FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 and restrictive provisions which limit, subject to certain customary exceptions and thresholds, FINV’s ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in 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 two2 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 thirty30 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 cross default provisions that apply to FINV’s other indebtedness.
As of March 31, 2020,2021, FINV had 0 borrowings outstanding under the ABL Credit Facility, letters of credit outstanding of $9.1$10.3 million and availability of $46.8$23.5 million.
In connection with the closing of the Merger, Frank’s expects that the Combined Company will enter into a new revolving credit facility and terminate or otherwise replace the existing Frank’s and Expro credit facilities.
Note 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 109—Fair Value Measurements in our Annual Report for further discussion.
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 March 31, 20202021 and December 31, 2019,2020, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Quoted Prices in Active Markets | | Significant Other Observable Inputs | | Significant Unobservable Inputs | | |
| (Level 1) | | (Level 2) | | (Level 3) | | Total |
March 31, 2021 | | | | | | | |
Assets: | | | | | | | |
| | | | | | | |
Investments: | | | | | | | |
Cash surrender value of life insurance policies - deferred compensation plan | $ | 0 | | | $ | 26,586 | | | $ | 0 | | | $ | 26,586 | |
Marketable securities - other | 2 | | | 0 | | | 0 | | | 2 | |
Liabilities: | | | | | | | |
| | | | | | | |
Deferred compensation plan | 0 | | | 20,125 | | | 0 | | | 20,125 | |
| | | | | | | |
December 31, 2020 | | | | | | | |
Assets: | | | | | | | |
| | | | | | | |
Investments: | | | | | | | |
Cash surrender value of life insurance policies - deferred compensation plan | $ | 0 | | | $ | 26,167 | | | $ | 0 | | | $ | 26,167 | |
Marketable securities - other | 3 | | | 0 | | | 0 | | | 3 | |
Liabilities: | | | | | | | |
| | | | | | | |
Deferred compensation plan | 0 | | | 20,271 | | | 0 | | | 20,271 | |
|
| | | | | | | | | | | | | | | |
| Quoted Prices in Active Markets | | Significant Other Observable Inputs | | Significant Unobservable Inputs | | |
| (Level 1) | | (Level 2) | | (Level 3) | | Total |
March 31, 2020 | | | | | | | |
Assets: | | | | | | | |
Investments: | | | | | | | |
Cash surrender value of life insurance policies - deferred compensation plan | $ | — |
| | $ | 25,386 |
| | $ | — |
| | $ | 25,386 |
|
Marketable securities - other | 1 |
| | — |
| | — |
| | 1 |
|
Liabilities: | | | | | | | |
Deferred compensation plan | — |
| | 19,749 |
| | — |
| | 19,749 |
|
| | | | | | | |
December 31, 2019 | | | | | | | |
Assets: | | | | | | | |
Investments: | | | | | | | |
Cash surrender value of life insurance policies - deferred compensation plan | $ | — |
| | $ | 27,313 |
| | $ | — |
| | $ | 27,313 |
|
Marketable securities - other | 8 |
| | — |
| | — |
| | 8 |
|
Liabilities: | | | | | | | |
Derivative financial instruments | — |
| | 324 |
| | — |
| | 324 |
|
Deferred compensation plan | — |
| | 23,251 |
| | — |
| | 23,251 |
|
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 accounts payable and accrued liabilities at December 31, 2019.
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’ 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.
We perform our goodwill impairment assessment for each reporting unit by comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. We estimate the fair value for each reporting unit using a discounted cash flow analysis based on management’s short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding discount rates, revenue growth rates,
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
expected profitability margins, forecasted capital expenditures and the timing of expected future cash flows based on market conditions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is measured and recorded.
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
When conducting an impairment test on long-lived assets, other than goodwill, we first compare estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount. If the undiscounted cash flows are less than the asset’s carrying amount, we then determine the asset’s fair value by using a discounted cash flow analysis. These analyses are based on estimates such as management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, estimates of the remaining useful life and service potential of the asset, and a discount rate based on our weighted average cost of capital.
As a result of factors, including COVID-19, we have sustained a continued decline in the market price of our common stock. This is one of the qualitative factors to be considered when evaluating whether events or changes in circumstances may indicate that it is likely that a potential goodwill impairment exists. We will consider this decline and other factors, both specific to us and to the energy industry as a whole, as a result of COVID-19 as we perform our annual goodwill impairment test as of October 31 this year.
The impairment assessments discussed above incorporate inherent uncertainties, including projected commodity pricing, supply and demand for our services and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts. If crude oil prices decline significantly and remain at low levels for a sustained period of time, we could be required to record an impairment of the carrying value of our long-lived assets in the future which could have a material adverse impact on our operating results. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs.
Other Fair Value Considerations
The carrying values on our condensed consolidated balance sheets of our cash and cash equivalents, restricted cash, short-term investments, trade accounts receivable, other current assets, accounts payable and accrued liabilities and lines of credit approximate fair values due to their short maturities.
Note 11—Derivatives
From time to time 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 March 31, 2020, we had no foreign currency derivative contracts outstanding. As of December 31, 2019, we had the following foreign currency derivative contracts outstanding in U.S. dollars (in thousands):
|
| | | | | | | | |
| | December 31, 2019 |
Derivative Contracts | | Notional Amount | | Contractual Exchange Rate | | Settlement Date |
Canadian dollar | | $ | 948 |
| | 1.3182 | | 3/16/2020 |
Euro | | 9,279 |
| | 1.1180 | | 3/17/2020 |
Norwegian krone | | 11,027 |
| | 9.0688 | | 3/17/2020 |
Pound sterling | | 16,057 |
| | 1.3381 | | 3/17/2020 |
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the location and fair value amounts of all derivative contracts in the condensed consolidated balance sheets as of December 31, 2019 (in thousands):
|
| | | | | | |
Derivatives not Designated as Hedging Instruments | | Consolidated Balance Sheet Location | | December 31, 2019 |
Foreign currency contracts | | Accounts payable and accrued liabilities | | $ | (324 | ) |
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 |
| | | | March 31, |
Derivatives not Designated as Hedging Instruments | | Location of Gain (Loss) Recognized in Income on Derivative Contracts | | 2020 | | 2019 |
Unrealized gain (loss) on foreign currency contracts | | Other income, net | | $ | — |
| | $ | 496 |
|
Realized gain (loss) on foreign currency contracts | | Other income, net | | 1,475 |
| | (660 | ) |
Total net gain (loss) on foreign currency contracts | | | | $ | 1,475 |
| | $ | (164 | ) |
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 December 31, 2019 (in thousands):
|
| | | | | | | | |
| | Derivative Asset Positions | | Derivative Liability Positions |
| | December 31, 2019 | | December 31, 2019 |
Gross position - asset / (liability) | | $ | 127 |
| | $ | (451 | ) |
Netting adjustment | | (127 | ) | | 127 |
|
Net position - asset / (liability) | | $ | — |
| | $ | (324 | ) |
Note 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. Rent expense associated with our related party leases was $0.7 million and $0.7 million for the three months ended March 31, 20202021 and 2019,2020, respectively. As of March 31, 2020, $5.72021, $3.1 million of our operating lease right-of-use assets and $6.4$4.5 million of our lease liabilities were associated with related party leases.
Tax Receivable Agreement and Amended & Restated Tax Receivable Agreement
Mosing Holdings LLC ("Mosing Holdings") and its permitted transferees converted all of their Preferred Stockits shares of our Series A convertible preferred stock into shares of our common stock on a 1-for-one basis on August 26, 2016, subjectin connection with its delivery to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, by deliveryFINV of all of theirits interests in FICV to us (the “Conversion”). As a result of an election under Section 754 of the Internal Revenue Code made by FICV, 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 transferred to FINV by Mosing Holdings and its permitted transferees.Holdings. These adjustments are allocatedsolely allocable to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
described above would not have been available absent thisthe 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 tax receivable agreement ("TRA"(the “TRA”) that we entered into with FICV and Mosing Holdings in connection with our IPOinitial public offering (“IPO”) generally provides for the payment by FINV to Mosing Holdings of 85% of the amount of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that we actually realize (or are deemed to realize in certain circumstances) in periods after our IPO as a result of (i) tax basis increases resulting from the Conversion and (ii) imputed interest deemed to be paid by usFINV as a result of, and additional tax basis arising from, payments under the TRA. We will retain the benefit of the remaining 15% of these cash savings, if any. Payments we makeFINV makes under the TRA will be increased by any interest accrued 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 FINV.
