UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ☑Quarterly Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2018~~2019

¨☐ Transition Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number: 001-36053

~~Frank’s International~~FRANK'S INTERNATIONAL N.V.

(Exact name of registrant as specified in its charter)



	The	Netherlands		98-1107145
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification number)

	Mastenmakersweg 1
	1786 PB	Den Helder
	The	Netherlands	Not Applicable
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: +31 (0)22367 0000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, €0.01 par value	FI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesþ☑ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨☐	Accelerated filer	þ☑
Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	¨
	☐	Emerging growth company	¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨☐ No þ☑

As of July 31, ~~2018,~~2019, there were ~~224,186,545~~225,341,713 shares of common stock, €0.01 par value per share, outstanding.



TABLE OF CONTENTS
		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) at June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	4
	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss (Unaudited) for the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	5
	Condensed Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	78
	Notes to the Unaudited Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	2628

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3638

Item 4.	Controls and Procedures	3638

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3739

Item 1A.	Risk Factors	3739

Item 6.	Exhibits	3840

Signatures		3941

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


FRANK'S INTERNATIONAL N.V.
FRANK’S INTERNATIONAL N.V.							FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS													(In thousands, except share data)

	June 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash and cash equivalents	$	178,764		$	213,015		$	157,204		$	186,212
Restricted cash							1,251			—
Short-term investments	66,414			81,021			14,921			26,603
Accounts receivables, net	147,642			127,210			204,647			189,414
Inventories, net	69,417			76,420			75,151			69,382
Assets held for sale	7,441			3,792			8,700			7,828
Other current assets	8,566			10,437			9,099			12,651
Total current assets	478,244			511,895			470,973			492,090

Property, plant and equipment, net	422,034			469,646			385,637			416,490
Goodwill	211,040			211,040			211,040			211,040
Intangible assets, net	29,490			33,895			25,354			31,069
Deferred tax assets, net							14,085			14,621
Operating lease right-of-use assets							34,428			—
Other assets	34,172			35,293			31,187			28,619
Total assets	$	1,174,980		$	1,261,769		$	1,172,704		$	1,193,929

Liabilities and Equity
Current liabilities:
Short-term debt	$	1,800		$	4,721		$	2,135		$	5,627
Accounts payable and accrued liabilities	92,057			108,885			107,532			123,981
Current portion of operating lease liabilities							8,012			—
Deferred revenue	47			4,703			138			116
Total current liabilities	93,904			118,309			117,817			129,724

Deferred tax liabilities	223			229			3,390			221
Non-current operating lease liabilities							26,490			—
Other non-current liabilities	28,271			27,330			28,931			29,212
Total liabilities	122,398			145,868			176,628			159,157

Commitments and contingencies (Note 14)
Commitments and contingencies (Note 15)

Stockholders' equity:
Common stock, €0.01 par value, 798,096,000 shares authorized, 225,174,579 and 224,228,071 shares issued and 224,038,183 and 223,289,389 shares outstanding	2,825			2,814
Stockholders’ equity:
Common stock, €0.01 par value, 798,096,000 shares authorized, 226,537,803 and 225,478,506 shares issued and 225,114,914 and 224,289,902 shares outstanding							2,841			2,829
Additional paid-in capital	1,056,592			1,050,873			1,069,065			1,062,794
Retained earnings	39,757			106,923
Retained earnings (deficit)							(28,923		)	16,860
Accumulated other comprehensive loss	(31,638		)	(30,972		)	(29,994		)	(32,338		)
Treasury stock (at cost), 1,136,396 and 938,682 shares	(14,954		)	(13,737		)
Total stockholders' equity	1,052,582			1,115,901
Treasury stock (at cost), 1,422,889 and 1,188,604 shares							(16,913		)	(15,373		)
Total stockholders’ equity							996,076			1,034,772
Total liabilities and equity	$	1,174,980		$	1,261,769		$	1,172,704		$	1,193,929

The accompanying notes are an integral part of these condensed consolidated financial statements.


FRANK'S INTERNATIONAL N.V.
FRANK’S INTERNATIONAL N.V.													FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS																									(In thousands, except per share data)	(Unaudited)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues:
Revenue:
Services	$	105,746		$	93,533		$	197,094		$	179,855		$	127,091		$	105,746		$	242,497		$	197,094
Products	26,339			24,126			50,560			48,535			28,563			26,339			57,565			50,560
Total revenue	132,085			117,659			247,654			228,390			155,654			132,085			300,062			247,654

Operating expenses:
Cost of revenues, exclusive of depreciation and amortization
Cost of revenue, exclusive of depreciation and amortization
Services	65,015			55,317			128,225			107,000			85,785			74,088			169,024			145,050
Products	20,306			23,027			39,053			45,296			23,475			18,798			43,603			36,427
General and administrative expenses	40,352			42,419			79,082			85,144			34,026			32,787			69,437			64,883
Depreciation and amortization	28,862			30,951			57,162			62,050			23,913			28,862			49,155			57,162
Severance and other charges	1,115			(299		)	2,369			738
(Gain) loss on disposal of assets	217			210			452			(1,262		)
Severance and other charges, net													815			1,115			1,270			2,369
Loss on disposal of assets													154			217			381			452
Operating loss	(23,782		)	(33,966		)	(58,689		)	(70,576		)	(12,514		)	(23,782		)	(32,808		)	(58,689		)

Other income (expense):
Tax receivable agreement ("TRA") related adjustments	(1,171		)	—			(4,112		)	—
Tax receivable agreement (“TRA”) related adjustments													220			(1,171		)	220			(4,112		)
Other income, net	2,033			598			1,593			732			669			2,033			1,198			1,593
Interest income, net	609			753			1,553			1,151			426			609			1,194			1,553
Mergers and acquisition expense	—			(10		)	(58		)	(459		)	—			—			—			(58		)
Foreign currency gain (loss)	(4,267		)	599			(2,563		)	1,345
Foreign currency loss													(661		)	(4,267		)	(178		)	(2,563		)
Total other income (expense)	(2,796		)	1,940			(3,587		)	2,769			654			(2,796		)	2,434			(3,587		)

Loss before income taxes	(26,578		)	(32,026		)	(62,276		)	(67,807		)	(11,860		)	(26,578		)	(30,374		)	(62,276		)
Income tax expense (benefit)	(815		)	(6,076		)	5,560			(15,194		)	3,300			(815		)	13,073			5,560
Net loss	$	(25,763	)	$	(25,950	)	$	(67,836	)	$	(52,613	)	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)

Dividends per common share	$	—		$	0.075		$	—		$	0.15

Loss per common share:
Basic and diluted	$	(0.12	)	$	(0.12	)	$	(0.30	)	$	(0.24	)	$	(0.07	)	$	(0.12	)	$	(0.19	)	$	(0.30	)

Weighted average common shares outstanding:
Basic and diluted	223,981			222,914			223,775			222,740			225,052			223,981			224,854			223,775

The accompanying notes are an integral part of these condensed consolidated financial statements.


FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FRANK’S INTERNATIONAL N.V.													FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS													CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)																									(Unaudited)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018

Net loss	$	(25,763	)	$	(25,950	)	$	(67,836	)	$	(52,613	)	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(835		)	838			(748		)	1,321			458			(835		)	708			(748		)
Marketable securities:
Unrealized gain (loss) on marketable securities	167			77			82			(4		)
Reclassification to net income	—			—			—			(395		)
Deferred tax asset / liability change	—			—			—			158
Unrealized gain (loss) on marketable securities, net of tax	167			77			82			(241		)
Unrealized gain on marketable securities													—			167			—			82
Total other comprehensive income (loss)	(668		)	915			(666		)	1,080			458			(668		)	708			(666		)
Comprehensive loss	$	(26,431	)	$	(25,035	)	$	(68,502	)	$	(51,533	)	$	(14,702	)	$	(26,431	)	$	(42,739	)	$	(68,502	)

The accompanying notes are an integral part of these condensed consolidated financial statements.


FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FRANK’S INTERNATIONAL N.V.																				FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY																				CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)																																							(Unaudited)

	Six Months Ended June 30, 2017
											Accumulated
					Additional						Other						Total
	Common Stock				Paid-In			Retained			Comprehensive			Treasury			Stockholders'
	Shares		Value		Capital			Earnings			Income (Loss)			Stock			Equity
Balances at December 31, 2016	222,401		$	2,802	$	1,036,786		$	317,270		$	(32,977	)	$	(12,562	)	$	1,311,319
Net loss	—		—		—			(52,613		)	—			—			(52,613		)
Foreign currency translation adjustments	—		—		—			—			1,321			—			1,321
Change in marketable securities	—		—		—			—			(241		)	—			(241		)
Equity-based compensation expense	—		—		9,116			—			—			—			9,116
Common stock dividends ($0.15 per share)	—		—		—			(33,426		)	—			—			(33,426		)
Common shares issued upon vesting of share-based awards	685		7		(7		)	—			—			—			—
Common shares issued for employee stock purchase plan ("ESPP")	50		1		525			—			—			—			526
Treasury shares issued upon vesting of share-based awards	1		—		(31		)	—			—			23			(8		)
Treasury shares issued for ESPP	105		1		(903		)	—			—			1,642			740
Treasury shares withheld	(190	)	—		—			—			—			(2,241		)	(2,241		)
Balances at June 30, 2017	223,052		$	2,811	$	1,045,486		$	231,231		$	(31,897	)	$	(13,138	)	$	1,234,493

	Six Months Ended June 30, 2018																			Six Months Ended June 30, 2018
											Accumulated																			Accumulated
					Additional						Other						Total							Additional						Other						Total
	Common Stock				Paid-In			Retained			Comprehensive			Treasury			Stockholders'			Common Stock				Paid-In			Retained			Comprehensive			Treasury			Stockholders’
	Shares		Value		Capital			Earnings			Income (Loss)			Stock			Equity			Shares		Value		Capital			Earnings			Income (Loss)			Stock			Equity
Balances at December 31, 2017	223,289		$	2,814	$	1,050,873		$	106,923		$	(30,972	)	$	(13,737	)	$	1,115,901		223,289		$	2,814	$	1,050,873		$	106,923		$	(30,972	)	$	(13,737	)	$	1,115,901
Cumulative effect of accounting change	—		—		—			670			—			—			670			—		—		—			670			—			—			670
Net loss	—		—		—			(67,836		)	—			—			(67,836		)	—		—		—			(42,073		)	—			—			(42,073		)
Foreign currency translation adjustments	—		—		—			—			(748		)	—			(748		)	—		—		—			—			87			—			87
Change in marketable securities	—		—		—			—			82			—			82			—		—		—			—			(85		)	—			(85		)
Equity-based compensation expense	—		—		5,168			—			—			—			5,168			—		—		2,280			—			—			—			2,280
Common shares issued upon vesting of share-based awards	848		10		(10		)	—			—			—			—			601		8		(8		)	—			—			—			—
Common shares issued for ESPP	99		1		561			—			—			—			562
Common shares issued for employee stock purchase plan																				99		1		560			—			—			—			561
Treasury shares withheld																				(167	)	—		—			—			—			(1,035		)	(1,035		)
Balances at March 31, 2018																				223,822		$	2,823	$	1,053,705		$	65,520		$	(30,970	)	$	(14,772	)	$	1,076,306
Net loss																				—		—		—			(25,763		)	—			—			(25,763		)
Foreign currency translation adjustments																				—		—		—			—			(835		)	—			(835		)
Change in marketable securities																				—		—		—			—			167			—			167
Equity-based compensation expense																				—		—		2,888			—			—			—			2,888
Common shares issued upon vesting of share-based awards																				247		2		(2		)	—			—			—			—
Common shares issued for employee stock purchase plan																				—		—		1			—			—			—			1
Treasury shares withheld	(198	)	—		—			—			—			(1,217		)	(1,217		)	(31	)	—		—			—			—			(182		)	(182		)
Balances at June 30, 2018	224,038		$	2,825	$	1,056,592		$	39,757		$	(31,638	)	$	(14,954	)	$	1,052,582		224,038		$	2,825	$	1,056,592		$	39,757		$	(31,638	)	$	(14,954	)	$	1,052,582

The accompanying notes are an integral part of these condensed consolidated financial statements.

FRANK'S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Six Months Ended
June 30,
2018 2017
Cash flows from operating activities
Net loss $ (67,836 ) $ (52,613 )
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization 57,162
62,050
Equity-based compensation expense 5,168
9,116
Amortization of deferred financing costs —
246
Deferred tax benefit —
(20,320 )
Provision for bad debts 41
371
(Gain) loss on disposal of assets 452
(1,262 )
Changes in fair value of investments (417 ) (1,474 )
Realized loss on sale of investment —
478
Unrealized (gain) loss on derivatives (765 ) 730
Other —
(1,876 )
Changes in operating assets and liabilities
Accounts receivable (21,712 ) (6,697 )
Inventories (1,461 ) 5,627
Other current assets 2,042
3,102
Other assets 324
1,745
Accounts payable and accrued liabilities (10,192 ) 4,400
Deferred revenue (424 ) (7,707 )
Other non-current liabilities (244 ) (3,383 )
Net cash used in operating activities (37,862 ) (7,467 )

Cash flows from investing activities
Purchases of property, plant and equipment and intangibles (11,265 ) (15,240 )
Proceeds from sale of assets 1,755
2,200
Proceeds from sale of investments 56,946
11,499
Purchase of investments (42,279 ) (118 )
Net cash (used in) provided by investing activities 5,157
(1,659 )

Cash flows from financing activities
Repayments of borrowings (2,921 ) (154 )
Dividends paid on common stock —
(33,426 )
Net treasury shares withheld for taxes (1,217 ) (2,249 )
Proceeds from the issuance of ESPP shares 562
1,266
Deferred financing costs (48 ) —
Net cash used in financing activities (3,624 ) (34,563 )
Effect of exchange rate changes on cash 2,078
(887 )
Net decrease in cash and cash equivalents (34,251 ) (44,576 )
Cash and cash equivalents at beginning of period 213,015
319,526
Cash and cash equivalents at end of period $ 178,764
$ 274,950

Non-cash transactions:
Change in accounts payable and accrued liabilities related to capital expenditures $ (3,460 ) $ 2,901
Net transfers from inventory to property, plant and equipment (2,028 ) (1,358 )



FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

	Six Months Ended June 30, 2019
											Accumulated
					Additional			Retained			Other						Total
	Common Stock				Paid-In			Earnings			Comprehensive			Treasury			Stockholders’
	Shares		Value		Capital			(Deficit)			Income (Loss)			Stock			Equity
Balances at December 31, 2018	224,290		$	2,829	$	1,062,794		$	16,860		$	(32,338	)	$	(15,373	)	$	1,034,772
Cumulative effect of accounting change	—		—		—			(700		)	—			—			(700		)
Net loss	—		—		—			(28,287		)	—			—			(28,287		)
Foreign currency translation adjustments	—		—		—			—			250			—			250
Equity-based compensation expense	—		—		2,574			—			—			—			2,574
Common shares issued upon vesting of share-based awards	720		8		(8		)	—			—			—			—
Common shares issued for employee stock purchase plan	154		2		690			—			—			—			692
Treasury shares withheld	(220	)	—		—			—			—			(1,452		)	(1,452		)
Balances at March 31, 2019	224,944		$	2,839	$	1,066,050		$	(12,127	)	$	(32,088	)	$	(16,825	)	$	1,007,849
Net loss	—		—		—			(15,160		)	—			—			(15,160		)
Foreign currency translation adjustments	—		—		—			—			458			—			458
Reclassification of marketable securities	—		—		—			(1,636		)	1,636			—			—
Equity-based compensation expense	—		—		3,017			—			—			—			3,017
Common shares issued upon vesting of share-based awards	186		2		(2		)	—			—			—			—
Treasury shares withheld	(15	)	—		—			—			—			(88		)	(88		)
Balances at June 30, 2019	225,115		$	2,841	$	1,069,065		$	(28,923	)	$	(29,994	)	$	(16,913	)	$	996,076

The accompanying notes are an integral part of these condensed consolidated financial statements.



