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 for periods subsequent to the Plan Effective Date (as defined below), “C&J” or the “Company”), is a leading provider of well construction, well c

ompletion,

well support and other complementary oilfield services

to oil and gas exploration and production ("E&P") companies throughout the continental United States. The Company offers an integrated suite of services throughout the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumping, cementing, coiled tubing, directional drilling, rig services, fluids management, artificial lift, and other completion and specialty well site support services. The Company is headquartered in Houston, Texas, and operates across all active onshore basins in the continental United States.

C&J

’s business was founded in Texas in

1997

as a partnership and converted to a Delaware corporation (“Old C&J”) in connection with an initial public offering which was completed in

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 transformative transaction (the “Nabors Merger”) that nearly tripled the Company’s size, significantly expanding the Company’s Completion Services business and adding the Well Support Services division to the Company’s service offerings. Upon the closing of the Nabors Merger, Old C&J became a subsidiary of C&J Energy Services Ltd., a Bermuda corporation (the “Predecessor” and together with its consolidated subsidiaries for periods prior to the Plan Effective Date, the “Predecessor Companies,” or the “Company”), 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 "Petition Date"), the Predecessor Companies voluntarily filed petitions for reorganization seeking relief under the provisions of Chapter

of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"), with ancillary recognition proceedings filed in Canada and Bermuda (collectively, the "Chapter

Proceeding").

December 16, 2016,

the Bankruptcy Court entered an order confirming the plan of reorganization (the “Restructuring Plan”) of the Predecessor Companies. On

January 6, 2017 (

the “Plan Effective Date”), the Predecessor Companies substantially consummated the Restructuring Plan and emerged from the Chapter

Proceeding. As part of the transactions undertaken pursuant to the Restructuring Plan, effective on the Plan Effective Date, the Successor was formed, the Predecessor

’s equity was canceled, the Predecessor transferred all of its assets and operations to the Successor and the Predecessor was subsequently dissolved. For more information regarding the Chapter

Proceeding, see Note

- Chapter

Proceeding and Emergence.

Upon emergence from the Chapter

Proceeding, the Company adopted Fresh Start accounting in accordance with the provisions set forth in Accounting Standards Codification (“ASC”)

852

Reorganizations

. For more information regarding the adoption of Fresh Start accounting, see Note

- Fresh Start Accounting.

Contemporaneously with the commencement of the Chapter

Proceeding, trading in the Predecessor

’s common stock was suspended and the Predecessor’s common stock was ultimately delisted from the NYSE. On

April 12, 2017,

the Successor completed an underwritten public offering of common stock and its common stock began trading again on the NYSE under the symbol “CJ.”

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.

As discussed above the Company adopted Fresh Start accounting in accordance with the provisions set forth in ASC

852

with respect to the accounting and financial statement disclosures.

Accordingly, the Company's consolidated financial statements and notes prior to

January 1, 2017,

are

not

comparable to the consolidated financial statements as of

January 1, 2017

and periods subsequent to

January 1, 2017

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.

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.

Summary of Significant Accounting Policies

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, goodwill, useful lives used in depreciation and amortization, inventory reserves, income taxes, share-based compensation and liabilities subject to compromise under the provisions of ASC

852

fresh start accounting ("Fresh Start"). 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

$23.8

million and

$16.1

million at

December

31,

2017

and

December

31,

2016,

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,

2017

and

2016,

the allowance for doubtful accounts totaled

$4.3

million and

$3.0

million, respectively. Bad debt expense of

$4.4

million,

$1.7

million and

$8.1

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

December

31,

2017,

2016

and

2015,

respectively.

Inventories

. Inventories are carried at the lower of cost or net realizable value. Inventories for the Company consist of raw materials, work-in-process and finished goods, including equipment components, chemicals, proppants, supplies and materials for the Company's operations.

Consistent with FASB requirements under ASC

852

an entity adopting fresh-start accounting

may

generally set new accounting policies for the successor independent of those followed by the predecessor. The entity emerging from bankruptcy typically is

not

required to demonstrate preferability for its new accounting policies, as the successor entity represents a new entity for financial reporting purposes.

During

January 2017,

the Company implemented a new computer system that provides financial reporting, inventory management and fixed asset management capabilities (the "new ERP system") to enhance functionality and to support the Company's existing and future operations. The new ERP system utilizes the weighted average cost flow method for determining inventory cost ("Weighted Average"), which replaced the

first

-in,

first

-out basis ("FIFO") method utilized by the Predecessor's legacy system. The Weighted Average and FIFO methods are both allowable under U.S. GAAP. As of the Fresh Start Reporting Date, the Company began utilizing the Weighted Average method for determining inventory cost. Inventory cost for the prior periods presented are still reflective of the FIFO method.