The estimation of the amount and timing of payments under the TRA is by its nature imprecise. For purposes of the TRA, cash savings in tax generally are calculated by comparing ourFINV’s actual tax liability to the amount weFINV would have been required to pay had weit not been able to utilize any of the tax benefits subject to the TRA. The
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
amounts payable, as well as the timing of any payments, under the TRA are dependent upon significant future events and assumptions, including the amount and timing of the taxable income we generateFINV generates in the future. As of March 31, 2020,2021, FINV has had 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 no longer able to conclude that there will be future cash savings that will lead to additional payouts under the TRA. 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 ourFINV’s obligations and are not obligations of FICV. The term of the TRA commenced upon the completion of the IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless FINV elects to exercise its right to terminate the TRA (or(or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of control), and we makeFINV makes the termination payment specified inby the TRA, or FINV otherwise settles its obligations under the TRA. If FINV elects to terminate the TRA early, which it may do in its sole discretion (or if it terminates early as a result of our breach), it would be required to make a substantial, immediate lump-sum payment equal to the present value of the hypothetical future payments that could be required to be paid under 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), determined by applying a discount rate equal to the long-term Treasury rate in effect on the applicable date plus 300 basis points. 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 March 31, 2020,2021, the estimated termination payment would be approximately $57.0$70.0 million (calculated using a discount rate of 4.15%). 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 FINV'sour operating subsidiaries to make distributions to it in an amount sufficient to cover FINV’s obligations under such agreement. The ability of certain of FINV’sour operating 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
In connection with the Merger Agreement, FINV, FICV and Mosing Holdings entered into the A&R TRA, pursuant to which FINV, FICV and Mosing Holdings have agreed, among other things, to settle the early termination payment obligation that would otherwise be owed to Mosing Holdings under the TRA as a result of the Merger by the payment by FINV to Mosing Holdings of (i) $15 million cash at the closing of the Transactions and (ii) certain other contingent payments in the future in the event the Combined Company realizes cash tax savings from tax attributes covered under the TRA during the ten year period following the Closing Date (as defined in the Merger Agreement) in excess of $18,057,000, as more fully described in the A&R TRA. The terms of the A&R TRA are conditioned upon and subject to the closing of the Transactions and the payment to Mosing Holdings of the $15 million cash payment at the closing of the Transactions. If such conditions do not occur, the A&R TRA will be terminated and will be null and void, and the TRA will remain in effect in accordance with its terms. Please see Note 1—Basis of Presentation in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional details regarding the Merger, the Merger Agreement and the Transactions.
Note 13—12—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
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
treasury stock method to determine the dilutive weighted average common shares represented by unvested restricted stock units and 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 | | | | Three Months Ended |
| March 31, | | | | March 31, |
| 2020 | | 2019 | | | | 2021 | | 2020 |
Numerator | | | | Numerator | | | | | |
Net loss | $ | (85,978 | ) | | $ | (28,287 | ) | Net loss | | | $ | (23,886) | | | $ | (85,978) | |
Denominator | | | | Denominator | | |
| Basic and diluted weighted average common shares (1) | 225,505 |
| | 224,653 |
| Basic and diluted weighted average common shares (1) | | | 227,019 | | | 225,505 | |
Loss per common share: | | | | Loss per common share: | | |
| Basic and diluted | $ | (0.38 | ) | | $ | (0.13 | ) | Basic and diluted | | | $ | (0.11) | | | $ | (0.38) | |
|
| | | | | | |
| | | | |
(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. | 2,015 |
| | 967 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
(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. | | | | | 2,252 | | | 2,015 | |
Note 14—13—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 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 15.3%(4.7)% and (52.8)%15.3% for the three months ended March 31, 20202021 and 2019,2020, respectively. The quarterly variance in effective tax rates compared to the same period last year is primarily due to the beneficial impact in the currentprior year period of afrom the five-year net operating loss carryback provision included in the recently-enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which allows corporations with net operating losses (“NOLs”) incurred in 2018, 2019 and 2020 to carry back such NOLs to each of the five years preceding the year of the NOL, beginning with the earliest year in which there is taxable income, and claim an income tax refundas well as a change in the applicable carryback year. As a resultgeographical mix of the NOL carryback provision in the CARES Act, we were able to recognize an income tax refund receivable as of March 31, 2020 of $17.5 million.income. We are subject to tax in many U.S. and foreignnon-U.S. jurisdictions. In many foreignnon-U.S. jurisdictions we are taxed on bases such as deemed profits or withholding taxes based on revenue. Consequently, the relationshiplevel of correlation between our pre-tax income and our income tax provision varies from period to period.
�� We are under audit by certain foreignnon-U.S. jurisdictions for the years 2008 - 2019. We do not expect the results of these audits to have any material effect on our financial statements.
As of March 31, 2020,2021, there were no significant changes to our uncertain tax positions as reported in our audited financial statements for the year ended December 31, 2019.2020.
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15—14—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 March 31, 20202021 and December 31, 2019.2020. 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”), our policies and other
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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”) 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.
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 boardBoard and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.
Note 16—15—Severance and Other Charges, net
We recognize severance and other charges for costs associated with workforce reductions, facility closures, exiting or reducing our footprint in certain countries, asset impairments and the retirement of excess machinery and equipment based on economic utility. As a result of the downturn in the industry and its impact on our business outlook, we continue to take actions to adjust our operations and cost structure to reflect current and expected activity levels. Depending on future market conditions, further actions may be necessary to adjust our operations, which may result in additional charges.
Our severance and other charges, net are summarized below (in thousands):
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
Severance and other costs | | $ | 538 |
| | $ | 389 |
|
Fixed asset impairments and retirements | | 15,479 |
| | 66 |
|
Intangible asset impairments | | 4,708 |
| | — |
|
| | $ | 20,725 |
| | $ | 455 |
|
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
Severance and other costs | | | | | | $ | 265 | | | $ | 538 | |
Mergers and acquisition expense | | | | | | 6,804 | | | 0 | |
Fixed asset impairments and retirements | | | | | | 171 | | | 15,479 | |
Inventory write-offs | | | | | | 136 | | | 0 | |
Intangible asset impairments | | | | | | 0 | | | 4,708 | |
| | | | | | $ | 7,376 | | | $ | 20,725 | |
Severance and other costs: We incurred costs due to a continued effort to adjust our cost base, including reducing our workforce to meet the depressed demand in the industry. At
Mergers and acquisition expense: During the three months ended March 31, 2020, our outstanding liability2021, we incurred $6.8 million of costs, primarily related to legal and consulting services, associated with our current program was approximately $3.8 million and included severance payments and other employee-related separation costs.the pending merger with Expro.
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Below is a reconciliation of our employee separation liability balance (in thousands):
|
| | | | | | | | | | | | | | | | | | | | |
| | Tubular Running Services | | Tubulars | | Cementing Equipment | | Corporate | | Total |
Balance at December 31, 2019 | | $ | 2,000 |
| | $ | 19 |
| | $ | 1,632 |
| | $ | 2,186 |
| | $ | 5,837 |
|
Additions for costs expensed | | 117 |
| | (19 | ) | | 82 |
| | 358 |
| | 538 |
|
Severance and other payments | | (1,005 | ) | | — |
| | (897 | ) | | (715 | ) | | (2,617 | ) |
Other adjustments | | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Balance at March 31, 2020 | | $ | 1,112 |
| | $ | — |
| | $ | 817 |
| | $ | 1,828 |
| | $ | 3,757 |
|
Fixed asset impairments and retirements: During the three months ended March 31, 2019,2020, we recognized $0.1 million of impairment related to assets held for sale. During the three months ended March 31, 2020, we recorded fixed asset impairment charges of $15.5 million primarily associated with construction in progress in our Cementing Equipment segment. During the three months ended March 31, 2021, we recognized a $0.2 million impairment associated our with construction in progress in our Tubular Running Services segment. Please see Note 5—Property, Plant and Equipment for additional details.
Inventory write-offs: During the three months ended March 31, 2021, certain inventories in our Tubular Running Services segment were determined to have costs that exceeded their net realizable values, resulting in a charge of $0.1 million.
Intangible asset impairments: During the three months ended March 31, 2020, we identified certain intangible assets where the carrying value exceeded the fair value in the Cementing Equipment segment, resulting in an
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
impairment charge of $4.7 million. NaN impairment was recorded during the three months ended March 31, 2021. Please see Note 6—Goodwill and Intangible Assets for additional details.
Note 17—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") in deciding how to allocate resources and assess performance. We are comprised of 3 reportable segments: Tubular Running Services (“TRS”) segment, Tubulars segment and Cementing Equipment (“CE”) segment.
The 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 5040 countries on 6 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.
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.
The 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 and temporary and permanent abandonments.
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.