FRANK’S INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities
Net loss	$	(43,447	)	$	(67,836	)
Adjustments to reconcile net loss to cash from operating activities
Depreciation and amortization	49,155			57,162
Equity-based compensation expense	5,591			5,168
Amortization of deferred financing costs	177			—
Deferred tax provision	3,702			—
Provision for bad debts	85			41
Loss on disposal of assets	381			452
Changes in fair value of investments	(1,879		)	(417		)
Unrealized (gain) loss on derivative instruments	204			(765		)
Other	(373		)	—
Changes in operating assets and liabilities
Accounts receivable	(14,334		)	(21,712		)
Inventories	(2,323		)	(1,461		)
Other current assets	2,063			2,042
Other assets	111			324
Accounts payable and accrued liabilities	(17,118		)	(10,192		)
Deferred revenue	22			(424		)
Other non-current liabilities	594			(244		)
Net cash used in operating activities	(17,389		)	(37,862		)

Cash flows from investing activities
Purchases of property, plant and equipment and intangibles	(17,240		)	(11,265		)
Proceeds from sale of assets	260			1,755
Proceeds from sale of investments	31,739			56,946
Purchase of investments	(20,185		)	(42,279		)
Net cash (used in) provided by investing activities	(5,426		)	5,157

Cash flows from financing activities
Repayments of borrowings	(3,492		)	(2,921		)
Treasury shares withheld for taxes	(1,542		)	(1,217		)
Proceeds from the issuance of ESPP shares	692			562
Deferred financing costs	(184		)	(48		)
Net cash used in financing activities	(4,526		)	(3,624		)
Effect of exchange rate changes on cash	(416		)	2,078
Net decrease in cash, cash equivalents and restricted cash	(27,757		)	(34,251		)
Cash, cash equivalents and restricted cash at beginning of period	186,212			213,015
Cash, cash equivalents and restricted cash at end of period	$	158,455		$	178,764

The accompanying notes are an integral part of these condensed consolidated financial statements.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

Nature of Business

Frank’s International N.V. ~~("FINV"~~(“FINV”), a limited liability company organized under the laws of ~~The~~the Netherlands, is a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry. FINV provides services and products to leading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells.

Basis of Presentation

The condensed consolidated financial statements of FINV for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 include the activities of ~~Frank's~~Frank’s International C.V. ~~("FICV"~~(“FICV”), Blackhawk Group Holdings, LLC ~~("Blackhawk"~~(“Blackhawk”) and their wholly owned subsidiaries (collectively, the ~~"Company," "we," "us"~~“Company,” “we,” “us” or ~~"our"~~“our”). All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements.

Our accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The consolidated balance sheet at December 31, ~~2017~~2018 is derived from audited financial statements. However, certain information and footnote disclosures required by generally accepted accounting principles in the United States of America ~~("GAAP"~~(“GAAP”) for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2017,~~2018, which are included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ~~("SEC"~~(“SEC”) on February ~~27, 2018 ("~~25, 2019 (“Annual ~~Report"~~Report”). In the opinion of management, these condensed consolidated financial statements, which have been prepared pursuant to the rules of the SEC and GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments that were necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year.

The condensed consolidated financial statements have been prepared on a historical cost basis using the United States dollar as the reporting currency. Our functional currency is primarily the United States dollar.

Reclassifications

Certain prior-period amounts have been reclassified to conform to the current ~~period's~~period’s presentation. These reclassifications had no impact on our operating income (loss), net income (loss), working capital, cash flows or total equity previously reported.

~~Our financial~~During the first quarter of 2019, the Company changed its reportable segment structure. Please see Note 16—Segment Information for additional information. As part of the change in reportable segments, the Company also changed the classification of certain costs within the condensed consolidated statements ~~for~~of operations to reflect a change in presentation of the ~~three~~information used by the Company’s chief operating decision maker (“CODM”). Historically, and ~~six months ended June 30, 2017~~through December 31, 2018, certain direct and indirect costs related to operations were classified and reported as general and administrative expenses (“G&A”) and certain costs associated with our Tubular Running Services manufacturing operations were classified as cost of revenue, products (“COR – Products”). The historical classification was consistent with the information used by the CODM to assess the performance of the Company’s segments and make resource allocation decisions. As part of the change in reportable segments, and to provide the CODM with additional oversight over costs that directly support operations versus costs that are more general and administrative in nature, certain costs previously classified as G&A have been ~~revised~~reclassified as cost of revenue – services (“COR – Services”). In addition, certain manufacturing costs previously classified as COR – Products have been reclassified to ~~decrease "cost~~COR – Services as a result of ~~revenues, services" and increase "cost of revenues, products" by~~ the ~~following immaterial amounts~~change in order to correct a misclassification associated with Blackhawk product costs. While the revisions do impact two financial statement line items, the revisions had no impact on our net income (loss), working capital, cash flows or total equity previously reported (in thousands):segment reporting.

Three Months Ended Six Months Ended
June 30, 2017 June 30, 2017
Cost of revenues, exclusive of depreciation and amortization
Services, as previously reported $ 60,777
$ 117,884
Blackhawk adjustment (5,460 ) (10,884 )
Services, as revised $ 55,317
$ 107,000

Products, as previously reported $ 17,567
$ 34,412
Blackhawk adjustment 5,460
10,884
Products, as revised $ 23,027
$ 45,296

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of reclassifications to previously reported amounts (in thousands):



	Three Months Ended June 30, 2018
	As previously reported		Reclassifications			As currently reported
Condensed Consolidated Statements of Operations
Cost of revenue, exclusive of depreciation and amortization
Services	$	65,015	$	9,073		$	74,088
Products	20,306		(1,508		)	18,798
General and administrative expenses	40,352		(7,565		)	32,787

	Six Months Ended June 30, 2018
	As previously reported		Reclassifications			As currently reported
Condensed Consolidated Statements of Operations
Cost of revenue, exclusive of depreciation and amortization
Services	$	128,225	$	16,825		$	145,050
Products	39,053		(2,626		)	36,427
General and administrative expenses	79,082		(14,199		)	64,883

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) generally in the form of accounting standards updates ~~("ASUs"~~(“ASUs”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all accounting pronouncements. ASUs not listed below were assessed and were either determined to be not applicable or are expected to have immaterial impact on our consolidated financial position, results of operations and cash flows.

In June 2018, the FASB issued new guidance which is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In May 2017, the FASB issued new guidance to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when accounting for a change to the terms and conditions of a share-based payment award. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this guidance should be applied prospectively to an award modified on or after the adoption date. We adopted the guidance on January 1, ~~2018~~2019, and the adoption did not have ana material impact on our consolidated financial statements.

In January 2017, the FASB issued new accounting guidance for business combinations clarifying the definition of a business. The objective of the guidance is to help companies and other organizations which have acquired or sold a business to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public entities, the guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We adopted the guidance on January 1, 2018 and the adoption did not have an impact on our consolidated financial statements.

In June 2016, the FASB issued new accounting guidance for credit losses on financial instruments. The guidance includes the replacement of the “incurred loss” approach for recognizing credit losses on financial assets, including trade receivables, with a methodology that reflects expected credit losses, which considers historical and current information as well as reasonable and supportable forecasts. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In February 2016, the FASB issued new accounting guidance for leases. The main objective of the accounting guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and the new guidance is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The new guidance requires lessees to recognize assets and liabilities arising from leases on the balance sheet and further defines a lease as a contract that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefit from the use of the asset and (2) the right to direct the use of the asset. The accounting guidance requires disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB amended the new lease accounting standard in an effort to reduce the burden of adoption. With the adoption of the new amended lease accounting standard, companies have the option of electing to apply the new lease accounting standard either on a retrospective or prospective basis. For public

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements and plan to adopt the new lease accounting standard, as amended, on a prospective basis effective January 1, 2019. While we are still evaluating its impact, we anticipate that the adoption of the lease accounting standard will have an impact to the Company's consolidated balance sheets in addition to the disclosures contained in the notes of its consolidated financial statements.

In May 2014, the FASB issued amendments to guidance on the recognition of revenue based upon the entity’s contracts with customers to transfer goods or services. Under the new revenue standard, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity 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 two transition methods: (a) a full retrospective adoption in which the standard is applied to all 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. In July 2015, the FASB deferred the effective date to December 15, 2017 for annual periods, and interim reporting periods within those fiscal years, beginning after that date.

We adopted the new ~~revenue~~lease standard effective January 1, ~~2018~~2019, using the modified retrospective ~~method. We recognized~~approach. The modified retrospective approach provides a method for recording existing leases at adoption, including not restating comparative periods. In our financial statements, the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Our adjustment related solely to revenues from certain product sales with bill-and-hold arrangements in our Tubular Sales segment. The comparative ~~information has not been restated and~~period continues to be reported under the accounting standards which were in effect for those periods. The impact to revenue of applying the new revenue recognition standard for the three and six months ended June 30, 2018 was immaterial. We expect the impact of the adoption of the new standard to be immaterial to our financial results on an ongoing basis.that period.

~~The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard was as follows (in thousands):~~

Balance at Impact of Balance at
December 31, 2017 Adjustments January 1, 2018
Balance Sheet
Assets
Inventories, net $ 76,420
$ (3,560 ) $ 72,860
Liabilities
Deferred revenue 4,703
(4,230 ) 473
Stockholders' Equity
Retained earnings 106,923
670
107,593

~~Note 2—Revenues~~

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Payment terms on services and products generally range from 30 days to 120 days. Given the short-term nature of our service and product offerings, our contracts do not have a significant financing component and the consideration we receive is generally fixed.

Service revenues are recognized over time as services are performed or rendered. We generally perform services either under direct service purchase orders or master service agreements which are supplemented by individual call-out provisions. For customers contracted under such arrangements, an accrual is recorded in unbilled revenue for revenue earned but not yet invoiced.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Revenues~~Adoption of the new standard resulted in recording lease assets of $34.9 million, lease liabilities of $34.4 million and an adjustment to retained earnings of $0.7 million as of January 1, 2019. The standard had no impact on ~~product sales are generally recognized at a point in time when the product has shipped~~our net income (loss) and significant risks of ownership have passed to the customer. The sales arrangements typically do not include a right of return or other similar provisions, nor do they contain any other post-delivery obligations.cash flows.

Some of our Tubular Sales and Blackhawk segment customers have requested that we store pipe, connectors and other products purchased from us in our facilities. We recognize revenues for these “bill and hold” sales once the following criteria have been met: (1) there is a substantive reason for the arrangement, (2) the product is identified as the customer's asset, (3) the product is ready for delivery to the customer, and (4) we cannot use the product or direct it to another customer.

~~Practical Expedients~~

We elected ~~to apply certain~~the package of practical expedients ~~available~~permitted under the transition guidance within the new ~~revenue standard. We elected~~standard, which allowed us to ~~expense cost of obtaining contracts, such as sales commissions, when incurred because~~carry forward the ~~amortization period would have been one year or less due to the length of our contracts. We have also~~historical lease classification. In addition, we elected not to ~~assess immaterial promises in the context~~separate lease and non-lease components for all classes of ~~our contracts as performance obligations and to exclude taxes from the assessment of transaction price in arrangements where taxes are collected by the entity from a customer.~~

~~We do not disclose the value of unsatisfied performance obligations for contracts~~leased assets. Also, leases with an ~~original expected duration~~initial term of ~~one year~~12 months or ~~less. Because our contracts with customers~~less are ~~short-term in nature and fall within this exemption, we do~~ not ~~have significant unsatisfied performance obligations as defined by~~recorded on the ~~new revenue standard.~~balance sheet.

Note ~~3—Accounts Receivable, net~~2—Leases

~~Accounts receivable at~~ We have operating leases for real estate, vehicles and certain equipment. Our leases have remaining lease terms of less than one year to 15 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one year. At the present time all of our leases are classified as operating leases. Our short-term lease expense was $0.9 million and $1.7 million for the three and six months ended June 30, ~~2018~~2019, respectively.

The accounting for some of our leases may require significant judgment, which includes determining the incremental borrowing rates to utilize in our net present value calculation of lease payments for lease agreements which do not provide an implicit rate and ~~December 31, 2017~~ ~~were as follows (in thousands):~~assessing the likelihood of renewal or termination options.

June 30, December 31,
2018 2017
Trade accounts receivable, net of allowance of $4,050 and $4,777, respectively $ 92,722
$ 83,482
Unbilled revenue 38,996
25,670
Taxes receivable 9,553
11,305
Affiliated ⁽¹⁾
549
716
Other receivables 5,822
6,037
Total accounts receivable, net $ 147,642
$ 127,210



	Three Months Ended			Six Months Ended
Long-term Lease Cost (in thousands)	June 30, 2019			June 30, 2019
Operating lease cost (a)	$	3,046		$	5,979

Sublease income	$	(134	)	$	(264	)


(a)	Includes variable lease costs, which are immaterial.



	Three Months Ended		Six Months Ended
Other Information (in thousands)	June 30, 2019		June 30, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	2,949	$	5,568

Right-of-use assets obtained in an exchange for lease obligations
Operating leases	$	1,110	$	3,501

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Lease Term and Discount Rate		June 30, 2019
Weighted average remaining lease term (years)

Operating leases		6.35
⁽¹⁾	~~Amounts represent expenditures on behalf of non-consolidated affiliates.~~
Weighted average discount rate
Operating leases		10.42%



Maturity of Operating Lease Liabilities (in thousands)	June 30, 2019
2019	$	5,508
2020	9,682
2021	8,071
2022	6,210
2023	4,412
Thereafter	13,296
Total undiscounted lease payments	47,179
Less: interest	12,677
Present value of lease liabilities	$	34,502

~~Note 4—Inventories, net~~

~~Inventories~~Future minimum lease commitments under noncancelable operating leases with initial or remaining terms of one year or more at ~~June 30, 2018~~ ~~and~~ December 31, ~~2017~~2018, were as follows (in thousands):



Year Ending December 31,	Amount
2019	$	10,544
2020	9,120
2021	7,370
2022	6,006
2023	4,251
Thereafter	13,103
Total future lease commitments	$	50,394

June 30, December 31,
2018 2017
Pipe and connectors, net of allowance of $20,466 and $20,064, respectively $ 24,574
$ 33,620
Finished goods, net of allowance of $1,490 and $1,520, respectively 16,823
14,541
Work in progress 7,478
9,206
Raw materials, components and supplies 20,542
19,053
Total inventories, net $ 69,417
$ 76,420

Note 3—Cash, Cash Equivalents and Restricted Cash

Amounts reported in the condensed consolidated balance sheets and condensed consolidated statements of cash flows as cash, cash equivalents and restricted cash at June 30, 2019 and December 31, 2018 were as follows (in thousands):



	June 30,		December 31,
	2019		2018
Cash and cash equivalents	$	157,204	$	186,212
Restricted cash	1,251		—
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	158,455	$	186,212

Restricted cash consists of cash deposits that collateralize our credit card program.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note ~~5—Property, Plant and Equipment~~4—Accounts Receivable, net

~~The following is a summary of property, plant and equipment~~Accounts receivable at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows (in thousands):

Estimated
Useful Lives
in Years
June 30,
2018 December 31,
2017
Land — $ 14,834
$ 15,314
Land improvements ⁽¹⁾
8-15 15,110
14,594
Buildings and improvements ⁽¹⁾
39 110,092
119,380
Rental machinery and equipment 7 894,279
898,146
Machinery and equipment - other 7 61,603
55,049
Furniture, fixtures and computers 5 24,735
27,259
Automobiles and other vehicles 5 29,675
29,971
Leasehold improvements ⁽¹⁾
7-15, or lease term if shorter 11,903
10,030
Construction in progress - machinery
and equipment and land improvements ⁽¹⁾
— 61,920
61,836
1,224,151
1,231,579
Less: Accumulated depreciation (802,117 ) (761,933 )
Total property, plant and equipment, net $ 422,034
$ 469,646



	June 30,		December 31,
	2019		2018
Trade accounts receivable, net of allowance of $3,671 and $3,925, respectively	$	135,337	$	114,630
Unbilled receivables	48,537		54,591
Taxes receivable	17,500		15,762
Affiliated ⁽¹⁾	549		549
Other receivables	2,724		3,882
Total accounts receivable, net	$	204,647	$	189,414


⁽¹⁾	~~See Note 11 - Related Party Transactions for additional information.~~Amounts represent expenditures on behalf of non-consolidated affiliates.