Inventories consisted of the following (in thousands):

	Successor			Predecessor
	As of December 31,
	2017			2016
Raw materials	$	5,302		$	16,367
Work-in-process		1,329			5,022
Finished goods		74,552			38,091
Total inventory		81,183			59,480
Inventory reserve		(3,390	)		(5,009	)
Inventory, net	$	77,793		$	54,471

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

$136.5

million,

$206.7

million, and

$261.8

million for the years ended

December

31,

2017,

2016

and

2015,

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

				Successor			Predecessor
	Estimated Useful Lives			As of December 31,
	(in years)			2017			2016
Land	Indefinite			$	38,385		$	46,000
Building and leasehold improvements	5	-	25		79,985			121,915
Office furniture, fixtures and equipment	3	-	5		34,672			29,435
Machinery and equipment	3	-	10		577,922			1,219,645
Transportation equipment	3	-	10		23,352			179,426
					754,316			1,596,421
Less: accumulated depreciation					(133,755	)		(683,189	)
					620,561			913,232
Construction in progress					82,468			37,579
Property, plant and equipment, net				$	703,029		$	950,811

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 primarily at the service line level. The Company's assets groups consist of the well support services, fracturing, cased-hole wireline and pumping services, well construction and intervention, artificial lift applications, and data acquisition and control instruments provider service lines as well as the research and technology ("R&T") service lines. 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 increased competition and put pressure on pricing for its services throughout

2015

and

2016.

Although uncertainty as to the severity and extent of this downturn still exists, activity and pricing levels

may

decline again 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 described above. During the

fourth

quarter of

2015,

the recoverability testing for the hydraulic fracturing, coiled tubing, directional drilling, international coiled tubing, equipment manufacturing and repair services, specialty chemicals and the research and technology 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

$393.1

million was recognized during the

fourth

quarter of

2015

and allocated across each respective asset group's major classification. The impairment charge was primarily related to underutilized pressure pumping and other equipment in the Completion Services and Other Services segments. 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.

impairment charge was recorded for the year ended

December 31, 2017.

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

was recognized across each asset group as follows (in thousands). Certain asset groups reflected in the table below were part of the Company

’s smaller, non-core service lines that were divested in

2016,

such as the Company's specialty chemical business, equipment manufacturing and repair business and international coiled tubing operations in the Middle East.

	Predecessor
	Year Ended December 31,		Year Ended December 31,
	2016		2015
Fracturing	$	—	$	255,283
Well Construction & Intervention		49,877		101,171
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

may

be allocated across

two

reporting units: Completions Services and Well Support Services. 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

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

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. With the exception of the C&J trade name, these intangibles, along with PP&E, are reviewed for impairment when a triggering event indicates that the asset group

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. The C&J trade name is a corporate asset, and it is reviewed for impairment when a triggering event indicates the trade name, on a stand-alone basis,

may

have a net book value in excess of consolidated C&J recoverable value using the same recoverability testing noted above.

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

$0.6

million,

$48.3

million and

$10.9

million for the years ended

December

31,

2017,

2016

and

2015,

respectively. Accumulated amortization of deferred financing costs was

$0.6

million and

$58.8

million at

December

31,

2017

and

2016,

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

Fracturing Services Revenue.

Through its fracturing service line, the Company provides fracturing services pursuant to contractual arrangements, such as term contracts and pricing agreements or on a spot market basis. 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, a field ticket is written that includes charges for the services 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 that 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.

Cased-hole Wireline & Pumping Services Revenue.

Through its cased-hole wireline & pumping services business, the Company provides cased-hole wireline, pumping, wireline logging, perforating, 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.

Well Construction & Intervention Services Revenue.

Through its well construction and intervention services business, the Company provides cementing, coiled tubing and directional drilling services.

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.

With respect to its coiled tubing services, 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 or pursuant to contractual arrangements such as term contracts and pricing agreements.

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, a field ticket is written that includes charges for the service performed.

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 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 Revenue.

The Company generates revenue from its R&T department, 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. Revenue is recognized upon the completion, delivery and customer acceptance of each order of parts and components.

Well Support Services Segment

Rig Services Revenue.

Through its rig services 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 agreed upon 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. The field ticket

may

also include charges for the mobilization and set-up of equipment,

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.

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 was generated from certain of the Company

’s smaller, non-core service lines that were divested in

2016,

such as the Company's specialty chemical business, equipment manufacturing and repair business and international coiled tubing operations in the Middle East. In line with the discontinuance of these small, ancillary service lines and divisions, subsequent to the year ended

December 31, 2016,

the Company is now disclosing

two

reportable segments, and financial information for the Other Services reportable segment is only presented for the corresponding prior year period.