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 revenue disaggregated by geography, based on the location where our services were provided and products sold (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Three Months Ended March 31, 2021 |
| Tubular Running Services | | Tubulars | | Cementing Equipment | | Consolidated |
United States | $ | 18,367 | | | $ | 7,993 | | | $ | 9,345 | | | $ | 35,705 | |
International | 47,918 | | | 3,676 | | | 7,512 | | | 59,106 | |
Total Revenue | $ | 66,285 | | | $ | 11,669 | | | $ | 16,857 | | | $ | 94,811 | |
| | | | | | | |
| Three Months Ended March 31, 2020 |
| Tubular Running Services | | Tubulars | | Cementing Equipment | | Consolidated |
United States | $ | 30,169 | | | $ | 9,797 | | | $ | 13,531 | | | $ | 53,497 | |
International | 59,328 | | | 2,745 | | | 7,922 | | | 69,995 | |
Total Revenue | $ | 89,497 | | | $ | 12,542 | | | $ | 21,453 | | | $ | 123,492 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| Tubular Running Services | | Tubulars | | Cementing Equipment | | Consolidated |
United States | $ | 30,169 |
| | $ | 9,797 |
| | $ | 13,531 |
| | $ | 53,497 |
|
International | 59,328 |
| | 2,745 |
| | 7,922 |
| | 69,995 |
|
Total Revenue | $ | 89,497 |
| | $ | 12,542 |
| | $ | 21,453 |
| | $ | 123,492 |
|
| | | | | | | |
| Three Months Ended March 31, 2019 |
| Tubular Running Services | | Tubulars | | Cementing Equipment | | Consolidated |
United States | $ | 38,155 |
| | $ | 16,628 |
| | $ | 21,578 |
| | $ | 76,361 |
|
International | 59,924 |
| | 2,029 |
| | 6,094 |
| | 68,047 |
|
Total Revenue | $ | 98,079 |
| | $ | 18,657 |
| | $ | 27,672 |
| | $ | 144,408 |
|
Revenue by geographic area were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
United States | | | | | $ | 35,705 | | | $ | 53,497 | |
Europe/Middle East/Africa | | | | | 28,254 | | | 35,434 | |
Latin America | | | | | 21,934 | | | 20,925 | |
Asia Pacific | | | | | 7,653 | | | 9,569 | |
Other countries | | | | | 1,265 | | | 4,067 | |
Total Revenue | | | | | $ | 94,811 | | | $ | 123,492 | |
|
| | | | | | | |
| Three Months Ended |
| March 31, |
| 2020 | | 2019 |
United States | $ | 53,497 |
| | $ | 76,361 |
|
Europe/Middle East/Africa | 35,434 |
| | 36,400 |
|
Latin America | 20,925 |
| | 17,444 |
|
Asia Pacific | 9,569 |
| | 7,949 |
|
Other countries | 4,067 |
| | 6,254 |
|
Total Revenue | $ | 123,492 |
| | $ | 144,408 |
|
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, net severance and other charges, 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
FRANK’S INTERNATIONAL N.V.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 |
| | March 31, |
| | 2020 | | 2019 |
Segment Adjusted EBITDA: | | | | |
Tubular Running Services | | $ | 13,305 |
| | $ | 17,735 |
|
Tubulars | | 1,396 |
| | 4,112 |
|
Cementing Equipment | | 2,544 |
| | 3,794 |
|
Corporate (1) | | (10,186 | ) | | (15,983 | ) |
| | 7,059 |
| | 9,658 |
|
Goodwill impairment | | (57,146 | ) | | — |
|
Severance and other charges, net | | (20,725 | ) | | (455 | ) |
Interest income, net | | 533 |
| | 768 |
|
Depreciation and amortization | | (19,718 | ) | | (25,242 | ) |
Income tax (expense) benefit | | 15,563 |
| | (9,773 | ) |
Loss on disposal of assets | | (60 | ) | | (227 | ) |
Foreign currency gain (loss) | | (9,892 | ) | | 483 |
|
Charges and credits (2) | | (1,592 | ) | | (3,499 | ) |
Net loss | | $ | (85,978 | ) | | $ | (28,287 | ) |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
Segment Adjusted EBITDA: | | | | | | | |
Tubular Running Services | | | | | $ | 8,128 | | | $ | 13,305 | |
Tubulars | | | | | 639 | | | 1,396 | |
Cementing Equipment | | | | | 4,795 | | | 2,544 | |
Corporate (1) | | | | | (6,909) | | | (10,186) | |
| | | | | 6,653 | | | 7,059 | |
Goodwill impairment | | | | | 0 | | | (57,146) | |
Severance and other charges, net | | | | | (7,376) | | | (20,725) | |
Interest income (expense), net | | | | | (287) | | | 533 | |
Depreciation and amortization | | | | | (16,107) | | | (19,718) | |
Income tax (expense) benefit | | | | | (1,070) | | | 15,563 | |
Gain (loss) on disposal of assets | | | | | 182 | | | (60) | |
Foreign currency loss | | | | | (2,868) | | | (9,892) | |
| | | | | | | |
Charges and credits (2) | | | | | (3,013) | | | (1,592) | |
Net loss | | | | | $ | (23,886) | | | $ | (85,978) | |
| |
(1)(1) Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives. | 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 March 31, 2020 and 2019: $2,146 and $2,574, respectively), Unrealized and realized gains (for the three months ended March 31, 2020 and 2019: $1,704 and $308, respectively) and Investigation-related matters (for the three months ended March 31, 2020 and 2019: $1,150 and $1,233, respectively). |
(2) Comprised of Equity-based compensation expense (for the three months ended March 31, 2021 and 2020: $2,872 and $2,146, respectively), Unrealized and realized gains (losses) (for the three months ended March 31, 2021 and 2020: $(99) and $1,704, respectively) and Investigation-related matters (for the three months ended March 31, 2021 and 2020: $42 and $1,150, 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 March 31, 2020 | | | | | | | | | |
Revenue from external customers | $ | 89,497 |
| | $ | 12,542 |
| | $ | 21,453 |
| | $ | — |
| | $ | 123,492 |
|
Operating income (loss) | (1,315 | ) | | 651 |
| | (77,498 | ) | | (16,046 | ) | | (94,208 | ) |
Adjusted EBITDA | 13,305 |
| | 1,396 |
| | 2,544 |
| | (10,186 | ) | | * |
| | | | | | | | | |
Three Months Ended March 31, 2019 | | | | | | | | | |
Revenue from external customers | $ | 98,079 |
| | $ | 18,657 |
| | $ | 27,672 |
| | $ | — |
| | $ | 144,408 |
|
Operating income (loss) | 141 |
| | 3,194 |
| | (824 | ) | | (22,805 | ) | | (20,294 | ) |
Adjusted EBITDA | 17,735 |
| | 4,112 |
| | 3,794 |
| | (15,983 | ) | | * |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tubular Running Services | | Tubulars | | Cementing Equipment | | Corporate | | Total |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Three Months Ended March 31, 2021 | | | | | | | | | |
Revenue from external customers | $ | 66,285 | | | $ | 11,669 | | | $ | 16,857 | | | $ | 0 | | | $ | 94,811 | |
Operating income (loss) | (5,452) | | | (875) | | | 1,993 | | | (15,452) | | | (19,786) | |
Adjusted EBITDA | 8,128 | | | 639 | | | 4,795 | | | (6,909) | | | * |
| | | | | | | | | |
Three Months Ended March 31, 2020 | | | | | | | | | |
Revenue from external customers | $ | 89,497 | | | $ | 12,542 | | | $ | 21,453 | | | $ | 0 | | | $ | 123,492 | |
Operating income (loss) | (1,315) | | | 651 | | | (77,498) | | | (16,046) | | | (94,208) | |
Adjusted EBITDA | 13,305 | | | 1,396 | | | 2,544 | | | (10,186) | | | * |
* Non-GAAP financial measure not disclosed.
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;
•The merger with Expro Group Holdings International Limited (“Expro”), (the “Merger”);
•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,” “expect,” “goal,” “plan,” “potential,” “predict,” “project,” 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 continuation of a swift and material decline in•continuing uncertainty relating to global crude oil demand and crude oil prices for an uncertain period of time that correspondingly may lead to afurther significant reduction ofreductions in domestic oil and gas activity, which in turn could result in further significant declines in demand for our products and services;
•uncertainty regarding the lengthextent and duration of time it will take forthe remaining restrictions in the United States and the rest of the world to slow the spread of the COVID-19 virus to the point where applicable authorities are comfortable easing current restrictionsglobally on various commercial and economic activities;activities due to the COVID-19 virus, including uncertainty regarding the re-imposition of restrictions due to resurgences in infection rates; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for oil and gas, which may correspondingly decrease demand for our products and services;
•uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the products and services we provide and the commercial opportunities available to us;
•the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations;
•unique risks associated with our offshore operations;
•political, economic and regulatory uncertainties in our 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;
•global or national health concerns, including health epidemics, including COVID-19; and
•policy or regulatory changes domestically in the United States.
States;
•risks and conditions that apply to Expro, which may be different from risks that apply to us;
•unforeseen consequences of the Merger;
•failure to complete the Merger or changes in the expected timing of the completion of the Merger;
•completion of the Merger following unforeseen changes in circumstance;
•uncertainty with respect to integration and realization of expected cost synergies following completion of the Merger; and
•litigation risk associated with the Merger.
These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item 1A 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, 2019,2020, filed with the SEC on February 25, 2020March 1, 2021 (our “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.
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 80 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.
We conduct our business through 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, as well as in the U.S. Gulf of Mexico. Our customers in these markets 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.
|
Outlook
Two significant events occurring during the first quarter are creating headwinds across the oil and gas markets. First, there was a breakdown in Organization of Petroleum Exporting Countries (“OPEC”) and Russia production cut agreements and during the period of dispute, meaningful downward pressure on commodity prices occurred. There was an ultimate agreement made amongst OPEC+ parties in April 2020 which will take effect beginning in May 2020. Despite this agreement, there is expected to be substantial oversupply in the future. This is due to the second event, the global COVID-19 pandemic which is creating energy demand declines and giving rise to logistical challenges in furthering existing drilling programs. Both of these events have generated reduced capital spending plans for our customers, with U.S. onshore markets seeing the largest reductions from initial 2020 guidance. International customer spending is also being reduced although at a lower rate than the U.S. onshore markets. Due to travel restrictions associated with COIVD-19, clients have suspended several international projects which we believe will recommence as travel restrictions are eased. We are also seeing a number of clients delay the start-up projects of new project later in the year, postponing these into 2021, or longer. We believe that the effects of COVID-19 will depress the oil and gas markets and also in several onshore regions with operations in approximately 40 countries on six continents. In the U.S., the TRS segment provides services in the short to intermediate term as many governments impose a range of regulations that continue to limit energy demand. We expect commodity over-supply issues to have a long-term effect overactive onshore oil and gas drilling regions, including the next 24 months, requiring time for the market supplyPermian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and demand curve to return to balance.