~~During the third quarter~~

Note 5—Inventories, net

Inventories at June 30, 2019 and December 31, 2018 were as follows (in thousands):



	June 30,		December 31,
	2019		2018
Pipe and connectors, net of allowance of $19,255 and $21,270, respectively	$	12,896	$	18,026
Finished goods, net of allowance of $905 and $1,354, respectively	27,071		22,608
Work in progress	8,964		8,285
Raw materials, components and supplies	26,220		20,463
Total inventories, net	$	75,151	$	69,382

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6—Property, Plant and Equipment

The following is a summary of 2017, we committed to sell certain of our buildings in the International Services segment and determined those assets met the criteria to be classified as held for sale in our condensed consolidated balance sheet. As a result, we reclassified the buildings, with a net book value of $4.1 million, from property, plant and equipment ~~to assets held for sale~~at June 30, 2019 and ~~recognized a $0.3 million loss.~~ December 31, 2018 (in thousands):



	Estimated Useful Lives in Years	June 30, 2019			December 31, 2018
Land	—	$	32,780		$	32,945
Land improvements	8-15	8,424			8,316
Buildings and improvements	13-39	124,618			125,088
Rental machinery and equipment	7	893,344			887,064
Machinery and equipment - other	7	61,978			61,796
Furniture, fixtures and computers	5	21,044			24,745
Automobiles and other vehicles	5	29,757			29,696
Leasehold improvements	7-15, or lease term if shorter	15,562			15,392
Construction in progress - machinery and equipment and land improvements	—	67,456			65,152
		1,254,963			1,250,194
Less: Accumulated depreciation		(869,326		)	(833,704		)
Total property, plant and equipment, net		$	385,637		$	416,490

During the first quarter of 2018, we sold ~~one of the buildings~~a building classified as held for sale for $0.8 million and recorded an immaterial loss. During the second quarter of 2018, additional assets with a net book value of $4.5 million met the criteria to be classified as held for sale and were reclassified from property, plant and equipment to assets held for sale on our condensed consolidated balance sheet. During the first quarter of 2019, buildings with a net book value of $1.1 million met the criteria to be classified as held for sale and were reclassified from property, plant and equipment to assets held for sale on our condensed consolidated balance sheet. During the second quarter of 2019, we sold a building classified as held for sale for $0.2 million and recorded an immaterial loss.

The following table presents the depreciation and amortization expense associated with each line item for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Services	$	20,907	$	24,302	$	42,412	$	47,881
Products	425		1,131		859		2,268
General and administrative expenses	2,581		3,429		5,884		7,013
Total	$	23,913	$	28,862	$	49,155	$	57,162

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Services $ 24,302
$ 26,252
$ 47,881
$ 52,895
Products 1,131
1,252
2,268
2,561
General and administrative expenses 3,429
3,447
7,013
6,594
Total $ 28,862
$ 30,951
$ 57,162
$ 62,050

1214

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6—7—Other Assets

Other assets at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 consisted of the following (in thousands):


	June 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
Cash surrender value of life insurance policies ⁽¹⁾	$	30,706	$	30,351	$	26,371	$	23,784
Deposits	2,502		2,564		2,173		2,269
Other	964		2,378		2,643		2,566
Total other assets	$	34,172	$	35,293	$	31,187	$	28,619


⁽¹⁾	See Note ~~9 –~~ 10—Fair Value Measurements for additional information.

Note 7—8—Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 consisted of the following (in thousands):



	June 30,		December 31,
	2019		2018
Accounts payable	$	13,065	$	28,045
Accrued compensation	23,795		30,822
Accrued property and other taxes	17,876		16,301
Accrued severance and other charges	689		2,328
Income taxes	15,904		12,075
Affiliated ⁽¹⁾	690		3,915
Accrued purchase orders and other	35,513		30,495
Total accounts payable and accrued liabilities	$	107,532	$	123,981

June 30, December 31,
2018 2017
Accounts payable $ 22,516
$ 33,912
Accrued compensation 21,207
25,510
Accrued property and other taxes 14,620
16,908
Accrued severance and other charges 925
1,444
Income taxes 9,410
8,091
Accrued purchase orders and other 23,379
23,020
Total accounts payable and accrued liabilities $ 92,057
$ 108,885


⁽¹⁾	Represents amounts owed to non-consolidated affiliates.

Note 8—9—Debt

Credit Facility

~~We have~~Asset Based Revolving Credit Facility

On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a ~~$100.0 million~~5-year senior secured revolving credit facility (the “ABL Credit Facility”) with ~~certain~~JPMorgan Chase Bank, N.A., as administrative agent (the “ABL Agent”), and other financial institutions as lenders with total commitments of $100.0 million including up to ~~$20.0~~$15.0 million in available for letters of ~~credit and up to~~ ~~$10.0 million~~ ~~in swingline loans, which matures in~~ ~~August 2018~~ ~~(the “Credit Facility”).~~credit. Subject to the terms of the ABL Credit Facility, we have the ability to increase the commitments to ~~$150.0 million. At~~ ~~June 30, 2018~~ ~~and~~ ~~December 31, 2017, we had $2.3 million and $2.8 million, respectively, in letters of credit outstanding and no outstanding borrowings~~$200.0 million. The maximum amount that the Company may borrow under the ~~Credit Facility. Our borrowing capacity is equal to 2.5x our trailing 12-month Adjusted EBITDA~~ ~~less~~ ~~letters of credit outstanding under the Credit Facility.~~

Borrowings under the Credit Facility bear interest, at our option, at either a base rate or an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equal to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate ~~plus~~ ~~0.50% or (iii) the adjusted Eurodollar rate~~ ~~plus1.00%~~, ~~plus~~ ~~an applicable margin ranging from~~ ~~0.50%~~ to ~~1.50%~~, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period ~~multiplied~~ ~~by the statutory reserves,~~ ~~plus~~ ~~an applicable margin ranging from~~ ~~1.50%~~ to ~~2.50%~~. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at the end of each three-month period. The unused portion of theABL Credit Facility is subject to a ~~commitment fee ranging from 0.250% to 0.375%~~borrowing base, which is based on a percentage of certain ~~leverage ratios.~~eligible accounts receivable and eligible inventory, subject to customary reserves and other adjustments.

1315

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

All obligations under the ABL Credit Facility are fully and unconditionally guaranteed jointly and severally by FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., subject to customary exceptions and exclusions. In addition, the obligations under the ABL Credit Facility are secured by first priority liens on substantially all of the assets and property of the borrowers and guarantors, including pledges of equity interests in certain of FINV’s subsidiaries, subject to certain exceptions. Borrowings under the ABL Credit Facility bear interest at FINV’s option at either (a) the Alternate Base Rate (“ABR”) (as defined therein), calculated as the greatest of (i) the rate of interest publicly quoted by the Wall Street Journal, as the “prime rate,” subject to each increase or decrease in such prime rate effective as of the date such change occurs, (ii) the federal funds effective rate that is subject to a 0.00% interest rate floor plus 0.50%, and (iii) the one-month Adjusted LIBO Rate (as defined therein) plus 1.00%, or (b) the Adjusted LIBO Rate, plus, in each case, an applicable margin.The applicable interest rate margin ranges from 1.00% to 1.50% per annum for ABR loans and 2.00% to 2.50% per annum for Eurodollar loans and, in each case, is based on FINV’s leverage ratio. The unused portion of the ABL Credit Facility is subject to a commitment fee that varies from 0.250% to 0.375% per annum, according to average daily unused commitments under the ABL Credit Facility. Interest on Eurodollar loans is payable at the end of the selected interest period, but no less frequently than quarterly. Interest on ABR loans is payable monthly in arrears.

The ABL Credit Facility contains various covenants ~~that,~~and restrictive provisions which limit, subject to certain customary exceptions and thresholds, FINV’s ability to, among other things, ~~limit our ability to grant certain liens,~~(1) enter into asset sales; (2) incur additional indebtedness; (3) make ~~certain~~investments, acquisitions, or loans and ~~investments, enter into mergers~~create or ~~acquisitions, enter into hedging transactions, change our lines of business, prepay~~incur liens; (4) pay certain ~~indebtedness, enter into certain affiliate transactions, incur additional indebtedness~~dividends or make other distributions and (5) engage in ~~certain asset dispositions.~~

transactions with affiliates. The ABL Credit Facility also requires FINV to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 based on the ratio of (a) consolidated EBITDA (as defined therein) minus unfinanced capital expenditures to (b) Fixed Charges (as defined therein), when either (i) an event of default occurs under the ABL Credit Facility or (ii) availability under the ABL Credit Facility falls for at least two consecutive calendar days below the greater of (A) $12.5 million and (B) 15% of the lesser of the borrowing base and aggregate commitments (a “FCCR Trigger Event”). Accounts receivable received by FINV’s U.S. subsidiaries that are parties to the ABL Credit Facility will be deposited into deposit accounts subject to deposit control agreements in favor of the ABL Agent. After a FCCR Trigger Event, these deposit accounts would be subject to “springing” cash dominion. After a FCCR Trigger Event, the Company will be subject to compliance with the fixed charge coverage ratio and “springing” cash dominion until no default exists under the ABL Credit Facility and availability under the facility for the preceding thirty consecutive days has been equal to at least the greater of (x) $12.5 million and (y) 15% of the lesser of the borrowing base and the aggregate commitments. If FINV fails to perform its obligations under the agreement that results in an event of default, the commitments under the ABL Credit Facility could be terminated and any outstanding borrowings under the ABL Credit Facility may be declared immediately due and payable. The ABL Credit Facility also contains ~~financial covenants, which, among~~cross default provisions that apply to FINV’s other ~~things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in our Credit Agreement) of not more than~~ ~~2.5~~ ~~to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than~~ ~~3.0~~ ~~to 1.0.~~ indebtedness.

As of June 30, ~~2018, we were in compliance with~~2019, FINV had no borrowings outstanding under the ~~covenants included in the~~ABL Credit ~~Agreement.~~

~~In addition, the Credit~~ Facility, contains customary events of default, including, among others, the failure to make required payments, the failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.

~~We are currently negotiating a new credit facility which we expect to be in place on or around the expiration of the existing Credit Facility in August 2018.~~

~~Citibank Credit Facility~~

~~In 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for the issuance of standby~~ letters of credit ~~and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest~~outstanding of ~~1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of June 30, 2018 and December 31, 2017, we had $4.9~~$5.6 million and ~~$2.6 million, respectively, in letters~~availability of ~~credit outstanding.~~$65.2 million.

Insurance Notes Payable

In ~~2017,~~2018, we entered into ~~three notes~~a note to finance our annual insurance premiums totaling ~~$5.1~~$6.8 million. The ~~notes bear~~note bears interest at an annual rate of ~~2.9%~~3.9% with a final maturity date in October ~~2018.~~2019. At June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the ~~total~~ outstanding balance was ~~$1.8~~$2.1 million and ~~$4.7~~$5.6 million, respectively.

Note 9—10—Fair Value Measurements

We follow fair value measurement authoritative accounting guidance for measuring fair values of assets and liabilities in financial statements. We have consistently used the same valuation techniques for all periods presented. Please see Note 10 - —Fair Value Measurements in our Annual Report for further discussion.

1416

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018, were as follows (in thousands):



	Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
June 30, 2019
Assets:
Investments:
Cash surrender value of life insurance policies - deferred compensation plan	$	—	$	26,371	$	—	$	26,371
Marketable securities - other	133		—		—		133
Liabilities:
Derivative financial instruments	—		305		—		305
Deferred compensation plan	—		23,995		—		23,995

December 31, 2018
Assets:
Investments:
Cash surrender value of life insurance policies - deferred compensation plan	$	—	$	23,784	$	—	$	23,784
Marketable securities - other	37		—		—		37
Liabilities:
Derivative financial instruments	—		101		—		101
Deferred compensation plan	—		23,663		—		23,663

Quoted Prices
in Active
Markets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

(Level 1) (Level 2) (Level 3) Total
June 30, 2018
Assets:
Derivative financial instruments $ —
$ 278
$ —
$ 278
Investments:
Cash surrender value of life insurance policies - deferred compensation plan —
30,706
—
30,706
Marketable securities - other 54
—
—
54
Liabilities:
Deferred compensation plan —
26,158
—
26,158

December 31, 2017
Assets:
Investments:
Cash surrender value of life insurance policies - deferred compensation plan $ —
$ 30,351
$ —
$ 30,351
Marketable securities - other 113
—
—
113
Liabilities:
Derivative financial instruments —
487
—
487
Deferred compensation plan —
26,797
—
26,797

Our derivative financial instruments consist of short-duration foreign currency forward contracts. The fair value of our derivative financial instruments is based on quoted market values including foreign exchange forward rates and interest rates. The fair value is computed by discounting the projected future cash flow amounts to present value. Derivative financial instruments are included in our condensed consolidated balance sheets in accounts ~~receivable, net at June 30, 2018 and in accounts~~ payable and accrued liabilities at both June 30, 2019 and December 31, ~~2017.~~2018.

Our investments associated with our deferred compensation plan consist primarily of the cash surrender value of life insurance policies and are included in other assets on the condensed consolidated balance sheets. Our investments change as a result of contributions, payments, and fluctuations in the market. Our liabilities associated with our deferred compensation plan are included in other non-current liabilities on the condensed consolidated balance sheets. Assets and liabilities, measured using significant observable inputs, are reported at fair value based on third-party broker statements, which are derived from the fair value of the ~~funds'~~funds’ underlying investments. We also have marketable securities in publicly traded equity securities as an indirect result of strategic investments. They are reported at fair value based on the price of the stock and are included in other assets on the condensed consolidated balance sheets.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

We apply the provisions of the fair value measurement standard to our non-recurring, non-financial measurements including business combinations and assets identified as held for sale, as well as impairment related to goodwill and other long-lived assets.

1517

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Fair Value Considerations

The carrying values on our condensed consolidated balance ~~sheet~~sheets of our cash and cash equivalents, restricted cash, short-term investments, trade accounts receivable, other current assets, accounts payable ~~accrued~~ and ~~other current~~accrued liabilities and lines of credit approximate fair values due to their short maturities.

Note ~~10—~~ 11—Derivatives

We enter into short-duration foreign currency forward derivative contracts to reduce the risk of foreign currency fluctuations. We use these instruments to mitigate our exposure to non-local currency operating working capital. We record these contracts at fair value on our condensed consolidated balance sheets. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, any changes in the fair value of the derivative instruments during a period will be included in our condensed consolidated statements of operations.

