shares outstanding - diluted		118,305			102,853			56,513
Net income (loss) per common share:
Basic	$	(7.98	)	$	(8.48	)	$	1.28
Diluted	$	(7.98	)	$	(8.48	)	$	1.22

A summary of securities excluded from the computation of basic and diluted earnings per share is presented below for the applicable periods:

	Years Ended December 31,
	2016		2015		2014
	(In thousands)
Basic earnings per share:
Unvested restricted stock		1,529		2,610		1,448
Diluted earnings per share:
Anti-dilutive stock options		4,808		3,661		201
Anti-dilutive restricted stock		1,490		2,125		3
Potentially dilutive securities excluded as anti-dilutive		6,298		5,786		204

January

2017,

the Debtors substantially consummated the Restructuring Plan and emerged from the Chapter

Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan, all of the existing shares of the Predecessor common equity that were used in the above earnings per share calculations were canceled as of the Plan Effective Date.

Recent Accounting Pronouncements

May

2014,

the Financial Accounting Standards Board ("FASB") issued

a comprehensive new revenue recognition standard, Accounting Standards Update ("ASU") No.

2014

09,

Revenue from Contracts with Customers

("ASU

2014

09")

that will supersede existing revenue recognition guidance under U.S. GAAP. In

August

2015,

the FASB issued an accounting standards update for a

one

-year deferral of the revenue recognition standard's effective date for all entities, which changed the effectiveness to annual reporting periods beginning after

December

15,

2017,

including interim periods within that reporting period. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard creates a

five

step model that requires companies to exercise judgment when considering the terms of a contract and all relevant facts and circumstances. The standard allows for several transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) a modified retrospective adoption in which the standard is applied only to the most current period presented in the financial statements, including additional disclosures of the standard’s application impact to individual financial statement line items. The Company is currently evaluating the impact, if any, of adopting this new accounting standard on its results of operations and financial position.

July

2015,

the FASB issued ASU No.

2015

11,

implifying the Measurement of Inventory

("ASU

2015

11"),

which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. ASU

2015

is part of the FASB’s simplification initiative and applies to entities that measure inventory using a method other than last-in,

first

-out ("LIFO") or the retail inventory method. The guidance will require prospective application at the beginning of the Company's

first

uarter of fiscal

2018,

but permits adoption in an earlier period. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

November

2015,

the FASB issued ASU No.

2015

17,

Income Taxes (Topic

740):

Balance Sheet Classification of Deferred Taxes

("ASU

2015

17”).

ASU

2015

amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. The Company is required to adopt this ASU for years beginning after

December

15,

2016,

with early adoption permitted, and the guidance

may

be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

February

2016,

the FASB issued ASU No.

2016

02,

Leases (Topic

842)

("ASU

2016

02").

ASU No.

2016

seeks to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. Unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, ASU No.

2016

will require both operating and finance leases to be recognized on the balance sheet. Additionally, the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The amendments in ASU No.

2016

are effective for fiscal years beginning after

December

15,

2018,

including interim periods within those fiscal years, and early application is permitted. The Company is currently evaluating the impact of adopting this new accounting standard on its results of operations and financial position.

March

2016,

the FASB issued ASU No.

2016

09,

Compensation—Stock Compensation (Topic

718):

Improvements to Employee Share-Based Payment Accounting

("ASU

2016

09"),

to simplify certain provisions in stock compensation accounting, including the simplification of accounting for a stock payment's tax consequences. The ASU amends the guidance for classifying awards as either equity or liabilities, allows companies to estimate the number of stock awards they expect to vest, and revises the tax withholding requirements for stock awards. The amendments in ASU No.

2016

are effective for public companies for fiscal years beginning after

December

15,

2016,

June

2016,

the FASB issued ASU No.

2016

13,

Financial Instruments-Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments

(“ASU

2016

13”),

which amends U.S. GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The amendments in ASU

2016

are effective for interim and annual reporting periods beginning after

December

15,

2019,

although it

may

be adopted

one

year earlier, and requires a modified retrospective transition approach. The Company is currently evaluating the impact this standard will have on its results of operations and financial position.

October

2016,

the FASB issued ASU No.

2016

16,

Income Taxes (Topic

740):

Intra-Entity Transfers of Assets Other Than Inventory

("ASU

2016

16"),

which requires an entity to recognize the income tax consequences of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory, when the transfer occurs. The ASU is effective for the interim and annual reporting periods beginning after

December

15,

2017,