As of March 31, 2020, the full impact of the COVID-19 outbreak and the reduction in oil sector activity continues to evolve daily. It is uncertain how long either event will last. With the significant decline in oil pricesUtica Shale, as well as in the general economic decline causedU.S. Gulf of Mexico. Our customers in these markets 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.
Merger Agreement with Expro
On March 10, 2021, FINV and Merger Sub, a direct wholly owned subsidiary of FINV, entered into the Merger Agreement with Expro, pursuant to which Expro will merge with and into Merger Sub, with Merger Sub surviving the merger as a direct, wholly owned subsidiary of FINV. If the Merger is completed, each of the Expro Ordinary Shares, issued and outstanding immediately prior to the Effective Time, will be converted into the right to receive a number of shares of Frank’s common stock equal to the Exchange Ratio. Upon consummation of the transactions contemplated by the impactsMerger Agreement and the Plan of COVID-19, we expect demand for our products and services to decline due to much lower capital expenditure budgets throughoutMerger (as defined in the industry.
The direct impactMerger Agreement), FINV expects that its current shareholders will own approximately 35% of the COVID-19 outbreak on our abilityCombined Company after the completion of the Merger and related transactions, and current Expro shareholders will own approximately 65% of the Combined Company. Following the Merger, the name of FINV will be changed to conduct operations has been minor. We“Expro Group Holdings N.V.” The closing of the Transactions, which is expected to occur during the third quarter of 2021, is subject to the satisfaction or waiver of closing conditions, including, among others, the requisite approval of the shareholders of each of FINV and Expro pursuant to the terms of the Merger Agreement.
In connection with the Merger Agreement, FINV, FICV and Mosing Holdings have implemented a work-from-home directive for office personnel acrossentered into an Amended and Restated Tax Receivable Agreement (the “A&R TRA”), that amends and restates the globe, split-shift rotation protocols for our manufacturing facilities and operations facilities, social distancing guidelines in manufacturing and operations facilities, and quarantine protocols for employees at riskTRA. See Note 1—Basis of exposure to COVID-19. In addition, we have experienced local disruptions of activity in response to outbreaks of COVID-19 at certain offshore drilling locations, and disruptions due to travel restrictions and local governmental orders. However,Presentation in the majority of locations, our products and services have been deemed essential economic activity and have continued during local restrictions on business activity.
In this challenging and uncertain environment, we are continuing and building upon our profitability improvement projectNotes to further reduce our cost base. We are implementing workforce reductions, in conjunction with changes to our compensation and benefits programs and concurrent with the pursuit of several government-sponsored relief support programs globally that will capture additional labor savings. We are also working to reduce our non-labor spend, engaging in active discussions with our vendors and scrutinizing research and development spending. We are also working to optimize working capital, with workstreams under way in the areas of collections, capital expenditures, inventory management and disbursements.
We also continue to monitor potential goodwill impairments as a result of COVID-19. For further information, see Note 6—Goodwill and Intangible Assets in our Notes to Unaudited Condensed Consolidated Financial Statements.Statements for additional information regarding the Merger Agreement and the A&R TRA.
Outlook
As we look toward recovery from the COVID-19 pandemic and balancing of OPEC-driven oversupply, we believe there may be a slow but steady drawdown of supply stockpiles over the next 18 months, driven by increasing demand as lockdown measures loosen with vaccine rollouts.
In the short term, uncertainty around further lockdowns may temper continued activity improvement. However, current indicators are supportive of improved market conditions for the remainder of 2021 as compared to the same period in 2020. We expect that crude oil demand and associated customer activity will continue to ramp up in the mid to long term toward pre-pandemic levels. However, we remain vigilant to the uncertainty that OPEC-controlled supply and U.S. activity levels can have on the market.
While management anticipatesthe Gulf of Mexico is expected to remain relatively flat through 2022, operators will continue to look to Frank’s digital and automated technologies to drive operational efficiencies with reduced personnel. Our recent successes in bolstering our market share in the Gulf of Mexico with digital and automated technology that removes personnel from the industryrig site sets a blueprint for duplicating this success in international offshore markets.
We anticipate our U.S. land business will continue to improve through at least 2022, supported by recent commercialization of performance drilling technologies and economic impact of COVID-19 and OPEC’s actions will have a negative effect on our results of operationsdigital solutions that increase operation efficiency. In international markets, we expect offshore markets to see continued moderate growth in 2020 and perhaps beyond, the degree to which these factors will impact our business remains uncertain. Please read Item 1A, Risk Factors, in this Quarterly Report.line with market trends.
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”), other non-cash adjustments and other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our 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), income tax, foreign currency exchange rates and other charges 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”).
The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods presented (in thousands):
|
| | | | | | | |
| Three Months Ended |
| March 31, |
| 2020 | | 2019 |
| | | |
Net loss | $ | (85,978 | ) | | $ | (28,287 | ) |
Goodwill impairment | 57,146 |
| | — |
|
Severance and other charges, net | 20,725 |
| | 455 |
|
Interest income, net | (533 | ) | | (768 | ) |
Depreciation and amortization | 19,718 |
| | 25,242 |
|
Income tax expense (benefit) | (15,563 | ) | | 9,773 |
|
Loss on disposal of assets | 60 |
| | 227 |
|
Foreign currency (gain) loss | 9,892 |
| | (483 | ) |
Charges and credits (1) | 1,592 |
| | 3,499 |
|
Adjusted EBITDA | $ | 7,059 |
| | $ | 9,658 |
|
Adjusted EBITDA margin | 5.7 | % | | 6.7 | % |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
| | | | | | | |
Net loss | | | | | $ | (23,886) | | | $ | (85,978) | |
Goodwill impairment | | | | | — | | | 57,146 | |
Severance and other charges, net | | | | | 7,376 | | | 20,725 | |
Interest (income) expense, net | | | | | 287 | | | (533) | |
Depreciation and amortization | | | | | 16,107 | | | 19,718 | |
Income tax expense (benefit) | | | | | 1,070 | | | (15,563) | |
(Gain) loss on disposal of assets | | | | | (182) | | | 60 | |
Foreign currency loss | | | | | 2,868 | | | 9,892 | |
| | | | | | | |
Charges and credits (1) | | | | | 3,013 | | | 1,592 | |
Adjusted EBITDA | | | | | $ | 6,653 | | | $ | 7,059 | |
Adjusted EBITDA margin | | | | | 7.0 | % | | 5.7 | % |
| |
(1)(1) Comprised of Equity-based compensation expense (for the three months ended March 31, 2021 and 2020: $2,872 and $2,146, respectively), Unrealized and realized (gains) losses (for the three months ended March 31, 2021 and 2020: $99 and $(1,704), respectively), and Investigation-related matters (for the three months ended March 31, 2021 and 2020: $42 and $1,150, respectively). | Comprised of Equity-based compensation expense (for the three months ended March 31, 2020 and 2019: $2,146 and $2,574, respectively), Unrealized and realized gains (for the three months ended March 31, 2020 and 2019: $1,704 and $308, respectively), and Investigation-related matters (for the three months ended March 31, 2020 and 2019: $1,150 and $1,233, 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 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.
Consolidated Results of Operations
The following table presents our consolidated results for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (Unaudited) |
Revenue: | | | | | | | |
Services | | | | | $ | 81,523 | | | $ | 105,083 | |
Products | | | | | 13,288 | | | 18,409 | |
Total revenue | | | | | 94,811 | | | 123,492 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Cost of revenue, exclusive of depreciation and amortization | | | | | | | |
Services | | | | | 63,935 | | | 79,380 | |
Products | | | | | 10,914 | | | 13,988 | |
General and administrative expenses | | | | | 16,447 | | | 26,683 | |
Depreciation and amortization | | | | | 16,107 | | | 19,718 | |
Goodwill impairment | | | | | — | | | 57,146 | |
Severance and other charges, net | | | | | 7,376 | | | 20,725 | |
(Gain) loss on disposal of assets | | | | | (182) | | | 60 | |
Operating loss | | | | | (19,786) | | | (94,208) | |
|
Other income (expense): | | | | | | | |
| | | | | | | |
Other income, net | | | | | 125 | | | 2,026 | |
Interest income (expense), net | | | | | (287) | | | 533 | |
| | | | | | | |
Foreign currency loss | | | | | (2,868) | | | (9,892) | |
Total other expense | | | | | (3,030) | | | (7,333) | |
| | | | | | | |
Loss before income taxes | | | | | (22,816) | | | (101,541) | |
Income tax expense (benefit) | | | | | 1,070 | | | (15,563) | |
Net loss | | | | | $ | (23,886) | | | $ | (85,978) | |
|
| | | | | | | |
| Three Months Ended |
| March 31, |
| 2020 | | 2019 |
| (Unaudited) |
Revenue: | | | |
Services | $ | 105,083 |
| | $ | 115,406 |
|
Products | 18,409 |
| | 29,002 |
|
Total revenue | 123,492 |
| | 144,408 |
|
| | | |
Operating expenses: | | | |
Cost of revenue, exclusive of depreciation and amortization | | | |
Services | 79,380 |
| | 83,239 |
|
Products | 13,988 |
| | 20,128 |
|
General and administrative expenses | 26,683 |
| | 35,411 |
|
Depreciation and amortization | 19,718 |
| | 25,242 |
|
Goodwill impairment | 57,146 |
| | — |
|
Severance and other charges, net | 20,725 |
| | 455 |
|
Loss on disposal of assets | 60 |
| | 227 |
|
Operating loss | (94,208 | ) | | (20,294 | ) |
|
Other income (expense): | | | |
Other income, net | 2,026 |
| | 529 |
|
Interest income, net | 533 |
| | 768 |
|
Foreign currency gain (loss) | (9,892 | ) | | 483 |
|
Total other income (expense) | (7,333 | ) | | 1,780 |
|
| | | |
Loss before income taxes | (101,541 | ) | | (18,514 | ) |
Income tax expense (benefit) | (15,563 | ) | | 9,773 |
|
Net loss | $ | (85,978 | ) | | $ | (28,287 | ) |
Three Months Ended March 31, 20202021 Compared to Three Months Ended March 31, 20192020
Two significant, and somewhat independent, events combined to cause a significant decrease in revenue near the end of the first quarter of 2020. Threatened actions to compete for market share gains by oil producing countries, notably Saudi Arabia and Russia, created the expectation of significant oversupply in the future, while the COVID-19 pandemic drove energy demand downward and led to disruptions of activity in some locations. U.S. onshore markets saw the largest reductions. International customer spending was also reduced, although to a lesser extent than the U.S. onshore market. Within the international market, certain regions were impacted more than others by disruptions related to COVID-19. In Africa, in particular, travel restrictions led to significant disruptions of activity.