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had the following foreign currency derivative contracts outstanding in U.S. dollars (in thousands):


	June 30, 2018				June 30, 2019
Derivative Contracts	Notional Amount		Contractual Exchange Rate	Settlement Date	Notional Amount		Contractual Exchange Rate	Settlement Date
Canadian dollar	$	5,904	1.3041	7/16/2018	$	1,421	1.3371	9/16/2019
Euro	8,598		1.1777	7/16/2018	8,055		1.1345	9/16/2019
Norwegian krone	5,233		8.0266	7/16/2018	9,146		8.6379	9/16/2019
Pound sterling	9,332		1.3331	7/16/2018	17,186		1.2730	9/16/2019



	December 31, 2018
Derivative Contracts	Notional Amount		Contractual Exchange Rate	Settlement Date
Canadian dollar	$	2,248	1.3343	3/18/2019
Euro	6,967		1.1421	3/18/2019
Norwegian krone	7,713		8.5566	3/18/2019
Pound sterling	16,452		1.2655	3/18/2019

December 31, 2017
Derivative Contracts Notional Amount Contractual Exchange Rate Settlement Date
Canadian dollar $ 6,226
1.2850 3/15/2018
Euro 5,326
1.1836 3/15/2018
Norwegian krone 6,212
8.3704 3/15/2018
Pound sterling 6,039
1.3419 3/15/2018

The following table summarizes the location and fair value amounts of all derivative contracts in the condensed consolidated balance sheets as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):



Derivatives not Designated as Hedging Instruments	Consolidated Balance Sheet Location	June 30, 2019			December 31, 2018
Foreign currency contracts	Accounts payable and accrued liabilities	$	(305	)	$	(101	)

Derivatives not Designated as Hedging Instruments Consolidated Balance Sheet Location June 30, 2018 December 31, 2017
Foreign currency contracts Accounts receivable, net $ 278
$ —
Foreign currency contracts Accounts payable and accrued liabilities —
(487 )

1618

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the location and amounts of the realized and unrealized gains and losses on derivative contracts in the condensed consolidated statements of operations (in thousands):



		Three Months Ended					Six Months Ended
		June 30,					June 30,
Derivatives not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative Contracts	2019			2018		2019			2018
Unrealized gain (loss) on foreign currency contracts	Other income, net	$	(700	)	$	204	$	(204	)	$	765
Realized gain on foreign currency contracts	Other income, net	1,072			1,065		412			125
Total net gain on foreign currency contracts		$	372		$	1,269	$	208		$	890

Three Months Ended Six Months Ended
June 30, June 30,
Derivatives not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income on Derivative Contracts 2018 2017 2018 2017
Unrealized gain (loss) on foreign currency contracts Other income, net $ 204
$ (274 ) $ 765
$ (730 )
Realized gain (loss) on foreign currency contracts Other income, net 1,065
(807 ) 125
(552 )
Total net gain (loss) on foreign currency contracts $ 1,269
$ (1,081 ) $ 890
$ (1,282 )

Our derivative transactions are governed through International Swaps and Derivatives Association master agreements. These agreements include stipulations regarding the right of offset in the event that we or our counterparty default on our performance obligations. If a default were to occur, both parties have the right to net amounts payable and receivable into a single net settlement between parties. Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists.

The following table presents the gross and net fair values of our derivatives at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):



	Derivative Asset Positions					Derivative Liability Positions
	June 30, 2019		December 31, 2018			June 30, 2019			December 31, 2018
Gross position - asset / (liability)	$	—	$	113		$	(305	)	$	(214	)
Netting adjustment	—		(113		)	—			113
Net position - asset / (liability)	$	—	$	—		$	(305	)	$	(101	)

Derivative Asset Positions Derivative Liability Positions
June 30, 2018 December 31, 2017 June 30, 2018 December 31, 2017
Gross position - asset / (liability) $ 278
$ —
$ —
$ (487 )
Netting adjustment —
—
—
—
Net position - asset / (liability) $ 278
$ —
$ —
$ (487 )

Note ~~11—~~12—Related Party Transactions

We have engaged in certain transactions with other companies related to us by common ownership. We have entered into various operating leases to lease facilities from these affiliated companies. The majority of these lease obligations expire in 2018. These leases may be extended or allowed to expire by us depending on operational needs, market prices and the ability for us to negotiate and secure, at our discretion, alternative leases or replacement locations. Rent expense associated with our related party leases was $0.7 million and $1.7 million for ~~both~~ the three months ended June 30, 2019 and 2018, respectively, and ~~2017,~~$1.4 million and $3.9 ~~million and $3.5~~ million for the six months ended June 30, 2019 and 2018, ~~and 2017,~~ respectively.

~~In certain cases, we have made improvements to properties subject to related party leases referenced above, including the construction of buildings.~~ As of June 30, ~~2018, the net book value~~2019, $7.2 million of our operating lease right-of-use assets and $8.0 million of our lease liabilities were associated with ~~buildings we constructed on properties subject to~~ related party ~~leases~~leases.

On November 2, 2018, Frank’s International, LLC entered into a purchase agreement with Mosing Ventures, LLC, Mosing Land & Cattle Company, LLC, Mosing Queens Row Properties, LLC, and 4-M Investments, each of which are companies related to us by common ownership (the “Mosing Companies”). Under the purchase agreement, we acquired real property that we previously leased from the Mosing Companies, and two additional properties located adjacent to those properties. The total purchase price was ~~$58.4 million. We~~$37.0 million, including legal fees and closing adjustments for normal operating activity. The purchase closed on December 18, 2018. The properties are ~~depreciating~~conveyed as-is, except that until 10 years following the ~~costs associated with these buildings over their estimated remaining useful lives of approximately 37 years, which exceeds~~Closing Date, the ~~remaining lease~~parties will continue to have certain rights and obligations under the terms ~~that primarily expire in 2018. Upon expiration~~ of the ~~leases, the buildings, land improvements and leasehold improvements could be construed as becoming the property~~agreements by which some of the ~~related party lessors.~~purchased properties were acquired by the Mosing Companies at the time of our initial public offering. We made improvements on the purchased properties during the lease period, and the purchase price was calculated excluding the value of those improvements. As of ~~June 30, 2018,~~ the ~~net book value associated with leasehold and land improvements~~purchase closing, we ~~constructed on~~no longer lease the acquired properties ~~subject to related party leases was $17.6 million, a portion of which is in construction in progress. We are depreciating~~from the costs associated with these leasehold and land improvements over their estimated remaining lives of approximately 10 years, which exceeds the remaining lease terms that primarily expire in 2018. We are currently engaged in negotiations to extend, renew or replace the related party property leases such that we have unrestricted use of the buildings and improvements throughout their estimated useful lives. Extension, renewal or replacement of the related party property leases is dependent on negotiations with related parties, the failure of which could result in material disputes with the relatedMosing Companies.

1719

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~parties. In the event we do not extend, renew or replace these related party property leases, we will revise the remaining estimated useful lives of the buildings and other improvements accordingly.~~

We were a party to certain agreements relating to the rental of aircraft to Western Airways ("WA"), an entity owned by the Mosing family. The WA agreements reflected both dry lease and wet lease rentals, whereby we were charged a flat monthly fee primarily for crew, hangar, maintenance and administration costs in addition to other variable costs for fuel and maintenance. We also earned charter income from third party usage through a revenue sharing agreement. We recorded $0.7 million and $0.6 million of net charter expense for the three and six months ended June 30, 2017, respectively. In March 2017, we sold a fully depreciated aircraft for a total sales price of $1.3 million and recorded a gain on sale of $1.3 million. The rental agreements were terminated with WA effective December 29, 2017, upon the sale of our last aircraft.

Tax Receivable Agreement

Mosing Holdings and its permitted transferees converted all their Preferred Stock into shares of our common stock on a one-for-one basis on August 26, 2016, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, by delivery of an equivalent portion of their interests in FICV to us (the “Conversion”). FICV made an election under Section 754 of the Internal Revenue Code. Pursuant to the Section 754 election, the Conversion resulted in an adjustment to the tax basis of the tangible and intangible assets of FICV with respect to the portion of FICV now held by FINV. These adjustments ~~will be~~are allocated to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent this Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

The TRA that we entered into with FICV and Mosing Holdings in connection with our initial public offering ~~("IPO"~~(“IPO”) generally provides for the payment by FINV of 85% of the amount of the actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as “cash savings”) in periods after our IPO as a result of (i) the tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, payments under the TRA. In addition, the TRA provides for payment by us of interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in either FICV or FINV. We will retain the remaining 15% of cash savings, if any.

The estimation of the liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount and timing of future taxable income. As of June 30, ~~2018,~~2019, FINV has a cumulative loss over the prior 36-month period. Based on this history of losses, as well as uncertainty regarding the timing and amount of future taxable income, we are unable to conclude that there will be future cash savings that will lead to additional payouts under the TRA beyond the estimated ~~$6.2~~$0.2 million as of June 30, ~~2018.~~2019. Additional TRA liability may be recognized in the future based on changes in expectations regarding the timing and likelihood of future cash savings.

The payment obligations under the TRA are our obligations and are not obligations of FICV. The term of the TRA will continue until all such tax benefits have been utilized or expired, unless FINV elects to exercise its sole right to terminate the TRA early. If FINV elects to terminate the TRA early, which it may do so in its sole discretion, it would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control. In these situations, FINV’s obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For example, if the TRA were terminated on June 30, ~~2018,~~2019, the estimated termination payment would be

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

approximately ~~$55.1~~$47.7 million (calculated using a discount rate of ~~5.91%~~5.31%). The foregoing number is merely an estimate and the actual payment could differ materially.

Because FINV is a holding company with no operations of its own, its ability to make payments under the TRA is dependent on the ability of ~~FICV~~its subsidiaries to make distributions to it in an amount sufficient to cover FINV’s obligations under such ~~agreements; this ability, in turn, may depend on the ability of FICV’s subsidiaries to provide payments to it.~~agreements. The ability of ~~FICV and its~~FINV’s subsidiaries to make such distributions will be subject to, among other things, the applicable provisions of Dutch law that may limit the amount of funds available for distribution and restrictions in our debt instruments. To the extent that FINV is unable to make payments under the TRA for any reason, except in the case of an acceleration of payments thereunder occurring in connection with an early termination of the TRA or certain mergers or change of control, such payments will be deferred and will accrue interest until paid, and FINV will be prohibited from paying dividends on its common stock.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note ~~12—~~13—Loss Per Common Share

Basic loss per common share is determined by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is determined by dividing net loss by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued. We apply the treasury stock method to determine the dilutive weighted average common shares represented by ~~the~~ unvested restricted stock units and ~~ESPP~~employee stock purchase plan (“ESPP”) shares.

The following table summarizes the basic and diluted loss per share calculations (in thousands, except per share amounts):


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Numerator
Net loss	$	(25,763	)	$	(25,950	)	$	(67,836	)	$	(52,613	)	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)
Denominator
Basic and diluted weighted average common shares⁽¹⁾	223,981			222,914			223,775			222,740			225,052			223,981			224,854			223,775
Loss per common share:
Basic and diluted	$	(0.12	)	$	(0.12	)	$	(0.30	)	$	(0.24	)	$	(0.07	)	$	(0.12	)	$	(0.19	)	$	(0.30	)

⁽¹⁾
Approximate number of unvested restricted stock units and stock to be issued pursuant to the ESPP that have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when results from operations are at a net loss position. 678
425
639
616




⁽¹⁾	Approximate number of unvested restricted stock units and stock to be issued pursuant to the ESPP that have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when results from operations are at a net loss position.	705	678	826	639

Note ~~13—~~14—Income Taxes

For interim financial reporting, we estimate the annual tax rate based on projected pre-tax income (loss) for the full year and record a quarterly income tax provision (benefit) in accordance with accounting guidance for income taxes. As the year progresses, we refine the estimate of the ~~year's~~year’s pre-tax income (loss) as new information becomes available. The continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, we adjust the income tax provision (benefit) during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the most current expected annual tax rate.

Our effective tax rate was ~~3.1%~~(27.8)% and ~~19.0%~~3.1% for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~(8.9)~~(43.0)% and ~~22.4%~~(8.9)% for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in tax rates as compared to the same ~~periods~~period last year is primarily ~~due~~the result of an increase in taxable income and a change in the jurisdiction mix. We are subject to ~~recording valuation allowances against the~~tax in many U.S. and ~~certain~~ foreign jurisdictions. In many foreign jurisdictions we are taxed on bases other than income such as deemed profits or withholding taxes based on revenue. Consequently, the relationship between our pre-tax income and our income tax ~~losses incurred~~provision varies from period to ~~date in 2018.~~period. For the six months ended June 30, ~~2018,~~2019, we ~~have a negative tax rate primarily due~~also recorded additional valuation allowances related to certain indefinite-lived intangible assets.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~to recording tax expense in various foreign jurisdictions even though we had a net consolidated loss for the current period.~~

In determining that a valuation allowance must be recorded in the current period, we assessed the available positive and negative evidence and concluded that it is not more likely than not that sufficient future taxable income would be generated to permit the use of our deferred tax assets. This conclusion is primarily the result of cumulative losses incurred in the most recent three-year period, and uncertainty regarding when we will return to profitability. The amount of deferred tax asset considered realizable and the related need for a valuation allowance may be adjusted in future periods as the available evidence changes.

We are under audit by ~~the U.S. and~~ certain foreign jurisdictions for the years ~~2014~~2008 - ~~2016.~~2017. We do not expect the results of these audits to have any material effect on our financial statements.

As of June 30, ~~2018,~~2019, there were no significant changes to our unrecognized tax benefits as reported in our audited financial statements for the year ended December 31, ~~2017.~~2018.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note ~~14—~~15—Commitments and Contingencies

We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. We had no material accruals for loss contingencies, individually or in the aggregate, as of June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. We believe the probability is remote that the ultimate outcome of these matters would have a material adverse effect on our financial position, results of operations or cash flows.

We are conducting an internal investigation of the operations of certain of our foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act ~~("FCPA"~~(“FCPA”), our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our extensive internal review to the SEC, the U.S. Department of Justice ~~("DOJ"~~(“DOJ”) and other governmental entities. It is our intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While our review has not indicated that there has been any material impact on our previously filed financial statements, we have continued to collect information and cooperate with the authorities, but at this time are unable to predict the ultimate resolution of these matters with these agencies.

In addition, during the course of the investigation, we discovered historical business transactions (and bids to enter into business transactions) in certain countries that may have been subject to U.S. and other international sanctions. We disclosed this information to the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement (“OEE”) and to the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) (as well as to the agencies involved in our ongoing investigation discussed above). We received a No Action Letter dated April 20, 2018 from OEE, stating that OEE had closed its investigation without taking further action. In addition, we received a No Action Letter dated April 23, 2018 from OFAC, stating that OFAC had closed its investigation without taking further action.

As disclosed above, our investigation into possible violations of the FCPA remains ongoing, and we will continue to cooperate with the SEC, DOJ and other relevant governmental entities in connection therewith. At this time, we are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us. Our board and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note ~~15—~~16—Segment Information

Reporting Segments

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the ~~Company's chief operating decision maker ("CODM")~~Company’s CODM in deciding how to allocate resources and assess performance. WeDuring 2018, changes to the Company’s organizational structure were internally announced. These changes allow each segment to operate as an “independent” business in order to drive accountability and streamline decision-making, while leveraging the advantages of our global infrastructure. During the first quarter of 2019, the Company’s CODM changed the information he regularly reviews to allocate resources and assess performance and we accordingly realigned our reporting segments into three reportable segments: Tubular Running Services (“TRS”) segment, Tubulars segment and Cementing Equipment (“CE”) segment. The TRS segment represents the prior International Services and U.S. Services segments, as well as the costs associated with manufacturing the TRS equipment. Corporate costs that were previously included in the International Services and U.S. Services segments are now included in a separate Corporate component. The Tubulars segment represents the prior Tubular Sales segment and the drilling tools business which was previously included within the International Services and U.S. Services segments, less costs associated with TRS equipment manufacturing. The CE segment is comprised of ~~four~~ ~~reportable segments:~~the prior Blackhawk segment. In addition, regional support costs that were previously included in the International Services and U.S. Services ~~Tubular Sales~~segments are now allocated amongst the three current segments, generally based on revenue or headcount. We have revised our segment reporting to reflect our current management approach and ~~Blackhawk.~~recast prior periods to conform to the current segment presentation.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The ~~International Services~~TRS segment provides tubular running services globally. Internationally, the TRS segment operates in ~~international~~the majority of the offshore oil and gas markets and also in several onshore ~~international regions.~~ ~~Our customers~~regions with operations in ~~these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies~~approximately 50 countries on six continents. In the U.S., ~~and other oilfield services companies~~.

~~The U.S. Services~~the TRS segment provides ~~tubular~~ services in the active onshore oil and gas drilling regions, ~~in the U.S.,~~ including the Permian Basin, Eagle Ford Shale, Haynesville Shale, ~~Marcellus/~~Marcellus Shale and Utica Shale, ~~Niobrara Shale, Woodford Shale, Green River Basin~~ and ~~Uintah Basin, as well as~~ in the U.S. Gulf of Mexico. Our customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

The ~~Tubular Sales~~Tubulars segment designs, manufactures and distributes ~~large outside diameter ("OD") pipe,~~ connectors and casing attachments ~~and~~for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe ~~mills. We also provide~~mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as ~~long length tubulars (up~~long-length tubular assemblies up to ~~300~~400 feet in ~~length) for use as caissons or pilings. This~~length. The Tubulars segment also ~~designs~~specializes in the development, manufacture and ~~manufactures~~supply of proprietary ~~equipment for use in our International and U.S. Services segments.~~drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.