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,

2017,

only nonqualified stock options, restricted shares and performance awards had been granted under such plans. The fair value of restricted stock grants is based on the closing price of C&J’s common stock on the grant date. The Company values option grants based on the grant date fair value using the Black-Scholes option-pricing model, and the Company values equity awards with market conditions based on the grant date fair value using a Monte Carlo simulation, both of which require the use of subjective assumptions. 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 and accounts payable. The recorded values of cash and cash equivalents, accounts receivable and accounts payable 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,

2017

and

December

31,

2016

was

$2.8

million and

$9.0

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 (

$0.1

) million, (

$5.7

) million and

$0.5

million the years ended

December

31,

2017,

2016

and

2015

respectively and is included in other income (expense), net, on the consolidated statements of operations.

Income Taxes

. The Company is subject to income and other similar taxes in all areas in which they 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 basis. 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 due to 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 a portion or all of the deferred tax assets will

not

be realized.

The Company has federal, state and international net operating losses ("NOLs") carried forward from prior years that will expire in the years

2020

through

2037.

After considering the scheduled reversal of deferred

tax liabilities, projected future taxable income, the potential limitation on use of NOLs under Section

382

of the Internal Revenue Code of

1986,

as amended (the "Code") 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 NOL carryforwards

As a result of the Chapter

Proceeding, on the Plan Effective Date, the Company believes it experienced an ownership change for purposes of S

ection

382

of the Code because of its Restructuring Plan and in addition experienced a subsequent ownership change on or about

June 30, 2017.

Consequently, its pre-change NOLs are subject to an annual limitation (See Note

- Chapter

Proceeding and Emergence for additional information, including definitions of capitalized defined terms, about the Chapter

Proceeding and emergence from the Chapter

Proceeding). 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 NOLs 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, which could cause the Company's pre-change NOL carryforwards to expire unused

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 uncertain tax positions are reversed in the

first

period in which it is 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. For the year ended

December

31,

2017,

the Company recorded an income tax benefit of

$6.5

million related to a decrease in the estimate of the reserve for unrecognized tax benefits relating to uncertain tax positions. The decrease resulted from the effect of changes in the application of relevant withholding tax provisions under applicable local country treaties related to certain of the Company's foreign subsidiaries. As of

December

31,

2017,

the Company has

uncertain tax positions.

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:

	Successor		Predecessor
	(In thousands, except per share amounts)
	Years Ended December 31,
	2017		2016			2015

Numerator:
Net income (loss) attributed to common stockholders	$	22,457	$	(944,289	)	$	(872,542	)
Denominator:
Weighted average common shares outstanding - basic		61,208		118,305			102,853
Effect of potentially dilutive securities:
Stock options		—		—			—
Restricted stock		4		—			—
Warrants		248		—			—
Weighted average common shares outstanding - diluted		61,460		118,305			102,853
Net income (loss) per common share:
Basic	$	0.37	$	(7.98	)	$	(8.48	)
Diluted	$	0.37	$	(7.98	)	$	(8.48	)

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

	Successor		Predecessor
	(In thousands)
	Years Ended December 31,
	2017		2016		2015
Basic earnings per share:
Unvested restricted stock		537		1,529		2,610
Diluted earnings per share:
Anti-dilutive stock options		235		4,808		3,661
Anti-dilutive warrants		—		—		—
Anti-dilutive restricted stock		524		1,490		2,125
Potentially dilutive securities excluded as anti-dilutive		759		6,298		5,786

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 of the Predecessor were canceled as of the Plan Effective Date.

Recent Accounting Pronouncements

May 2014,

the

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 the following 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 adopted this new accounting standard on

January 1, 2018,

and upon adoption, the Company incorporated the modified retrospective approach as its transition method. The approach included performing a detailed review of key contracts representative of the Company’s different service lines and comparing historical accounting policies and practices to the new standard. Based on this assessment, the Company has concluded the adoption of this new accounting standard will

not

have a material impact on the consolidated financial statements.

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 Company adopted ASU

2015

January 1, 2017

prospectively and the adoption had

effect on the 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

adopted ASU

2015

January 1, 2017

prospectively and

prior periods have been restated to conform to the new presentation. The adoption had

effect on the Company's

results of operations or financial position

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 consolidated financial statements.

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,

including interim periods within those fiscal years, and early application is permitted. The Company adopted ASU

2016

January 1, 2017

prospectively

and the adoption

had

effect on

the Company's

results of operations or financial position

In 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 consolidated financial statements.

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,

including interim periods within those fiscal years, and early application is permitted. The Company adopted this new accounting standard on

January 1, 2018.

The Company anticipates a cumulative effect adjustment as a reduction to retained earnings of approximately

$13.2

million will occur as a result of the Company's adoption of ASU

2016

January 2017,

the FASB issued ASU

No.

2017

04,

Intangibles-Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

("ASU

2017

04"

), which establishes a

one

-step process for testing goodwill for a drop in value. This ASU is effective for the interim and annual reporting periods beginning after

December 15, 2019

and early adoption is permitted. The Company does

not

expect the adoption of this new accounting standard to have a significant impact on its consolidated financial statements.