Direct impact of the COVID-19 outbreak on our ability to conduct operations has been minor. We have implemented a work-from-home directive for office personnel across the globe, split-shift rotation protocols for our manufacturing facilities and operations facilities, social distancing guidelines in manufacturing and operations facilities, and quarantine protocols for employees at risk of exposure to COVID-19. In addition, we have experienced local disruptions of activity in response to outbreaks of COVID-19 at certain offshore drilling locations, and disruptions due to travel restrictions
and local governmental orders. However, in the majority of locations, our products and services have been deemed essential economic activity and have continued during local restrictions on business activity.
Revenue. Revenue from external customers, excluding intersegment sales, for the three months ended March 31, 20202021 decreased by $20.9$28.7 million, or 14.5%23.2%, to $123.5$94.8 million from $144.4$123.5 million for the three months ended March 31, 2019.2020. Revenue decreased across all segments partially due to the COVID-19 pandemic and the sharp decline in oil prices. 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 three months ended March 31, 20202021 decreased by $10.0$18.6 million, or 9.7%19.9%, to $93.4$74.8 million from $103.4$93.4 million for the three months ended March 31, 2019.2020. The decrease was driven by lower activity levels and mix of work in the TRS, Tubulars and CE segments.
General and administrative expenses. General and administrative expenses for the three months ended March 31, 20202021 decreased by $8.7$10.3 million, or 24.6%38.6%, to $26.7$16.4 million from $35.4$26.7 million for the three months ended March 31, 20192020 due to the restructuring and cost cutting measures we implemented during 2019.2020.
Depreciation and amortization. Depreciation and amortization for the three months ended March 31, 20202021 decreased by $5.5$3.6 million, or 21.9%18.3%, to $19.7$16.1 million from $25.2$19.7 million for the three months ended March 31, 2019,2020, as a result of a lower depreciable base and less intangible asset amortization.
Goodwill impairment. There was no goodwill impairment charge during the three months ended March 31, 2021. We recognized a goodwill impairment of $57.1 million for the three months ended March 31, 2020. There was no goodwill impairment charge during the three months ended March 31, 2019.2020. See Note 6—Goodwill and Intangible Assets in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.
Severance and other charges, net. Severance and other charges, net for the three months ended March 31, 2020 increased2021 decreased by $20.3$13.3 million to $20.7$7.4 million from $0.5$20.7 million for the three months ended March 31, 2019.2020. Severance and other charges, net for the three months endedMarch 31, 2020 was unfavorably impacted by fixed asset impairment charges of $15.5 million and intangible asset impairments of $4.7 million, and severance and other costs of $0.5 million, primarily driven by COVID-19-related activity disruptions and customer spending cuts in response to falling oil prices. Severance and other charges, net for the expected decrease in demand for our servicesthree months ended March 31, 2021 includes $6.8 million of mergers and products as a result of lower oil prices due toacquisition costs associated with the ongoing COVID-19 pandemic and the OPEC+ price war. pending merger with Expro.See Note 16—15—Severance and Other Charges, net in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.
Foreign currency loss. Foreign currency loss for the three months ended March 31, 2020 changed2021 decreased by $10.4$7.0 million, to a loss of$2.9 million compared to $9.9 million from a gain of $0.5 million for the three months ended March 31, 2019.2020. The change in foreign currency results year-over-year was primarily driven by increasedreduced strengthening of the U.S. dollar in the current period as compared to the prior year period, partially due to the impact of COVID-19.period.
Income tax expense (benefit). Income tax expense (benefit) for the three months ended March 31, 2020 increased2021 changed by $25.3$16.7 million to an expense of $1.1 million from a benefit of $15.6 million from an expense of $9.8 million for the three months ended March 31, 2019.2020. The variance in effective tax rates compared to the same period last year is due to the beneficial impact in the currentprior year period from the 5-year net operating loss carryback provision included in the recently-enacted Coronavirus Aid, Relief, and Economic Security Act.Act (the “CARES Act”) as well as a change in the geographical mix of income.
Operating Segment Results
The following table presents revenue and Adjusted EBITDA by segment (in thousands):
|
| | | | | | | |
| Three Months Ended |
| March 31, |
| 2020 | | 2019 |
Revenue: | | | |
Tubular Running Services | $ | 89,497 |
| | $ | 98,079 |
|
Tubulars | 12,542 |
| | 18,657 |
|
Cementing Equipment | 21,453 |
| | 27,672 |
|
Total | $ | 123,492 |
| | $ | 144,408 |
|
| | | |
Segment Adjusted EBITDA (1): | | | |
Tubular Running Services | $ | 13,305 |
| | $ | 17,735 |
|
Tubulars | 1,396 |
| | 4,112 |
|
Cementing Equipment | 2,544 |
| | 3,794 |
|
Corporate (2) | (10,186 | ) | | (15,983 | ) |
| $ | 7,059 |
| | $ | 9,658 |
|
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
Revenue: | | | | | | | |
Tubular Running Services | | | | | $ | 66,285 | | | $ | 89,497 | |
Tubulars | | | | | 11,669 | | | 12,542 | |
Cementing Equipment | | | | | 16,857 | | | 21,453 | |
Total | | | | | $ | 94,811 | | | $ | 123,492 | |
| | | | | | | |
Segment Adjusted EBITDA (1): | | | | | | | |
Tubular Running Services | | | | | $ | 8,128 | | | $ | 13,305 | |
Tubulars | | | | | 639 | | | 1,396 | |
Cementing Equipment | | | | | 4,795 | | | 2,544 | |
Corporate (2) | | | | | (6,909) | | | (10,186) | |
| | | | | $ | 6,653 | | | $ | 7,059 | |
| |
(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 EBITDA and Adjusted EBITDA Margin”).
|
| |
(2)
| Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives. |
(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 EBITDA and Adjusted EBITDA Margin”).
(2)Includes certain expenses not attributable to a particular segment, such as costs related to support functions and corporate executives.
Three Months Ended March 31, 20202021 Compared to Three Months Ended March 31, 20192020
Tubular Running Services
Revenue for the TRS segment was $89.5$66.3 million for the three months ended March 31, 20202021, a decrease of $8.6$23.2 million, or 8.8%25.9%, compared to $98.1$89.5 million for the same period in 2019.2020. The decrease was driven by COVID-19-related activity disruptions and initial customer spending cuts in response to falling oil prices inmost offshore markets and the U.S., Middle East, Africa, and Canada, partially offset by improved year-over-year results in Mexico, Asia Pacific and Europe. land market.
Adjusted EBITDA for the TRS segment was $13.3$8.1 million for the three months ended March 31, 20202021, a decrease of $4.4$5.2 million, or 25.0%39.1%, compared to $17.7$13.3 million for the same period in 2019.2020. Segment results were negatively impacted by the activity declines in Africa,across most offshore markets and the U.S., Middle East and Canada. land market.
Tubulars
Revenue for the Tubulars segment was $12.5$11.7 million for the three months ended March 31, 20202021, a decrease of $6.1$0.8 million, or 32.8%6.4%, compared to $18.7$12.5 million for the same period in 2019,2020, primarily as a result of lower drilling tools activity and lower tubular sales during the current period, due in part to COVID-19-related activity disruptions and initial customer spending cuts in response to falling oil prices.period.
Adjusted EBITDA for the Tubulars segment was $1.4$0.6 million for the three months ended March 31, 20202021, a decrease of $2.7$0.8 million, or 66.1%57.1%, compared to $4.1$1.4 million for the same period in 2019. Lower2020. A decrease in high margin drilling tools activity and lower tubular sales impacted the current period.