The ~~Blackhawk~~CE segment provides ~~well construction~~specialty equipment to enhance the safety and ~~well intervention~~efficiency of rig operations. It provides specialized equipment, services and products ~~in addition to cementing tool expertise,~~utilized in the ~~U.S.~~construction of the wellbore in both onshore and ~~Mexican Gulf~~offshore environments. The product portfolio includes casing accessories that serve to improve the installation of ~~Mexico, onshore U.S.~~casing, centralization and ~~other select international locations. Blackhawk’s customer base consists primarily of major and independent oil and gas companies~~wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other ~~oilfield services companies.~~rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.

~~Revenues~~Revenue

We disaggregate our revenue from contracts with customers by geography for each of our segments, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Intersegment revenue is immaterial.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following tables presents our ~~revenues~~revenue disaggregated by geography, based on the location where our services were provided and products sold (in thousands):


	Three Months Ended June 30, 2018										Three Months Ended June 30, 2019
	International Services		U.S. Services		Tubular Sales		Blackhawk		Consolidated		Tubular Running Services		Tubulars		Cementing Equipment		Consolidated
United States	$	—	$	35,136	$	14,001	$	18,418	$	67,555	$	41,408	$	18,387	$	21,341	$	81,136
International	59,361		—		60		5,109		64,530		65,207		3,947		5,364		74,518
Total Revenues	$	59,361	$	35,136	$	14,061	$	23,527	$	132,085
Total Revenue											$	106,615	$	22,334	$	26,705	$	155,654

											Three Months Ended June 30, 2018
											Tubular Running Services		Tubulars		Cementing Equipment		Consolidated
United States											$	33,372	$	15,765	$	18,418	$	67,555
International											58,146		1,275		5,109		64,530
Total Revenue											$	91,518	$	17,040	$	23,527	$	132,085


	Three Months Ended June 30, 2017											Six Months Ended June 30, 2019
	International Services		U.S. Services		Tubular Sales		Blackhawk			Consolidated		Tubular Running Services		Tubulars		Cementing Equipment		Consolidated
United States	$	—	$	29,905	$	15,775	$	17,791		$	63,471	$	79,563	$	35,015	$	42,919	$	157,497
International	53,499		—		366		323		��	54,188		125,131		5,976		11,458		142,565
Total Revenues	$	53,499	$	29,905	$	16,141	$	18,114		$	117,659
Total Revenue												$	204,694	$	40,991	$	54,377	$	300,062

												Six Months Ended June 30, 2018
												Tubular Running Services		Tubulars		Cementing Equipment		Consolidated
United States												$	64,301	$	32,547	$	35,472	$	132,320
International												106,091		2,179		7,064		115,334
Total Revenue												$	170,392	$	34,726	$	42,536	$	247,654

2124

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018
International Services U.S. Services Tubular Sales Blackhawk Consolidated
United States $ —
$ 67,743
$ 29,105
$ 35,472
$ 132,320
International 108,094
—
176
7,064
115,334
Total Revenues $ 108,094
$ 67,743
$ 29,281
$ 42,536
$ 247,654

Six Months Ended June 30, 2017
International Services U.S. Services Tubular Sales Blackhawk Consolidated
United States $ —
$ 60,871
$ 32,334
$ 33,942
$ 127,147
International 100,109
—
752
382
101,243
Total Revenues $ 100,109
$ 60,871
$ 33,086
$ 34,324
$ 228,390

Revenue by geographic area ~~was~~were as follows (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
United States	$	81,136	$	67,555	$	157,497	$	132,320
Europe/Middle East/Africa	38,655		32,544		75,055		61,090
Latin America	19,895		12,983		37,339		20,457
Asia Pacific	10,077		9,572		18,026		17,266
Other countries	5,891		9,431		12,145		16,521
Total Revenue	$	155,654	$	132,085	$	300,062	$	247,654

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
United States $ 67,555
$ 63,471
$ 132,320
$ 127,147
Europe/Middle East/Africa 34,447
36,719
64,693
65,205
Latin America 12,983
9,128
20,457
19,060
Asia Pacific 7,669
4,926
13,663
9,489
Other countries 9,431
3,415
16,521
7,489
Total Revenues $ 132,085
$ 117,659
$ 247,654
$ 228,390

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gain or loss, the effects of the TRA, other non-cash adjustments and other charges. We review Adjusted EBITDA on both a consolidated basis and on a segment basis. We use Adjusted EBITDA to assess our financial performance because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP.

Our CODM uses Adjusted EBITDA as the primary measure of segment reporting performance.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The following table presents a reconciliation of Segment Adjusted EBITDA to net loss (in thousands):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Segment Adjusted EBITDA:
Tubular Running Services	$	25,400		$	18,860		$	43,135		$	23,806
Tubulars	3,934			3,327			8,046			6,920
Cementing Equipment	3,029			4,151			6,823			5,102
Corporate ⁽¹⁾	(15,200		)	(15,385		)	(31,183		)	(27,034		)
	17,163			10,953			26,821			8,794
Interest income, net	426			609			1,194			1,553
Depreciation and amortization	(23,913		)	(28,862		)	(49,155		)	(57,162		)
Income tax (expense) benefit	(3,300		)	815			(13,073		)	(5,560		)
Loss on disposal of assets	(154		)	(217		)	(381		)	(452		)
Foreign currency loss	(661		)	(4,267		)	(178		)	(2,563		)
TRA related adjustments	220			(1,171		)	220			(4,112		)
Charges and credits ⁽²⁾	(4,941		)	(3,623		)	(8,895		)	(8,334		)
Net loss	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Segment Adjusted EBITDA:
International Services $ 13,458
$ 9,022
$ 16,046
$ 14,308
U.S. Services ⁽¹⁾
(6,379 ) (9,238 ) (15,680 ) (16,453 )
Tubular Sales 170
815
2,358
3,069
Blackhawk 3,704
2,965
6,070
4,176
10,953
3,564
8,794
5,100
Interest income, net 609
753
1,553
1,151
Depreciation and amortization (28,862 ) (30,951 ) (57,162 ) (62,050 )
Income tax (expense) benefit 815
6,076
(5,560 ) 15,194
Gain (loss) on disposal of assets (217 ) (210 ) (452 ) 1,262
Foreign currency gain (loss) (4,267 ) 599
(2,563 ) 1,345
TRA related adjustments (1,171 ) —
(4,112 ) —
Charges and credits ⁽²⁾
(3,623 ) (5,781 ) (8,334 ) (14,615 )
Net loss $ (25,763 ) $ (25,950 ) $ (67,836 ) $ (52,613 )


⁽¹⁾	~~Includes all corporate general and administrative expenses.~~

⁽²⁾

Comprised of Equity-based compensation expense (for the three months ended June 30, 2018 and 2017: $2,888 and $3,415, respectively, and for the six months ended June 30, 2018 and 2017: $5,168 and $9,116, respectively), Mergers and acquisition expense (for the three months ended June 30, 2018 and 2017: none and $10, respectively, and for the six months ended June 30, 2018 and 2017: $58 and $459, respectively), Severance and other charges (for the three months ended June 30, 2018 and 2017: $1,115 and $(299), respectively, and for the six months ended June 30, 2018 and 2017: $2,369 and $738, respectively), Unrealized and realized gains (losses) (for the three months ended June 30, 2018 and 2017: $1,561 and $(1,088), respectively, and for the six months ended June 30, 2018 and 2017: $1,161 and $(1,696), respectively) and Investigation-related matters (for the three months ended June 30, 2018 and 2017: $1,181 and $1,567, respectively, and for the six months ended June 30, 2018 and 2017: $1,900 and $2,606, respectively).

2325

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


⁽¹⁾	Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.

⁽²⁾

Comprised of Equity-based compensation expense (for the three months ended June 30, 2019 and 2018: $3,017 and $2,888, respectively, and for the six months ended June 30, 2019 and 2018: $5,591 and $5,168, respectively), Mergers and acquisition expense (for the three months ended June 30, 2019 and 2018: none and none, respectively, and for the six months ended June 30, 2019 and 2018: none and $58, respectively), Severance and other charges, net (for the three months ended June 30, 2019 and 2018: $815 and $1,115, respectively, and for the six months ended June 30, 2019 and 2018: $1,270 and $2,369, respectively), Unrealized and realized gains (for the three months ended June 30, 2019 and 2018: $383 and $1,561, respectively, and for the six months ended June 30, 2019 and 2018: $691 and $1,161, respectively) and Investigation-related matters (for the three months ended June 30, 2019 and 2018: $1,492 and $1,181, respectively, and for the six months ended June 30, 2019 and 2018: $2,725 and $1,900, respectively).

The following tables set forth certain financial information with respect to our reportable segments (in thousands):



	Tubular Running Services			Tubulars		Cementing Equipment			Corporate			Total
Three Months Ended June 30, 2019
Revenue from external customers	$	106,615		$	22,334	$	26,705		$	—		$	155,654
Operating income (loss)	8,700			3,089		(2,310		)	(21,993		)	(12,514		)
Adjusted EBITDA	25,400			3,934		3,029			(15,200		)	*

Three Months Ended June 30, 2018
Revenue from external customers	$	91,518		$	17,040	$	23,527		$	—		$	132,085
Operating income (loss)	(3,615		)	2,653		(272		)	(22,548		)	(23,782		)
Adjusted EBITDA	18,860			3,327		4,151			(15,385		)	*

Six Months Ended June 30, 2019
Revenue from external customers	$	204,694		$	40,991	$	54,377		$	—		$	300,062
Operating income (loss)	8,841			6,283		(3,134		)	(44,798		)	(32,808		)
Adjusted EBITDA	43,135			8,046		6,823			(31,183		)	*

Six Months Ended June 30, 2018
Revenue from external customers	$	170,392		$	34,726	$	42,536		$	—		$	247,654
Operating income (loss)	(20,508		)	5,656		(3,755		)	(40,082		)	(58,689		)
Adjusted EBITDA	23,806			6,920		5,102			(27,034		)	*

International
Services

U.S.
Services
Tubular Sales Blackhawk Eliminations Total
Three Months Ended June 30, 2018
Revenue from external customers $ 59,361
$ 35,136
$ 14,061
$ 23,527
$ —
$ 132,085
Inter-segment revenue (56 ) 4,639
96
344
(5,023 ) —
Operating income (loss) (2,052 ) (19,920 ) (829 ) (981 ) —
(23,782 )
Adjusted EBITDA 13,458
(6,379 ) 170
3,704
—
*

Three Months Ended June 30, 2017
Revenue from external customers $ 53,499
$ 29,905
$ 16,141
$ 18,114
$ —
$ 117,659
Inter-segment revenue 12
4,543
3,564
72
(8,191 ) —
Operating income (loss) (6,980 ) (24,292 ) 805
(3,499 ) —
(33,966 )
Adjusted EBITDA 9,022
(9,238 ) 815
2,965
—
*

Six Months Ended June 30, 2018
Revenue from external customers $ 108,094
$ 67,743
$ 29,281
$ 42,536
$ —
$ 247,654
Inter-segment revenue (79 ) 8,855
193
554
(9,523 ) —
Operating income (loss) (13,773 ) (41,900 ) 436
(3,452 ) —
(58,689 )
Adjusted EBITDA 16,046
(15,680 ) 2,358
6,070
—
*

Six Months Ended June 30, 2017
Revenue from external customers $ 100,109
$ 60,871
$ 33,086
$ 34,324
$ —
$ 228,390
Inter-segment revenue 15
8,828
7,239
72
(16,154 ) —
Operating income (loss) (16,493 ) (47,639 ) 3,185
(9,629 ) —
(70,576 )
Adjusted EBITDA 14,308
(16,453 ) 3,069
4,176
—
*

* Non-GAAP financial measure not disclosed.

2426

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those that express a belief, expectation or intention, as well as those that are not statements of historical fact. Forward-looking statements include information regarding our future plans and goals and our current expectations with respect to, among other things:

our business strategy and prospects for growth;

our cash flows and liquidity;

our financial strategy, budget, projections and operating results;

the amount, nature and timing of capital expenditures;

the availability and terms of capital;

competition and government regulations; and

general economic conditions.

Our forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” ~~“project,~~“expect,” “goal,” “plan,” “potential,” “predict,” ~~“believe,~~“project,” ~~“expect,” “anticipate,” “potential,” “plan,” “goal”~~ or other terms that convey the uncertainty of future events or outcomes, although not all forward-looking statements contain such identifying words. The forward-looking statements in this Form 10-Q speak only as of the date of this report; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. Forward-looking statements are not assurances of future performance and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, but are not limited to, the following:

the level of activity in the oil and gas industry;

~~renewed~~further or sustained declines in oil and gas prices, including those resulting from weak global demand;

the timing, magnitude, probability and/or sustainability of any oil and gas price recovery;

unique risks associated with our offshore operations;

political, economic and regulatory uncertainties in our ~~domestic and~~ international operations;

our ability to develop new technologies and products;

our ability to protect our intellectual property rights;

our ability to employ and retain skilled and qualified workers;

the level of competition in our industry;

operational safety laws and regulations;

international trade laws and sanctions;

weather conditions and natural ~~disasters.~~disasters; and

policy or regulatory changes domestically in the United States.

These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item IA1A of this Form 10-Q, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q, and elsewhere within this Form 10-Q, (2) our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC on February ~~27, 2018~~25, 2019 (our ~~"Annual Report"~~“Annual Report”), (3) our other reports and filings we make with the SEC from time to time and (4) other announcements we make from time to time. Should one or more of the risks or uncertainties described in the documents above or in this Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statements. All such forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements in this section.

2527

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” of this Form 10-Q.

Overview of Business

We are a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and have been in business for over 7580 years. We provide our services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.

During the first quarter of 2019, the Company changed its reportable segment structure. Please see Note 16—Segment Information in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information. We conduct our business through ~~four~~three operating segments:

•

Tubular Running Services. The Tubular Running Services (“TRS”) segment provides tubular running services globally. Internationally, the TRS segment operates in the majority of the offshore oil and gas markets and also in several onshore regions with operations in approximately 50 countries on six continents. In the U.S., the TRS segment provides services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, and in the U.S. Gulf of Mexico. Our customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

•

Tubulars. The Tubulars segment designs, manufactures and distributes connectors and casing attachments for large outside diameter (“OD”) heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specializes in the development, manufacture and supply of proprietary drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.

•

Cementing Equipment. The Cementing Equipment (“CE”) segment provides specialty equipment to enhance the safety and efficiency of rig operations. It provides specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio includes casing accessories that serve to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.

~~International Services.~~ The International Services segment currently provides tubular services in approximately 50 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies~~, and other oilfield services companies~~.

~~U.S. Services.~~ The U.S. Services segment services customers in the offshore areas of the U.S. Gulf of Mexico. In addition, we have a presence in the active onshore oil and gas drilling regions in the U.S., including the ~~Permian Basin,~~ ~~Eagle Ford Shale, Haynesville Shale, Marcellus/Utica Shale, Niobrara Shale, Woodford Shale, Green River Basin and Uintah Basin~~.