Cementing Equipment
Revenue for the CE segment was $21.5$16.9 million for the three months ended March 31, 20202021, a decrease of $6.2$4.6 million, or 22.5%21.4%, compared to $27.7$21.5 million for the same period in 2019,2020, driven by lower drilling activity and product sales in the U.S. as a result of falling oil prices.
Adjusted EBITDA for the CE segment was $2.5$4.8 million for the three months ended March 31, 20202021, a decreasean increase of $1.3$2.3 million, or 32.9%92.0%, compared to $3.8$2.5 million for the same period in 2019,2020, primarily due to cost cutting measures that more than offset lower revenue, particularly in the U.S. offshore market.revenue.
Corporate
Adjusted EBITDA for Corporate was a loss of $10.2$6.9 million for the three months ended March 31, 20202021, an improvement of $5.8$3.3 million, or 36.3%32.4%, compared to a loss of $16.0$10.2 million for the same period in 2019,2020, primarily due to lower costs associated withas a result of restructuring and cost cutting measures we implemented during 2019.measures.
Liquidity and Capital Resources
Liquidity
At March 31, 2020,2021, we had cash and cash equivalents and and short-term investments of $170.9$193.6 million and no debt. 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. The COVID-19 pandemic has significantly reduced economic activity levels across the globe, which has resulted in lower demand for oil and natural gas, as well as for our services and products. The reduced demand for our services and products has had, and is likely tomay continue to have, a material adverse impact on our business, results of operations and financial condition. In consideration of these risks, we are undertaking additional measures to protect liquidity. These
measures include increased focus on collection of receivables, with particular attention to the U.S. onshore market, enhanced customer credit review, special measures to reduce risks of high-cost inventory items, and enhanced cash reporting requirements.
Our Board has authorized a program to repurchase our common stock from time to time. Approximately $38,502,322 remained authorized for repurchases as of March 31, 2021; subject to the limitation set in our shareholder authorization for repurchases of our common stock, which is currently 10% of the common stock outstanding as of April 30, 2020. From the inception of this program in February 2020 to date, we repurchased 570,044 shares of our common stock for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020 due to the impacts of COVID-19 and commodity price declines and will be revisited when market conditions stabilize sufficiently to provide greater clarity to anticipated business results. We expect that following the Merger, the board of directors of the Combined Company will reevaluate this program.
Our total capital expenditures are estimated to range between $20.0 million andbe approximately $25.0 million in 2020,2021, of which we expect approximately 90% will be used for the purchase and manufacture of equipment and 10% for other property, plant and equipment, inclusive of capitalized enterprise resource planning software implementation costs.equipment. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions and timing of deliveries. During the three months ended March 31, 20202021 and 2019,2020, cash expenditures related to property, plant and equipment and intangibles were $10.0$2.3 million and $8.1$10.0 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 2020.2021. We expect that following the Merger, the board of directors of the Combined Company will reevaluate our capital expenditures plan.
Credit Facility
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 five-year senior secured revolving credit facility (the “ABL Credit Facility”) with 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 $15.0 million available for letters of credit. Subject to the terms of the ABL Credit Facility, we have the ability to increase the commitments to $200.0 million. The maximum amount that the Company may borrow under the ABL Credit Facility is subject to a borrowing base, which is based on a percentage of 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 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 and restrictive provisions which limit, subject to certain customary exceptions and thresholds, FINV’s ability to, among other things, (1) enter into asset sales; (2) incur additional indebtedness; (3) make investments, acquisitions, or loans and create or incur liens; (4) pay certain dividends or make other distributions and (5) engage in 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 cross default provisions that apply to FINV’s other indebtedness.
As of March 31, 2020,2021, FINV had no borrowings outstanding under the ABL Credit Facility, letters of credit outstanding of $9.1$10.3 million and availability of $46.8$23.5 million. At this time, due to our expected ability to fund our capital expenditure and liquidity requirements from cash on hand, we do not anticipate a need to borrow under the ABL Credit Facility during the remainder of 2020.2021. Further, we do not believe that an FCCR Trigger Event will occur in the remainder of 2020.2021.
In connection with the closing of the Merger, Frank’s expects that the Combined Company will enter into a new revolving credit facility and terminate or otherwise replace the existing Frank’s and Expro credit facilities.
Tax Receivable Agreement and Amended & Restated Tax Receivable Agreement
We entered into the TRA with FICV and Mosing Holdings in connection with our IPO. The TRA generally provides for the payment by usFINV to Mosing Holdings of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that weFINV actually realizerealizes (or areis deemed to realize in certain circumstances) in periods after our IPO as a result of (i) 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 stockConversion and (ii) imputed interest deemed to be paid by usFINV as a result of, and additional tax basis arising from, payments under the TRA. We will retain the benefit of the remaining 15% of these cash savings, if any. Payments we makeFINV makes under the TRA will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return to the date of payment.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 FINV. As of April 30, 2020,29, 2021, based on the best information available to us, the Mosing family collectively owns approximately 52%,47% of our common shares.
The payment obligations under the TRA are ourFINV’s obligations and are not obligations of FICV. The term of the TRA commenced upon the completion of the IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless weFINV elects to exercise ourits right to terminate the TRA (or the TRA is terminated due to other circumstances, including our breach of a material obligation thereunder or certain mergers or other changes of controls)control), and we makeFINV makes the termination payment specified inby the TRA or FINV otherwise settles its obligations under the TRA.
If we elect to execute our sole rightFINV elects to terminate the TRA early, which it may do in its sole discretion (or if it terminates early as a result of our breach), weit would be required to make a substantial, immediate lump-sum payment equal to the present value of the hypothetical future payments that could be required to be paid under 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,benefits), determined by applying a discount rate equal to the long-term Treasury rate in effect on the applicable date plus 300 basis points. 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 certain circumstances, weFINV may be required to make payments under the TRA that we haveit has entered into with Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that we recognizeFINV recognizes from tax benefits resulting from the conversion of Preferred Stock,Conversion, which would reduce the actual tax benefit to us.FINV. If we wereFINV was to elect to exercise ourits sole right to terminate the TRA early or enter into certain change of control transactions, weFINV may incur payment obligations prior to the time weit actually incurincurs any tax benefit. In those circumstances, weFINV would need to pay the amounts out of cash on hand, finance the payments or refrain from incurring the obligation (including by not entering into a change of control transaction). Though we do not have any present intention of incurring an advance payment under the TRA (other than as described below with respect to the
A&R TRA), based on our current liquidity and our expected ability to access debt and equity financing, we believe weFINV 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.
In connection with the Merger Agreement, FINV, FICV and Mosing Holdings have entered into the A&R TRA. Pursuant to the A&R TRA, FINV, FICV and Mosing Holdings have agreed, among other things to settle the early termination payment obligation that would otherwise be owed to Mosing Holdings under the TRA as a result of the Merger by the payment by FINV to Mosing Holdings of (i) $15 million cash at the closing of the Transactions and (ii) certain other contingent payments in the future in the event the Combined Company realizes cash tax savings from tax attributes covered under the TRA during the ten year period following the Closing Date in excess of $18,057,000, as more fully described in the A&R TRA. The terms of the A&R TRA are conditioned upon and subject to the closing of the Transactions and the payment to Mosing Holdings of the $15 million cash payment at the closing of the Transactions. If such conditions do not occur, the A&R TRA will be terminated and will be null and void, and the TRA will remain in effect in accordance with its terms. Please see Note 12—11—Related Party Transactions in the Notes to Unaudited Condensed Consolidated Financial Statements.Statements.
Cash Flows from Operating, Investing and Financing Activities
Cash flows from our operations, investing and financing activities are summarized below (in thousands):
| | | | | | | | | | | |
| Three Months Ended |
| March 31, |
| 2021 | | 2020 |
Operating activities | $ | (15,481) | | | $ | (22,252) | |
Investing activities | (1,956) | | | (10,039) | |
Financing activities | (2,165) | | | (1,521) | |
| (19,602) | | | (33,812) | |
Effect of exchange rate changes on cash | 1,350 | | | 9,327 | |
Net decrease in cash, cash equivalents and restricted cash | $ | (18,252) | | | $ | (24,485) | |
|
| | | | | | | |
| Three Months Ended |
| March 31, |
| 2020 | | 2019 |
Operating activities | $ | (22,252 | ) | | $ | (29,770 | ) |
Investing activities | (10,039 | ) | | (787 | ) |
Financing activities | (1,521 | ) | | (2,497 | ) |
| (33,812 | ) | | (33,054 | ) |
Effect of exchange rate changes on cash | 9,327 |
| | (376 | ) |
Net decrease in cash, cash equivalents and restricted cash | $ | (24,485 | ) | | $ | (33,430 | ) |
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 $22.3$15.5 million for the three months ended March 31, 20202021 compared to cash flow used in operating activities of $29.8$22.3 million for the same period in 2019.2020. The change in cash flow from operating activities of $7.5$6.8 million was primarily due to a decrease in employee cash compensation andresult of favorable changes in the realized positionsaccounts receivable of our foreign currency derivative contracts,$9.3 million and accounts payable and accrued liabilities of $24.1 million, partially offset by unfavorable working capital changes.changes in inventories of $10.6 million.