~~Tubular Sales.~~ ~~The Tubular Sales segment designs, manufactures and distributes large OD pipe, connectors and casing attachments~~ ~~and sells large OD pipe originally manufactured by various pipe mills.~~ We also provide specialized fabrication and welding services in support of offshore projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubulars (up to 300 feet in length) for use as caissons or pilings. ~~This segment also designs and manufactures proprietary equipment for use in our International and U.S. Services segments.~~

~~Blackhawk.~~ The Blackhawk segment provides well construction and well intervention services and products, in addition to cementing tool expertise, in the U.S. and Mexican Gulf of Mexico, onshore U.S. and other select international locations. ~~Blackhawk’s customer base consists primarily of major and independent oil and gas companies as well as other oilfield services companies.~~

~~Market~~ Outlook

We have observed and expect to see ~~a continued increase in~~increased customer ~~demand for our products and services over the remainder of 2018 based on current commodity price levels and anticipated capital~~ spending globally on oil and natural gas exploration and production ~~activities. However, much of the anticipated capital spending is likely to be associated with onshore or shallow water offshore projects that contribute lower revenue and margins~~in response to the ~~Company than deep water~~continued stabilization of commodity prices. Exploration and development spending has started to shift toward offshore and internationally focused projects. ~~The~~We anticipate the rate of spending on U.S. onshore projects to remain relatively flat for the balance of 2019 as operators adjust budgets. Activity in the deep and ultra-deep offshore markets are ~~showing signs of~~already benefiting from a modest improvement ~~but are not projected~~that is expected to continue through 2020. Pricing associated with newly sanctioned projects is estimated to be marginally higher than recent trends. In many international offshore shelf markets, we see ~~significant increases~~increased activity as operators recognize improved economics at current commodity prices. Overall, we expect continued and modest improvement in both operator spend and activity ~~or pricing over the near term. In response, we are expanding~~through 2020. We will continue our ~~products and services~~efforts to expand our newer product lines that have been historically weighted to the U.S. offshore market ~~including specialty cementing equipment and drilling tool technologies,~~ to ~~select~~ international markets, ~~lowering costs through~~with a focus on operational efficiency gains and prioritizing ~~customers and~~ projects ~~intended to~~that improve market share and profitability. In furtherance of these efforts, we intend to initiate a comprehensive review of our open projects and assets to ensure that Company resources are being maximized given current and expected market conditions and that required economic returns on assets and new technologies can be achieved.

How We Evaluate Our Operations

We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including revenue, Adjusted EBITDA, Adjusted EBITDA margin and safety performance.

Revenue

We analyze our revenue growth by comparing actual monthly revenue to our internal projections for each month to assess our performance. We also assess incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gains or losses, the effects of the tax receivable agreement ~~("TRA"~~(“TRA”), other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our ~~revenues.~~revenue. We review Adjusted EBITDA and Adjusted EBITDA margin on both a consolidated basis and on a segment basis. We use Adjusted EBITDA and Adjusted EBITDA margin to assess our financial performance because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), ~~items outside the control of our management team (such as~~ income tax, ~~and~~ foreign currency exchange ~~rates)~~rates and other charges ~~outside the normal course of business.~~and credits. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles in the U.S. ~~("GAAP"~~(“GAAP”).

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The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin ~~to net loss~~ for each of the periods presented (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018

Net loss	$	(25,763	)	$	(25,950	)	$	(67,836	)	$	(52,613	)	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)
Interest income, net	(609		)	(753		)	(1,553		)	(1,151		)	(426		)	(609		)	(1,194		)	(1,553		)
Depreciation and amortization	28,862			30,951			57,162			62,050			23,913			28,862			49,155			57,162
Income tax expense (benefit)	(815		)	(6,076		)	5,560			(15,194		)	3,300			(815		)	13,073			5,560
(Gain) loss on disposal of assets	217			210			452			(1,262		)
Foreign currency (gain) loss	4,267			(599		)	2,563			(1,345		)
Loss on disposal of assets													154			217			381			452
Foreign currency loss													661			4,267			178			2,563
TRA related adjustments	1,171			—			4,112			—			(220		)	1,171			(220		)	4,112
Charges and credits⁽¹⁾	3,623			5,781			8,334			14,615			4,941			3,623			8,895			8,334
Adjusted EBITDA	$	10,953		$	3,564		$	8,794		$	5,100		$	17,163		$	10,953		$	26,821		$	8,794
Adjusted EBITDA margin	8.3		%	3.0		%	3.6		%	2.2		%	11.0		%	8.3		%	8.9		%	3.6		%

⁽¹⁾

Comprised of Equity-based compensation expense (for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $3,017 and $2,888, ~~and $3,415,~~ respectively, and for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $5,591 and $5,168, ~~and $9,116,~~ respectively), Mergers and acquisition expense (for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: none and ~~$10,~~none, respectively, and for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: none and $58, ~~and $459,~~ respectively), Severance and other charges, net (for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $815 and $1,115, ~~and $(299),~~ respectively, and for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $1,270 and $2,369, ~~and $738,~~ respectively), Unrealized and realized ~~(gains) losses~~gains (for the three months ended June 30, ~~2018~~2019 and ~~2017: $(1,561)~~2018: $383 and ~~$1,088,~~$1,561, respectively, and for the six months ended June 30, ~~2018~~2019 and ~~2017: $(1,161)~~2018: $691 and ~~$1,696,~~$1,161, respectively) and Investigation-related matters (for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $1,492 and $1,181, ~~and $1,567,~~ respectively, and for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: $2,725 and $1,900, ~~and $2,606,~~ respectively).

For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see “Operating Segment Results.”

Safety and Quality Performance

Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor ~~and improve~~ our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for our safety performance is the tracking of the Total Recordable Incident Rate which is reviewed on both a monthly and rolling twelve-month basis.

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Consolidated Results of Operations

The following table presents our consolidated results for the periods presented (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
(Unaudited)
Revenues:
Services $ 105,746
$ 93,533
$ 197,094
$ 179,855
Products
26,339
24,126
50,560
48,535
Total revenue 132,085
117,659
247,654
228,390

Operating expenses:
Cost of revenues, exclusive of depreciation and amortization
Services ⁽¹⁾
65,015
55,317
128,225
107,000
Products ⁽¹⁾
20,306
23,027
39,053
45,296
General and administrative expenses 40,352
42,419
79,082
85,144
Depreciation and amortization 28,862
30,951
57,162
62,050
Severance and other charges 1,115
(299 ) 2,369
738
(Gain) loss on disposal of assets 217
210
452
(1,262 )
Operating loss (23,782 ) (33,966 ) (58,689 ) (70,576 )

Other income (expense):
TRA related adjustments (1,171 ) —
(4,112 ) —
Other income, net 2,033
598
1,593
732
Interest income, net 609
753
1,553
1,151
Mergers and acquisition expense —
(10 ) (58 ) (459 )
Foreign currency gain (loss) (4,267 ) 599
(2,563 ) 1,345
Total other income (expense) (2,796 ) 1,940
(3,587 ) 2,769

Loss before income taxes (26,578 ) (32,026 ) (62,276 ) (67,807 )
Income tax expense (benefit) (815 ) (6,076 ) 5,560
(15,194 )
Net loss $ (25,763 ) $ (25,950 ) $ (67,836 ) $ (52,613 )



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Unaudited)
Revenue:
Services	$	127,091		$	105,746		$	242,497		$	197,094
Products	28,563			26,339			57,565			50,560
Total revenue	155,654			132,085			300,062			247,654

Operating expenses:
Cost of revenue, exclusive of depreciation and amortization
Services ⁽¹⁾	85,785			74,088			169,024			145,050
Products⁽¹⁾	23,475			18,798			43,603			36,427
General and administrative expenses⁽¹⁾	34,026			32,787			69,437			64,883
Depreciation and amortization	23,913			28,862			49,155			57,162
Severance and other charges, net	815			1,115			1,270			2,369
Loss on disposal of assets	154			217			381			452
Operating loss	(12,514		)	(23,782		)	(32,808		)	(58,689		)

Other income (expense):
TRA related adjustments	220			(1,171		)	220			(4,112		)
Other income, net	669			2,033			1,198			1,593
Interest income, net	426			609			1,194			1,553
Mergers and acquisition expense	—			—			—			(58		)
Foreign currency loss	(661		)	(4,267		)	(178		)	(2,563		)
Total other income (expense)	654			(2,796		)	2,434			(3,587		)

Loss before income taxes	(11,860		)	(26,578		)	(30,374		)	(62,276		)
Income tax expense (benefit)	3,300			(815		)	13,073			5,560
Net loss	$	(15,160	)	$	(25,763	)	$	(43,447	)	$	(67,836	)

⁽¹⁾

~~Our financial statements for~~For the three months ended June 30, 2018, $7,565 and $1,508 have been reclassified from general and administrative expenses and cost of revenue, products, respectively, to cost of revenue, services. For the six months ended June 30, ~~2017~~2018, $14,199 and $2,626 have been ~~revised to decrease~~reclassified from general and administrative expenses and cost of ~~revenues, services and increase~~revenue, products, respectively, to cost of ~~revenues, products by $5,460 and $10,884, respectively.~~revenue, services. See Note ~~1 -~~ 1—Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements.

Three Months Ended June 30, ~~2018~~2019 Compared to Three Months Ended June 30, ~~2017~~2018

~~Revenues.~~ ~~Revenues~~Revenue. Revenue from external customers, excluding intersegment sales, for the three months ended June 30, ~~2018~~2019 increased by ~~$14.4~~$23.6 million, or ~~12.3%~~17.8%, to ~~$132.1~~$155.7 million from ~~$117.7~~$132.1 million for the three months ended June 30, ~~2017. The revenue increase was primarily attributable to~~ ~~our International Services, U.S. Services and Blackhawk~~2018. Revenue increased across all segments~~partially offset by a decrease in our Tubular Sales segment. Revenues~~. Revenue for our segments ~~are~~is discussed separately below under the heading ~~"Operating~~“Operating Segment Results."”

Cost of ~~revenues,~~revenue, exclusive of depreciation and amortization. Cost of ~~revenues~~revenue for the three months ended June 30, ~~2018~~2019 increased by ~~$7.0~~$16.4 million, or ~~8.9%~~17.6%, to ~~$85.3~~$109.3 million from ~~$78.3~~$92.9 million for the three months ended June 30, ~~2017~~2018. The increase was driven by higher activity levels and mix of work in the ~~U.S. Services~~TRS and ~~Blackhawk~~CE segments, partially offset by productivity actions taken in ~~2017 and~~ 2018.

General and administrative expenses. General and administrative expenses for the three months ended June 30, ~~2018 decreased~~2019 increased by ~~$2.1~~$1.2 million, or ~~4.9%~~3.8%, to ~~$40.4~~$34.0 million from ~~$42.4~~$32.8 million for the three months ended June 30, ~~2017~~

2018, primarily due to ~~lower equity-based~~higher compensation ~~expense~~ and ~~reduced expenses associated with aircraft disposed of in 2017.~~insurance expenses.

Depreciation and amortization. Depreciation and amortization for the three months ended June 30, ~~2018~~2019 decreased by ~~$2.1~~$4.9 million, or ~~6.7%~~17.1%, to ~~$28.9~~$23.9 million from ~~$31.0~~$28.9 million for the three months ended June 30, ~~2017,~~2018, as a result of a lower depreciable base due to decreased capital expenditures during the current and prior ~~years.~~year, partially offset by increased intangible asset amortization expense.

Severance and other charges, net. Severance and other charges, net for the three months ended June 30, 2019 decreased by $0.3 million, or 26.9%, to $0.8 million from $1.1 million for the three months ended June 30, 2018, ~~increased by $1.4 million as compared to the three months ended June 30, 2017,~~ as a result of ~~higher~~the absence of formal workforce reductions in the second quarter of ~~2018~~2019 compared to ~~2017 as we~~ ~~took steps to adjust our workforce to meet the depressed demand in the industry.~~2018.

Foreign currency ~~gain (loss)~~loss. Foreign currency loss for the three months ended June 30, ~~2018 increased~~2019 decreased by ~~$4.9~~$3.6 million, or 84.5%, to ~~$4.3~~$0.7 million from ~~a foreign currency gain of $0.6~~$4.3 million for the three months ended June 30, ~~2017.~~2018. The change in foreign currency results year-over-year was primarily driven by ~~the~~reduced strengthening of the U.S. dollar ~~against other currencies.~~in the current period as compared to the prior year period.

Income tax expense (benefit). Income tax benefit for the three months ended June 30, ~~2018~~2019 decreased by ~~$5.3~~$4.1 million, ~~or 86.6%,~~ to ~~$0.8~~an expense of $3.3 million from ~~$6.1~~a benefit of $0.8 million for the three months ended June 30, ~~2017.~~ ~~The reduction is~~2018, primarily due to recording valuation allowances against the U.S. and foreign tax benefits for losses incurred to date in 2018. In 2017 we provided a tax benefit for tax losses without a corresponding valuation allowance.

~~Six Months Ended~~ ~~June 30, 2018~~ ~~Compared to Six Months Ended~~ ~~June 30, 2017~~

~~Revenues.~~ Revenues from external customers, excluding intersegment sales, for the six months ended June 30, 2018 increased by $19.3 million, or 8.4%, to $247.7 million from $228.4 million for the six months ended June 30, 2017. The revenue increase was primarily attributable to ~~our International Services, U.S. Services and Blackhawk segments,~~ ~~partially offset by a decrease in revenues attributable to our Tubular Sales segment. Revenues for our segments are discussed separately below under the heading "Operating Segment Results."~~

~~Cost of revenues, exclusive of depreciation and amortization.~~ Cost of revenues for the six months ended June 30, 2018 increased by $15.0 million, or 9.8%, to $167.3 million from $152.3 million for the six months ended June 30, 2017 driven by higher activity levels and mix of work in the U.S. Services and Blackhawk segments, partially offset by productivity actions taken in 2017 and 2018.

~~General and administrative expenses.~~ General and administrative expenses for the six months ended June 30, 2018 decreased by $6.1 million, or 7.1%, to $79.1 million from $85.1 million for the six months ended June 30, 2017 primarily due to lower equity-based compensation and other personnel expenses, as well as reduced expenses associated with aircraft disposed of in 2017.

~~Depreciation and amortization.~~ ~~Depreciation and amortization for the six months ended June 30, 2018 decreased by $4.9 million, or 7.9%, to $57.2 million from $62.1 million for the six months ended June 30, 2017,~~ as a result of ~~a lower depreciable base due to decreased capital expenditures during the current~~an increase in taxable income and ~~prior years.~~

~~Severance and other charges. Severance and other charges for the six months ended June 30, 2018 increased by $1.6 million over the six months ended June 30, 2017, as a result of higher workforce reductions~~changes in ~~the first half of 2018 compared to 2017 as we~~ ~~took steps to adjust our workforce to meet the depressed demand in the industry.~~

~~Foreign currency gain (loss)~~. Foreign currency loss for the six months ended June 30, 2018 was $2.6 million as compared to a foreign currency gain for the six months ended June 30, 2017 of $1.3 million. The change in foreign currency results year-over-year was primarily driven by the strengthening of the U.S. dollar against other currencies.

~~Income tax expense (benefit).~~ ~~Income tax expense of $5.6 million for the six months ended June 30, 2018 increased by $20.8 million from an income tax benefit of $15.2 million for the six months ended June 30, 2017.~~ ~~In the current~~

~~period we recorded tax expense in various foreign jurisdictions even though we had a net consolidated loss for the current period.~~jurisdictional mix. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of ~~revenues~~revenue rather than profits) and withholding taxes based on ~~revenues;~~revenue; consequently, the relationship between our pre-tax income from operations and our income tax provision varies from period to period.

~~We also recorded tax expense~~Six Months Ended June 30, 2019 Compared to ~~establish valuation allowances against~~Six Months Ended June 30, 2018

Revenue. Revenue from external customers, excluding intersegment sales, for the ~~benefit~~six months ended June 30, 2019 increased by $52.4 million, or 21.2%, to $300.1 million from $247.7 million for ~~tax losses~~the six months ended June 30, 2018. Revenue increased across all segments. Revenue for our segments is discussed separately below under the heading “Operating Segment Results.”

Cost of revenue, exclusive of depreciation and amortization. Cost of revenue for the six months ended June 30, 2019 increased by $31.2 million, or 17.2%, to $212.6 million from $181.5 million for the six months ended June 30, 2018. The increase was driven by higher activity levels and mix of work in the ~~U.S.~~TRS and ~~certain foreign jurisdictions~~CE segments, partially offset by productivity actions taken in 2018.