Investing Activities
Cash flow used in investing activities was $10.0$2.0 million for the three months ended March 31, 20202021 compared to $0.8$10.0 million in the same period in 2019. The change in cash flow from investing activities2020, a year-over-year decrease of $9.3$8.0 million, was driven byprimarily due to a $1.8$7.6 million increasedecrease in the purchases of property, plant, equipment and intangibles. First quarter of 2019 investing activities included net proceeds from sales of investments of $7.4 million that did not reoccur in the first quarter of 2020.equipment.
Financing Activities
Cash flow used in financing activities was $1.5$2.2 million for the three months ended March 31, 20202021 compared to $2.5$1.5 million in the same period in 2019.2020. The decreaseincrease in cash flow used in financing activities of $1.0$0.7 million was due to decreasedincreased treasury shares withheld for employee taxes of $0.8 million and increased repayment of borrowings of $1.7 million and treasury shares withheld of $0.4$0.7 million, partially offset by repurchases under our publicly announced share repurchase program of $1.0 million during the first quarter of 2020.three months ended March 31, 2020 that did not reoccur during 2021.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements with the exception of purchase obligations.
Critical Accounting Policies
There were no changes to our significant accounting policies from those disclosed in our Annual Report.
Impact of Recent Accounting Pronouncements
Refer to Note 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. Our exposure to market risk has not changed materially since December 31, 2019.2020.
Item 4. Controls and Procedures
| |
(a) | Evaluation of Disclosure 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 March 31, 20202021 at the reasonable assurance level.
| |
(b) | Change in Internal Control Over Financial Reporting. |
There have been(b) Change in Internal Control Over Financial Reporting.
Except as described below, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that there were no changes in ourthe Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting during the period covered by this quarterly report.
During the first quarter of 2021, the Company implemented a new enterprise resource planning (“ERP”) system. In connection with this ERP system, we have updated our internal controls over financial reporting to accommodate modifications to our business processes and accounting procedures. As with all new information systems, this ERP system and the related internal controls over financial reporting will require testing for effectiveness. We do not believe that the transition to this ERP system will have an adverse effect on our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 March 31, 20202021 and December 31, 2019.2020. 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. Please see Note 15—14—Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements.
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”), 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”), the U.S. Department of Justice (“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.
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 boardBoard and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks discussed below and 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.
Our business dependsRisk Factors Relating to the Merger
The Exchange Ratio will not be adjusted in the event of any change in the stock price of Frank’s.
At the Effective Time, each Expro Ordinary Share outstanding immediately prior to the Effective Time, other than shares owned by Expro, Frank’s, Merger Sub or any subsidiary of Frank’s (but including, for the avoidance of doubt, any such shares held by any wholly-owned subsidiary of Expro), will be converted into the right to receive a number of shares of our common stock equal to the Exchange Ratio. The Exchange Ratio will not be adjusted for changes in the market price of our common stock between the date of signing the Merger Agreement and completion of the Merger. Changes in the price of our common stock prior to the Merger will affect the value of our common stock that Expro shareholders will receive on the leveldate of activitythe Merger. Stock price changes may result from a variety of factors (many of which are out of our control), including the following:
•changes in the oilrespective businesses, operations and gas industry, which is significantly affected by oilprospects of Frank’s and gas pricesExpro;
•changes in market assessments of the business, operations and prospects of Frank’s and Expro;
•investor behavior and strategies, including market assessments of the likelihood that the Merger will be completed;
•interest rates, general market and economic conditions and other factors.factors generally affecting the price of our common stock; and
•legislation, governmental regulation and legal developments in the businesses in which Frank’s and Expro operate.
The price of our common stock on the levelClosing Date may vary from its price on the date the Merger Agreement was executed, on the date of activity in oilthe proxy statement/prospectus and gas exploration, developmenton the date of the 2021 annual general meeting of our shareholders (the “Annual Meeting”). As a result, the value represented by the Exchange Ratio will also vary, and production inyou will not know or be able to calculate at the time of the Annual Meeting the market sectors worldwide. Oil and gas prices and market expectationsvalue of potentialthe merger consideration Expro shareholders will receive upon completion of the Merger.
In addition, the Merger might not be completed until a significant period of time has passed after the Annual Meeting. Because the Exchange Ratio will not be adjusted to reflect any changes in these prices significantly affect this levelthe market value of activity. However,our common stock, the market value of the our common stock issued in connection with the Merger may be higher commodity prices do not necessarily translate into increased drilling or well construction and completion activity, since customers’ expectationslower than the value of future commodity prices typically drive demand for our services and products. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments also affect the demand for our services and products. Worldwide military, political and economic events havethose shares on earlier dates. Stock price changes may result from, among other things, changes in the past contributedbusiness, operations or prospects of Frank’s and Expro prior to oilor following the Merger, litigation or regulatory considerations, general business, market, industry or economic conditions and gasother factors both within and beyond the control of Frank’s. Neither Frank’s nor Expro is permitted to terminate the Merger Agreement solely because of changes in the market price volatilityor value of either company’s equity securities.
Current Frank’s shareholders will have a reduced ownership and continuevoting interest in the Combined Company after the Merger, and such reduced ownership could have negative Dutch tax consequences.
Frank’s will issue approximately 426,146,247 shares of our common stock to do soExpro shareholders in the Merger. As a result of these issuances, Expro shareholders are expected to hold up to approximately 65% of the Combined Company’s outstanding common stock immediately following completion of the Merger.
Frank’s shareholders currently have the right to vote for its directors and on other matters affecting Frank’s. Each Frank’s shareholder will remain a shareholder of Frank’s with a percentage ownership of the Combined Company that will be smaller than the shareholder’s percentage of Frank’s prior to the Merger. As a result of these reduced ownership percentages, Frank’s shareholders will have less voting power in the Combined Company than they now have with respect to Frank’s.
As a result of the Merger, the interest held by current Frank’s shareholders in the Combined Company could fall below certain thresholds relevant for Dutch tax purposes, such as the threshold relevant in respect of the Dutch substantial interest rules, which could give rise to Dutch taxes on income and capital gains. In addition, the Merger will impact the average paid-in capital of Frank’s common stock held by current Frank’s shareholders as recognized for purposes of Dutch dividend withholding tax, which may have tax consequences in relation to future liquidation proceeds of redemption of Frank’s common stock or proceeds of repurchases of Frank’s common stock derived by current Frank’s shareholders. For further information, see the “Material Dutch Tax Consequences” section of the Registration Statement on Form S-4 filed with the SEC on April 26, 2021. Each Frank’s shareholder should seek tax advice from his own tax advisors about the potential tax consequences to it of holding and disposing of shares of our common stock (some of which could be material) following the merger.
The Merger is subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at present. Average daily prices for New York Mercantile Exchange West Texas Intermediate ranged from a high of approximately $63/Bbl in January 2020all.
The Merger is subject to a lownumber of negative $37/Bbl in April 2020. This significant decline in crude oil prices has largely been attributable toconditions beyond the recent actionscontrol of Saudi ArabiaFrank’s and Russia, which have resulted in a substantial decrease in oil and natural gas prices, and the global outbreak of COVID-19, which has reduced demand for oil and natural gas because of significantly reduced global and national economic activity. Specifically, in March 2020, Saudi Arabia and Russia failed to agree on a plan to cut production of oil and gas within OPEC and Russia. Subsequently, Saudi Arabia announced plans to increase production to record levels and reduce the prices at which they sell oil.Expro that may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when these conditions will be satisfied. Any delay in completing the Merger could cause the Combined Company not to realize some or when oil productionall of the benefits that we expect to achieve if the Merger is successfully completed within its expected time frame.
Failure to complete the Merger could negatively impact the future business and economic activitiesfinancial results of Frank’s.
Neither Frank’s nor Expro can make any assurances that it will returnbe able to normalized levels. Saudi Arabiasatisfy all of the conditions to the Merger or succeed in any litigation brought in connection with the Merger. If the Merger is not completed, the financial results of Frank’s may be adversely affected and Russia subsequently announced production cuts,Frank’s will be subject to several risks, including but even withnot limited to:
•Frank’s being required to pay Expro a termination fee of $37.5 million or Expro being required to pay Frank’s a termination fee of $71.5 million, in each case under certain circumstances provided in the Merger Agreement;
•payment of costs relating to the Merger, such cuts oil prices could remain at current levels, or decline further, for an extended periodas legal, accounting, financial advisor and printing fees, regardless of time. If current levels are sustained or decline further, certainwhether the Merger is completed;
•the focus of our management team on the Merger instead of the pursuit of other opportunities that could have been beneficial to Frank’s; and
•the potential occurrence of litigation related to any failure to complete the Merger.
In addition, if the Merger is not completed, Frank’s may experience negative reactions from the financial markets and from its customers and employees. If the Merger is not completed, Frank’s cannot assure its shareholders that these risks will not materialize and will not materially and adversely affect the business, financial results of Frank’s or the stock price of our common stock.
The Merger Agreement contains provisions that limit each party’s ability to pursue alternatives to the Merger, could discourage a potential competing acquiror of either Frank’s or Expro from making a favorable alternative transaction proposal and, in specified circumstances, could require either party to pay a termination fee to the other party.