General and administrative expenses. General and administrative expenses for the six months ended June 30, 2019 increased by $4.6 million, or 7.0%, to $69.4 million from $64.9 million for the six months ended June 30, 2018, primarily due to increased insurance costs driven by a premium adjustment in the first quarter of 2019, as well as higher professional fees and research and development expenses.

Depreciation and amortization. Depreciation and amortization for the six months ended June 30, 2019 decreased by $8.0 million, or 14.0%, to $49.2 million from $57.2 million for the six months ended June 30, 2018, as a result of a lower depreciable base due to decreased capital expenditures during the current and prior year, partially offset by increased intangible asset amortization expense.

Severance and other charges, net. Severance and other charges, net for the six months ended June 30, 2019 decreased by $1.1 million, or 46.4%, to $1.3 million from $2.4 million for the six months ended June 30, 2018, as a result of the absence of formal workforce reductions in the first half of 2019 compared to 2018.

Foreign currency loss. Foreign currency loss for the six months ended June 30, 2019 decreased by $2.4 million, or 93.1%, to $0.2 million from $2.6 million for the six months ended June 30, 2018. InThe change in foreign currency

results year-over-year was primarily driven by reduced strengthening of the ~~first half of 2017, we recorded a~~U.S. dollar in the current period as compared to the prior year period.

Income tax ~~benefit~~expense (benefit). Income tax expense for the six months ended June 30, 2019 increased by $7.5 million, or 135.1%, to $13.1 million from $5.6 million for the six months ended June 30, 2018. The change is primarily due to an increase in taxable income and changes in our jurisdictional mix. We are subject to many U.S. and foreign ~~losses which fully offset~~tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenue rather than profits) and withholding taxes based on revenue; consequently, the relationship between our pre-tax income from operations and our income tax ~~expense in profitable jurisdictions, resulting in an overall tax benefit for the first half of 2017.~~provision varies from period to period.

Operating Segment Results

The following table presents ~~revenues~~revenue and Adjusted EBITDA by segment (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Revenue:
International Services $ 59,361
$ 53,499
$ 108,094
$ 100,109
U.S. Services 35,136
29,905
67,743
60,871
Tubular Sales 14,061
16,141
29,281
33,086
Blackhawk 23,527
18,114
42,536
34,324
Total $ 132,085
$ 117,659
$ 247,654
$ 228,390

Segment Adjusted EBITDA ⁽¹⁾:

International Services $ 13,458
$ 9,022
$ 16,046
$ 14,308
U.S. Services (6,379 ) (9,238 ) (15,680 ) (16,453 )
Tubular Sales 170
815
2,358
3,069
Blackhawk 3,704
2,965
6,070
4,176
$ 10,953
$ 3,564
$ 8,794
$ 5,100



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue:
Tubular Running Services	$	106,615		$	91,518		$	204,694		$	170,392
Tubulars	22,334			17,040			40,991			34,726
Cementing Equipment	26,705			23,527			54,377			42,536
Total	$	155,654		$	132,085		$	300,062		$	247,654

Segment Adjusted EBITDA ⁽¹⁾:
Tubular Running Services	$	25,400		$	18,860		$	43,135		$	23,806
Tubulars	3,934			3,327			8,046			6,920
Cementing Equipment	3,029			4,151			6,823			5,102
Corporate ⁽²⁾	(15,200		)	(15,385		)	(31,183		)	(27,034		)
	$	17,163		$	10,953		$	26,821		$	8,794


⁽¹⁾	Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. (For a reconciliation of our Adjusted EBITDA, see ~~"Adjusted~~“Adjusted EBITDA and Adjusted EBITDA ~~Margin"~~Margin”).


⁽²⁾	Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.

Three Months Ended June 30, ~~2018~~2019 Compared to Three Months Ended June 30, ~~2017~~2018

~~International~~Tubular Running Services

Revenue for the ~~International Services~~TRS segment was ~~$59.4~~$106.6 million for the three months ended June 30, ~~2018~~2019, an increase of ~~$5.9~~$15.1 million, or ~~11.0%~~16.5%, compared to $91.5 million for the same period in ~~2017,~~2018, primarily due to activity improvements in ~~offshore Western Hemisphere, Asia Pacific,~~the U.S., Latin America and ~~the Middle East, which was~~Africa, partially offset by lower activity levels in ~~Africa and decreased work scope in the North Sea.~~Canada.

Adjusted EBITDA for the ~~International Services~~TRS segment was ~~$13.5~~$25.4 million for the three months ended June 30, ~~2018,~~2019, an increase of ~~$4.4~~$6.5 million, or ~~49.2%~~34.7%, compared to $18.9 million for the same period in ~~2017, primarily due to efficiency gains with higher revenues in offshore Western Hemisphere and~~2018. Segment results were positively impacted by activity improvements in ~~Asia Pacific,~~Africa, the U.S. and Latin ~~America and the Middle East, partially offset by decreased work scope in the North Sea.~~America.

Tubulars

~~U.S. Services~~

Revenue for the ~~U.S. Services~~Tubulars segment was ~~$35.1~~$22.3 million for the three months ended June 30, ~~2018,~~2019, an increase of ~~$5.2~~$5.3 million, or 31.1%, compared to $17.0 million for the same period in 2018, primarily due to higher drilling tools activity.

Adjusted EBITDA for the Tubulars segment was $3.9 million for the three months ended June 30, ~~2018,~~2019, an improvement of $0.6 million, or ~~17.5%~~18.2%, compared to $3.3 million for the same period in 2017. Onshore services revenue increased by $4.3 million as a result of improved activity from increased rig counts. The offshore business saw an increase in revenue of $0.9 million as a result of increased service activity in the Gulf of Mexico.2018.

~~Adjusted EBITDA~~Cementing Equipment

Revenue for the ~~U.S. Services~~CE segment was ~~a loss of $6.4~~$26.7 million for the three months ended June 30, ~~2018,~~2019, an ~~improvement~~increase of ~~$2.9~~$3.2 million, or ~~30.9%~~13.5%, compared to $23.5 million for the same period in ~~2017,~~2018, driven by increased drilling activity and market share in the U.S. Gulf of Mexico, higher U.S. onshore product sales, primarily ~~due to an increase~~ in ~~onshore services activity, partially offset by lower pricing for our offshore services.~~the Permian Basin, and increased international activity.

~~Tubular Sales~~

~~Revenue~~Adjusted EBITDA for the ~~Tubular Sales~~CE segment was ~~$14.1~~$3.0 million for the three months ended June 30, ~~2018,~~2019, a decrease of ~~$2.1~~$1.1 million, or ~~12.9%~~27.0%, compared to $4.2 million for the same period in ~~2017,~~2018, primarily due to an increased share of support costs year-over-year, as ~~a result of rig schedule changes with key customers in the Gulf of Mexico.~~well as higher labor to support ongoing international expansion efforts and increased product costs.

Corporate

Adjusted EBITDA for ~~the Tubular Sales segment~~Corporate was ~~$0.2~~a loss of $15.2 million for the three months ended June 30, ~~2018,~~2019, a ~~decrease~~favorable change of ~~$0.6~~$0.2 million, or ~~79.1%~~1.2%, compared to a loss of $15.4 million for the same period in ~~2017, primarily~~2018 due to lower ~~sales activity, partially offset by improved margin.~~compensation related expenses.

~~Blackhawk~~

Revenue for the Blackhawk Segment was $23.5 million for the three months ended June 30, 2018, an increase of $5.4 million, or 29.9%, compared to the same period in 2017, driven by strong activity in the U.S. onshore market, increased market share and new product offerings in the Gulf of Mexico and growth in international markets.

Adjusted EBITDA for the Blackhawk segment was $3.7 million for the three months ended June 30, 2018, an increase of $0.7 million, or 24.9%, compared to the same period in 2017, primarily due to improved operational results, partially offset by higher corporate overhead expense.

Six Months Ended June 30, ~~2018~~2019 Compared to Six Months Ended June 30, ~~2017~~2018

~~International~~Tubular Running Services

Revenue for the ~~International Services~~TRS segment was ~~$108.1~~$204.7 million for the six months ended June 30, ~~2018~~2019, an increase of ~~$8.0~~$34.3 million, or ~~8.0%~~20.1%, compared to $170.4 million for the same period in ~~2017, primarily due to~~2018. The increase was driven by activity improvements in ~~offshore Western Hemisphere, Asia Pacific~~U.S., Latin America, Africa, and ~~the Middle East, which was~~Europe, partially offset by lower activity levels in ~~Africa~~Asia Pacific and ~~Latin America and decreased work scope in the North Sea.~~Canada.

Adjusted EBITDA for the ~~International Services~~TRS segment was ~~$16.0~~$43.1 million for the six months ended June 30, 2019, an increase of $19.3 million, or 81.2%, compared to $23.8 million for the same period in 2018. Segment results were positively impacted by activity improvements in Africa, the U.S. and Latin America.

Tubulars

Revenue for the Tubulars segment was $41.0 million for the six months ended June 30, 2019, an increase of $6.3 million, or 18.0%, compared to $34.7 million for the same period in 2018, primarily as a result of higher drilling tools activity.

Adjusted EBITDA for the Tubulars segment was $8.0 million for the six months ended June 30, 2019, an increase of $1.1 million, or 16.3%, compared to $6.9 million for the same period in 2018.

Cementing Equipment

Revenue for the CE segment was $54.4 million for the six months ended June 30, 2019, an increase of $11.8 million, or 27.8%, compared to $42.5 million for the same period in 2018, driven by expansion to international markets, improved market share in the U.S. onshore market and increased market share and product sales in the U.S. Gulf of Mexico.

Adjusted EBITDA for the CE segment was $6.8 million for the six months ended June 30, 2019, an increase of $1.7 million, or ~~12.1%~~33.7%, compared to $5.1 million for the same period in 2017, primarily due to efficiency gains with higher revenues and upsell work in offshore Western Hemisphere, partially offset by decreased work scope in the North Sea and start-up costs on new projects in Latin America.

~~U.S. Services~~

~~Revenue for the U.S. Services segment was $67.7 million for the~~ ~~six months ended June 30,~~ 2018,, an increase of $6.9 million, or 11.3%, compared to the same period in 2017. Onshore services revenue increased by $9.0 million as a result of improved activity from increased rig counts. The offshore business saw a decrease in revenue of $2.1 million as a result of decreased activity levels in the Gulf of Mexico.

~~Adjusted EBITDA for the U.S. Services segment was a loss of $15.7 million for the~~ ~~six months ended June 30, 2018~~, a favorable change of $0.8 million, or 4.7%, compared to the same period in 2017, primarily due to an increase in onshore services activity, partially offset by lower demand for our offshore services.

~~Tubular Sales~~

~~Revenue for the Tubular Sales segment was $29.3 million for the~~ ~~six months ended June 30, 2018, a decrease of $3.8 million, or 11.5%, compared to the same period in 2017, primarily as a result of rig schedule changes with key customers and lower activity in the Gulf of Mexico.~~

~~Adjusted EBITDA for the Tubular Sales segment was $2.4 million for the~~ ~~six months ended June 30, 2018, a decrease of $0.7 million, or 23.2%, compared to the same period in 2017, primarily due to lower sales activity, partially offset by improved margin.~~

~~Blackhawk~~

~~Revenue for the Blackhawk Segment was $42.5 million for the~~ ~~six months ended June 30, 2018~~, an increase of $8.2 million, or 23.9%, compared to the same period in 2017, driven by strong activity in the U.S. onshore market, increased market share and new product offerings in the Gulf of Mexico and growth in international markets.

~~Adjusted EBITDA for the Blackhawk segment was $6.1 million for the~~ ~~six months ended June 30, 2018, an increase of $1.9 million, or 45.4%, compared to the same period in 2017,~~ primarily due to improved operational results, ~~partially offset~~particularly in offshore international markets and the U.S. onshore market.

Corporate

Adjusted EBITDA for Corporate was a loss of $31.2 million for the six months ended June 30, 2019, an unfavorable change of $4.1 million, or 15.3%, compared to a loss of $27.0 million for the same period in 2018, primarily due to increased insurance costs driven by a premium adjustment, as well as higher ~~corporate overhead expense.~~professional fees and compensation related expenses.

Liquidity and Capital Resources

Liquidity

At June 30, ~~2018,~~2019, we had cash and cash equivalents and short-term investments of ~~$245.2~~$172.1 million and debt of ~~$1.8~~$2.1 million. Our primary sources of liquidity to date have been cash flows from operations. Our primary uses of capital have been for organic growth capital expenditures. We continually monitor potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements.

Our total capital expenditures are estimated atto range between $40.0 million and $50.0 million for ~~2018. We~~2019, of which we expect ~~to spend~~ approximately ~~$32.0 million~~65% will be used for the purchase and manufacture of equipment and ~~$8.0 million~~35% for other property, plant and equipment, inclusive of the purchase or construction of facilities. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market ~~conditions.~~conditions and timing of deliveries. During the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, cash expenditures related to property, plant and equipment and intangibles were ~~$11.3~~$17.2 million and ~~$15.2~~$11.3 million, respectively, all of which were funded from internally generated funds. We believe our cash on hand should be sufficient to fund our capital expenditure and liquidity requirements for the remainder of ~~2018.~~2019.

Credit Facility

~~We have~~Asset Based Revolving Credit Facility

On November 5, 2018, FICV, Frank’s International, LLC and Blackhawk, as borrowers, and FINV, certain of FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., as guarantors, entered into a ~~$100.0 million~~five-year senior secured revolving credit facility (the “ABL Credit Facility”) with ~~certain~~JPMorgan Chase Bank, N.A., as administrative agent (the “ABL Agent”), and other financial institutions as lenders with total commitments of $100.0 million including up to ~~$20.0~~$15.0 million inavailable for letters of ~~credit and up to $10.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”).~~credit. Subject to the terms of the ABL Credit Facility, we have the ability to increase the commitments to ~~$150.0~~$200.0 million. ~~At June 30, 2018 and December 31, 2017, we had $2.3 million and $2.8 million, respectively, in letters of credit outstanding and no outstanding borrowings under~~The maximum amount that the ~~Credit Facility. As of June 30, 2018, our ability to~~Company may borrow under the ABL Credit Facility ~~has been reduced~~is subject to ~~approximately $23.5 million as~~ a ~~result~~borrowing base, which is based on a percentage of ~~our decreased Adjusted EBITDA.~~certain eligible accounts receivable and eligible inventory, subject to customary reserves and other adjustments.

All obligations under the ABL Credit Facility are fully and unconditionally guaranteed jointly and severally by FINV’s subsidiaries, including FICV, Frank’s International, LLC, Blackhawk, Frank’s International GP, LLC, Frank’s International, LP, Frank’s International LP B.V., Frank’s International Partners B.V., Frank’s International Management B.V., Blackhawk Intermediate Holdings, LLC, Blackhawk Specialty Tools, LLC, and Trinity Tool Rentals, L.L.C., subject to customary exceptions and exclusions. In addition, the obligations under the ABL Credit Facility are secured by first priority liens on substantially all of the assets and property of the borrowers and guarantors, including pledges of equity interests in certain of FINV’s subsidiaries, subject to certain exceptions. Borrowings under the ABL Credit Facility bear interest at ~~our~~FINV’s option at either ~~a base rate or an adjusted Eurodollar rate.~~(a) the Alternate Base ~~rate loans under~~Rate (“ABR”) (as defined therein), calculated as the ~~Credit Facility bear interest at a rate equal to the higher~~greatest of (i) the ~~prime~~ rate ~~as published in~~of interest publicly quoted by the Wall Street Journal, as the “prime rate,” subject to each increase or decrease in such prime rate effective as of the date such change occurs, (ii) the ~~Federal Funds Effective Rate~~ federal funds effective rate that is subject to a 0.00% interest rate floor plus 0.50% or, and (iii) the ~~adjusted Eurodollar rate~~ one-month Adjusted LIBO Rate (as defined therein) plus 1.00%, or (b) the Adjusted LIBO Rate, plus, ~~an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest~~

is in each case, ~~payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period~~ ~~multiplied~~ ~~by the statutory reserves,~~ ~~plus~~an applicable ~~margin ranging from 1.50% to 2.50%. Interest is payable at the end of~~margin. The applicable interest ~~periods~~rate margin

ranges from 1.00% to 1.50% per annum for ABR loans and 2.00% to 2.50% per annum for Eurodollar loans ~~except that if the interest period for a Eurodollar loan~~and, in each case, is ~~longer than three months, interest is paid at the end of each three-month period.~~based on FINV’s leverage ratio. The unused portion of the ABL Credit Facility is subject to a commitment fee ~~ranging~~that varies from 0.250% to 0.375% ~~based~~per annum, according to average daily unused commitments under the ABL Credit Facility. Interest on ~~certain leverage ratios.~~Eurodollar loans is payable at the end of the selected interest period, but no less frequently than quarterly. Interest on ABR loans is payable monthly in arrears.

transactions with affiliates. The ABL Credit Facility also requires FINV to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 based on the ratio of (a) consolidated EBITDA (as defined therein) minus unfinanced capital expenditures to (b) Fixed Charges (as defined therein), when either (i) an event of default occurs under the ABL Credit Facility or (ii) availability under the ABL Credit Facility falls for at least two consecutive calendar days below the greater of (A) $12.5 million and (B) 15% of the lesser of the borrowing base and aggregate commitments (a “FCCR Trigger Event”). Accounts receivable received by FINV’s U.S. subsidiaries that are parties to the ABL Credit Facility will be deposited into deposit accounts subject to deposit control agreements in favor of the ABL Agent. After a FCCR Trigger Event, these deposit accounts would be subject to “springing” cash dominion. After a FCCR Trigger Event, the Company will be subject to compliance with the fixed charge coverage ratio and “springing” cash dominion until no default exists under the ABL Credit Facility and availability under the facility for the preceding thirty consecutive days has been equal to at least the greater of (x) $12.5 million and (y) 15% of the lesser of the borrowing base and the aggregate commitments. If FINV fails to perform its obligations under the agreement that results in an event of default, the commitments under the ABL Credit Facility could be terminated and any outstanding borrowings under the ABL Credit Facility may be declared immediately due and payable. The ABL Credit Facility also contains ~~financial covenants, which, among~~cross default provisions that apply to FINV’s other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in the Credit Agreement) of not more than 2.5 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0. indebtedness.

As of June 30, ~~2018, we were in compliance with~~2019, FINV had no borrowings outstanding under the ~~covenants included in the~~ABL Credit ~~Agreement.~~

~~In addition, the Credit~~ Facility, contains customary events of default, including, among others, the failure to make required payments, failure to comply with certain covenants or other agreements, breach of the representations and covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.

~~We are currently negotiating a new credit facility which we expect it to be in place on or around the expiration of the existing Credit Facility in August 2018.~~

~~Citibank Credit Facility~~

~~In 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for issuance of standby~~ letters of credit ~~and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest~~outstanding of ~~1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of June 30, 2018 and December 31, 2017, we had $4.9~~$5.6 million and ~~$2.6 million, respectively, in letters~~availability of ~~credit outstanding.~~$65.2 million.

Insurance Notes Payable

Tax Receivable Agreement

We entered into a tax receivable agreement with ~~Frank's~~Frank’s International C.V. ~~("FICV"~~(“FICV”) and Mosing Holdings, LLC ("(“Mosing ~~Holdings"~~Holdings”) in connection with our initial public offering ~~("IPO"~~(“IPO”). The TRA generally provides for the payment by us to Mosing Holdings of 85% of the amount of the actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax in periods after our IPO (which reductions we refer to as ~~"cash savings"~~“cash savings”) as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with the conversion of shares of Preferred Stock into shares of our common stock on August 26, 2016 and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, payments under the TRA. In addition, the TRA provides for interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. We will retain the remaining 15% of cash savings, if any. The payment obligations under the TRA are our obligations and not obligations of FICV. The term of the TRA continues until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the TRA.

If we elect to execute our sole right to terminate the TRA early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination

date are deemed to be exchanged on the termination date). In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.

In certain circumstances, we may be required to make payments under the TRA that we have entered into with Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that we recognize in connection with the conversion of Preferred Stock, which would reduce the actual tax benefit to us. If we were to elect to exercise our sole right to terminate the TRA early or enter into certain change of control transactions, we may incur payment obligations prior to the time we actually incur any tax benefit. In those circumstances, we would need to pay the amounts out of cash on hand, finance the payments or refrain from triggering the obligation. Though we do not have any present intention of triggering an advance payment under the TRA, based on our current liquidity and our expected ability to access debt and equity financing, we believe we would be able to make such a payment if necessary. Any such payment could reduce our cash on hand and our borrowing availability, however, which would also reduce the amount of cash available to operate our business, to fund capital expenditures and to be paid as dividends to our stockholders, among other things. Please see Note ~~11 -~~ 12—Related Party Transactions in the Notes to Unaudited Condensed Consolidated Financial Statements.

Cash Flows from Operating, Investing and Financing Activities

Cash flows from our operations, investing and financing activities are summarized below (in thousands):


	Six Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2019			2018
Operating activities	$	(37,862	)	$	(7,467	)	$	(17,389	)	$	(37,862	)
Investing activities	5,157			(1,659		)	(5,426		)	5,157
Financing activities	(3,624		)	(34,563		)	(4,526		)	(3,624		)
	(36,329		)	(43,689		)	(27,341		)	(36,329		)
Effect of exchange rate changes on cash	2,078			(887		)	(416		)	2,078
Net decrease in cash and cash equivalents	$	(34,251	)	$	(44,576	)
Net decrease in cash, cash equivalents and restricted cash							$	(27,757	)	$	(34,251	)

Statements of cash flows for entities with international operations that use the local currency as the functional currency exclude the effects of the changes in foreign currency exchange rates that occur during any given year, as these are noncash changes. As a result, changes reflected in certain accounts on the condensed consolidated statements of cash flows may not reflect the changes in corresponding accounts on the condensed consolidated balance sheets.

Operating Activities

Cash flow used in operating activities was ~~$37.9~~$17.4 million for the six months ended June 30, ~~2018~~2019 compared to $37.9 million for the same period in 2018. The decrease in cash flow used in operating activities of ~~$7.5 million for the same period in 2017. The increase in cash flow used by operating activities of $30.4~~$20.5 million was primarily due to a reduced net loss year-over-year of $24.4 million and favorable accounts receivable changes of $7.4 million, partially offset by unfavorable ~~working capital changes.~~accounts payable and accrued liabilities changes of $6.9 million.

Investing Activities

Cash flow used in investing activities was $5.4 million for the six months ended June 30, 2019 compared to cash flow provided by investing activities ~~was $5.2~~of $5.2 million ~~for the~~ ~~six months ended June 30, 2018~~ ~~compared to cash flow used in investing activities of~~ ~~$1.7 million~~ in the same period in ~~2017.~~2018. The ~~increase~~change in cash flow from investing activities of ~~$6.8~~$10.6 million was ~~primarily~~ related to ~~lower~~a $6.0 million increase in the purchases of property, plant, ~~and~~ equipment and intangibles, lower proceeds from the sale of ~~$4.0~~assets of $1.5 million and a net ~~increase~~decrease in proceeds from investments of ~~$3.3~~$3.1 million.

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Financing Activities

Cash flow used in financing activities was ~~$3.6~~$4.5 million for the six months ended June 30, ~~2018~~2019 compared to $~~34.6~~3.6 million in the same period in ~~2017.~~2018. The ~~decrease~~increase in cash flow used in financing activities of ~~$30.9~~$0.9 million was ~~primarily~~ due to ~~lower dividend payments on common stock~~increased repayment of ~~$33.4~~borrowings of $0.6 million ~~partially offset by an~~and a $0.3 million increase in ~~repayments on borrowings of $2.8 million.~~treasury shares withheld.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements with the exception of ~~operating leases.~~purchase obligations.

Critical Accounting Policies

There were no changes to our significant accounting policies from those disclosed in our Annual Report with the exception of ~~revenue recognition.~~leases. Please see Note ~~2 - Revenues~~2—Leases in the Notes to Unaudited Condensed Consolidated Financial Statements.

Impact of Recent Accounting Pronouncements

Refer to Note ~~1 -~~ 1—Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of accounting standards we recently adopted or will be required to adopt.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report. Except for the change below, our exposure to market risk has not changed materially since December 31, ~~2017.~~2018.

Based on the derivative contracts that were in place as of June 30, ~~2018,~~2019, a simultaneous 10% weakening of the U.S. dollar as compared to the Canadian dollar, Euro, Norwegian krone, and Pound sterling would result in a ~~$3.0~~$3.7 million decrease in the market value of our forward contracts. Please see ~~Item 1.~~Note 11—Derivatives in the Notes to Unaudited Condensed Consolidated Financial Statements—~~Note 10~~—~~Derivatives~~ for additional information regarding our foreign currency derivative contracts outstanding in U.S. dollars as of June 30, ~~2018.~~2019.

Item 4. Controls and Procedures


(a)	Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, ~~2018~~2019 at the reasonable assurance level.


(b)	Change in Internal Control Over Financial Reporting.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3638

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are conducting an internal investigation of the operations of certain of our foreign subsidiaries in West Africa including possible violations of the U.S. Foreign Corrupt Practices Act ~~("FCPA"~~(“FCPA”), our policies and other applicable laws. In June 2016, we voluntarily disclosed the existence of our extensive internal review to the U.S. Securities and Exchange Commission ~~("SEC"~~(“SEC”), the U.S. Department of Justice ~~("DOJ"~~(“DOJ”) and other governmental entities. It is our intent to continue to fully cooperate with these agencies and any other applicable authorities in connection with any further investigation that may be conducted in connection with this matter. While our review has not indicated that there has been any material impact on our previously filed financial statements, we have continued to collect information and cooperate with the authorities, but at this time are unable to predict the ultimate resolution of these matters with these agencies.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risks under the heading “Risk Factors” in our Annual Report, which risks could materially affect our business, financial condition or future results. These risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

3739

Item 6. Exhibits

The exhibits required to be filed by Item 6 are set forth in the Exhibit Index included below.

EXHIBIT INDEX



Exhibit Number	Description
3.1	~~3.1~~	Deed of Amendment to Articles of Association of ~~Frank's~~Frank’s International N.V., dated May 19, 2017 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on May 25, 2017).
*†10.1	†~~10.1~~Separation Agreement and Release, dated as of June 24, 2019 and effective as of July 1, 2019, by and between Kyle McClure and Frank’s International N.V.
*†10.2	Employment Offer Letter for Melissa Cougle dated May 20, 2019 and effective as of May 29, 2019.
*†10.3	Indemnification Agreement dated May ~~8, 2018,~~29, 2019, by and between ~~Frank's~~Frank’s International N.V. and ~~Darren C. Miles (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-36053), filed on May 8, 2018).~~Melissa Cougle.
*†~~10.2~~ 31.1	~~Indemnification Agreement dated June 13, 2018, by and between Frank's International N.V. and Steven Russell.~~
*†~~10.3~~	~~Indemnification Agreement dated June 18, 2018, by and between Frank's International N.V. and Nigel Lakey.~~
*†~~10.4~~	~~Indemnification Agreement dated June 25, 2018, by and between Frank's International N.V. and John Symington.~~
*†~~10.5~~	~~Separation Agreement, dated as of June 12, 2018 and effective as of September 30, 2018, by and among Alejandro Cestero, Frank’s International, LLC and Frank’s International N.V.~~
*†~~10.6~~	Transition and Separation Agreement, dated as of June 12, 2018 and effective as of December 31, 2018, by and among Burney J. Latiolais, Jr., Frank’s International, LLC and Frank’s International N.V.
*†~~10.7~~	~~Employment Assignment Letter for Steven Russell dated June 1, 2018 and effective as of June 13, 2018.~~
*†~~10.8~~	~~Employment Offer Letter for Nigel Lakey dated May 25, 2018 and effective as of June 18, 2018.~~
*†~~10.9~~	~~Employment Agreement, dated June 19, 2013, between Blackhawk Specialty Tools, LLC and Scott McCurdy.~~
*~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.
*31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
**32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
**32.2	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
*101.INS	XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101.SCH	Inline XBRL Taxonomy Extension Schema Document.
*101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.


†	Represents management contract or compensatory plan or arrangement.


*	Filed herewith.


**	Furnished herewith.

3840

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			~~FRANK'S~~FRANK’S INTERNATIONAL N.V.

Date:	August ~~8, 2018~~	6, 2019	By:	/s/ ~~Kyle McClure~~Melissa Cougle
			~~Kyle McClure~~Melissa Cougle
			Senior Vice President and Chief Financial Officer
			(Principal Financial Officer)

3941



	Three Months Ended			Six Months Ended
	June 30, 2017			June 30, 2017
Cost of revenues, exclusive of depreciation and amortization
Services, as previously reported	$	60,777		$	117,884
Blackhawk adjustment	(5,460		)	(10,884		)
Services, as revised	$	55,317		$	107,000

Products, as previously reported	$	17,567		$	34,412
Blackhawk adjustment	5,460			10,884
Products, as revised	$	23,027		$	45,296



	Balance at		Impact of			Balance at
	December 31, 2017		Adjustments			January 1, 2018
Balance Sheet
Assets
Inventories, net	$	76,420	$	(3,560	)	$	72,860
Liabilities
Deferred revenue	4,703		(4,230		)	473
Stockholders' Equity
Retained earnings	106,923		670			107,593



	Estimated Useful Lives in Years	June 30, 2018			December 31, 2017
Land	—	$	14,834		$	15,314
Land improvements ⁽¹⁾	8-15	15,110			14,594
Buildings and improvements ⁽¹⁾	39	110,092			119,380
Rental machinery and equipment	7	894,279			898,146
Machinery and equipment - other	7	61,603			55,049
Furniture, fixtures and computers	5	24,735			27,259
Automobiles and other vehicles	5	29,675			29,971
Leasehold improvements ⁽¹⁾	7-15, or lease term if shorter	11,903			10,030
Construction in progress - machinery and equipment and land improvements ⁽¹⁾	—	61,920			61,836
		1,224,151			1,231,579
Less: Accumulated depreciation		(802,117		)	(761,933		)
Total property, plant and equipment, net		$	422,034		$	469,646



	International Services			U.S. Services			Tubular Sales			Blackhawk			Eliminations			Total
Three Months Ended June 30, 2018
Revenue from external customers	$	59,361		$	35,136		$	14,061		$	23,527		$	—		$	132,085
Inter-segment revenue	(56		)	4,639			96			344			(5,023		)	—
Operating income (loss)	(2,052		)	(19,920		)	(829		)	(981		)	—			(23,782		)
Adjusted EBITDA	13,458			(6,379		)	170			3,704			—			*

Three Months Ended June 30, 2017
Revenue from external customers	$	53,499		$	29,905		$	16,141		$	18,114		$	—		$	117,659
Inter-segment revenue	12			4,543			3,564			72			(8,191		)	—
Operating income (loss)	(6,980		)	(24,292		)	805			(3,499		)	—			(33,966		)
Adjusted EBITDA	9,022			(9,238		)	815			2,965			—			*

Six Months Ended June 30, 2018
Revenue from external customers	$	108,094		$	67,743		$	29,281		$	42,536		$	—		$	247,654
Inter-segment revenue	(79		)	8,855			193			554			(9,523		)	—
Operating income (loss)	(13,773		)	(41,900		)	436			(3,452		)	—			(58,689		)
Adjusted EBITDA	16,046			(15,680		)	2,358			6,070			—			*

Six Months Ended June 30, 2017
Revenue from external customers	$	100,109		$	60,871		$	33,086		$	34,324		$	—		$	228,390
Inter-segment revenue	15			8,828			7,239			72			(16,154		)	—
Operating income (loss)	(16,493		)	(47,639		)	3,185			(9,629		)	—			(70,576		)
Adjusted EBITDA	14,308			(16,453		)	3,069			4,176			—			*