The Merger Agreement contains “non-solicitation” provisions that, subject to limited exceptions, restrict Frank’s or Expro’s ability to, among other things, directly or indirectly initiate, solicit, knowingly encourage or knowingly facilitate or take any action designed to lead to the inquiry, making, or submission of a proposal competing with the transactions contemplated by the Merger Agreement. In addition, while each of the Frank’s Board and the Expro Board has the ability, in certain circumstances, to change its recommendation of the transaction to its shareholders, neither party can terminate the Merger Agreement to accept an alternative proposal, and the other party generally has an opportunity to modify the terms of the Merger and Merger Agreement in response to any alternative proposals that may be made before such board of directors may withdraw or modify its recommendation. Moreover, in certain circumstances, Frank’s or Expro may be required to pay up to $5.5 million of the other party’s expenses, respectively, or a termination fee of $37.5 million or $71.5 million, respectively.
These provisions could discourage a potential third party that might have an interest in acquiring all or a significant portion of Frank’s or Expro from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the Merger. In addition, these provisions might result in a potential third party acquirer proposing to pay a lower price to the shareholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
If the Merger Agreement is terminated and either Frank’s or Expro determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.
Members of Frank’s management and the Frank’s Board have interests in the Transactions that are different from, or in addition to, those of other Frank’s shareholders.
In considering whether to approve the Transactions, holders of our common stock should recognize that members of Frank’s management and the Frank’s Board have interests in the Transactions that differ from, or are in addition to, their interests as shareholders of Frank’s.
Frank’s and Expro may be unable to pay their vendorsobtain the regulatory clearances and service providers, including us, as aapprovals required to complete the Merger or, in order to do so, Frank’s and Expro may be required to comply with material restrictions or conditions.
resultConsummation of the declineMerger is subject to obtaining approval under certain antitrust and foreign investment laws. Regulatory entities may impose certain requirements or obligations as conditions for their approval or in commodity prices. Reduced activity in our areasconnection with their review. The Merger Agreement may require Frank’s or Expro to accept conditions from these regulators that could adversely impact the Combined Company without either of operation as a result of decreased capital spending could have a negative long-term impact on our business, even in an environment of stronger oil and natural gas prices.
The demand for our services and products may also be generally affected by numerous factors, including:
them having the level of worldwide oil and gas exploration and production;
right to refuse to close the cost of exploring for, producing and delivering oil and gas;
demand for energy, which is affected by worldwide economic activity and population growth;
the level of excess production capacity;
the discovery rate of new oil and gas reserves;
the ability of OPEC to set and maintain production levels for oil;
the level of production by non-OPEC countries;
global or national health concerns, including health epidemics such as the outbreak of COVID-19 at the beginning of 2020;
the location of oil and gas drilling and production activity, including the relative amounts of activity onshore and offshore;
the technical specifications of wells including depth of wells and complexity of well design;
U.S. and global political and economic uncertainty or inactivity, socio-political unrest and instability or hostilities;
demand for, availability of and technological viability of, alternative sources of energy; and
technological advances affecting energy exploration, production, transportation and consumption.
Demand for our offshore services and products substantially dependsMerger on the levelbasis of activity in offshore oil and gas exploration, development and production. The level of offshore activity is historically cyclical and characterized by large fluctuations in response to relatively minor changes in a variety of factors, including oil and gas prices, which couldthose regulatory conditions. Neither Frank’s nor Expro can provide any assurance that they will obtain the necessary clearances or approvals, or that any required conditions will not have a material adverse effect on our business, financial condition and results of operations.
A significant amount of our U.S. onshore business is focused on unconventional shale resource plays. The demand for those services and products is substantially affected by oil and gas prices and market expectations of potential changes in these prices. If commodity prices remain depressed, demand for our services and productsthe Combined Company following the Merger or result in the U.S. onshore marketabandonment of the Merger.
Additionally, even after completion of the Merger, governmental authorities could seek to challenge the Merger. Frank’s or Expro may not prevail and may incur significant costs in defending or settling any action under the antitrust laws.
The pendency of the Merger could adversely affect the business and operations of Frank’s.
In connection with the pending Merger, some customers or vendors of Frank’s may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of Frank’s, regardless of whether the Merger is completed. Similarly, current and prospective employees of Frank’s may experience uncertainty about their future roles with the Combined Company following the Merger, which may materially adversely affect the ability of Frank’s to attract, retain and motivate key personnel during the pendency of the Merger and which may materially adversely divert attention from the daily activities of Frank’s existing employees.
In addition, due to operating covenants in the Merger Agreement, Frank’s may be unable, during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial to Frank’s. Further, the process of seeking to accomplish the Merger could also divert the focus of management of Frank’s from pursuing other opportunities that could be reduced,beneficial to it, without realizing any of the benefits which couldmight have resulted had the Merger been completed.
The COVID-19 outbreak may adversely affect Frank’s and Expro’s ability to timely consummate the Merger.
COVID-19 and the various precautionary measures attempting to limit its spread taken by many governmental authorities worldwide has had a material adversesevere effect on our business, financial conditionglobal markets and results of operations. Any actual or anticipated reduction in oil or gas prices may reduce the level of exploration, drilling and production activities. Prolonged low oil prices have resulted in softer demand for our products and services and if prices remain at current levels, demand could be further reduced. Additionally, we have reduced pricing in some of our customer contracts in light of the volatility of the oil and gas market.
Furthermore, the oil and gas industry has historically experienced periodic downturns,global economy. The extent to which have been characterized by reduced demand for oilfield products and services and downward pressure on the prices we charge. A significant downturn in the oil and gas industry has adversely affected the demand for oilfield services and our business, financial condition and results of operations since late 2014. In the first quarter of 2020, demand further decreased due to the COVID-19 outbreak and increased oil production out of Saudi Arabia and Russia. With the continued downturn, demand for our products and services has not returned to the levels experienced prior to late 2014. We cannot be assured that there will be a significant recovery in the demand for our products and services to equal or approach levels experienced prior to the downturn.
The recent downturns in 2014 and 2020 in the oil and gas industry have negatively affected, and will likely continue to affect, our ability to accurately predict customer demand, causing us to potentially hold excess or obsolete inventory and experience a reduction in gross margins and financial results.
We may not be able to accurately predict what or how many products our customers will need in the future. Orders are placed with our suppliers based on forecasts of customer demand and, in some instances, we may establish buffer inventories to accommodate anticipated demand. Our forecasts of customer demand are based on multiple assumptions, each of which may introduce errors into the estimates. In addition, many of our suppliers require a longer lead time to
provide products than our customers demand for delivery of our finished products. If we overestimate customer demand, we may allocate resources to the purchase of material or manufactured products that we may not be able to sell when we expect to, if at all. As a result, we would hold excess or obsolete inventory, which would reduce gross margin and adversely affect financial results. We overestimated customer demand for our pipe and connectors inventory, and this resulted in a material impairment charge in 2017. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect profit margins, increase product obsolescence and restrict our ability to fund our operations. Recently, the uncertainty surrounding the duration and spread of the COVID-19 pandemic along with the market volatility due to increased oil production from Russiaimpacts Frank’s and Saudi Arabia have further decreased our ability to accurately estimate demand for our services and products. In particular, sporadic suspensions of activity in certain locations due to local outbreaks of COVID-19 are difficult or impossible to anticipate, and can cause interruption of revenue and delays in availability of equipment and personnel for subsequent work, interfering with our ability to plan allocation of resources over time.
We may be exposed to unforeseen risks in our services and product manufacturing, which could adversely affect our results of operations.
We operate a number of manufacturing facilities to support our operations. In addition, we also manufacture certain products, including large OD pipe connectors and cementing products that we sell directly to external customers. The equipment and management systems necessary for suchExpro’s respective business operations may break down, perform poorly or fail, resulting in fluctuations in manufacturing efficiencies. In addition, in the event of an outbreak of COVID-19 among workers at a manufacturing facility, all or some of the workers at the facility might become temporarily unavailable due to required public health measures. Any such disruptions caused by equipment or personnel availability could negatively impact our ability to manufacture and timely deliver products to our customers or our field operations, which could materially and negatively impact the results of our operations. In addition, in such circumstances our customers might cancel purchase orders for failure to timely deliver the products, potentially leading to us holding excess or obsolete inventory, which would reduce gross margin and adversely affect financial results.
Additionally, some of our U.S. onshore business may be conducted under fixed price or “turnkey” contracts. Under fixed price contracts, we agree to perform a defined scope of work for a fixed price. Prices for these contracts are based largely upon estimates and assumptions relating to project scope and specifications, personnel and material needs.
Fluctuations in our manufacturing process and inaccurate estimates and assumptions used in our projects may occur due to factors out of our control, resulting in cost overruns, which we may be required to absorb and could have a material adverse effect on our business, financial condition and results of operations. Such fluctuations or incorrect estimates may affect our ability to deliver services and products to our customers on a timely basis and we may suffer financial penalties and a diminution of our commercial reputation and future product orders, which could adversely affect our business, financial condition and results of operations.
We may be unable to employ a sufficient number of skilled and qualified workers to sustain or expand our current operations.
Our operations require personnel with specialized skills and experience. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force. The demand for skilled workers is high, the supply can be limited in certain jurisdictions, and the cost to attract and retain qualified personnel has increased over the past few years. In addition, we are currently a party to collective bargaining or similar agreements in certain international areas in which we operate, which could result in increases in the wage rates that we must pay to retain our employees. Furthermore, a significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. Finally, the recent COVID-19 pandemic provides an illustrative example of how a pandemic or other health crisis can impact our operations and business by affecting the health of skilled workers and rendering them unable to work or travel. These events may cause our capacity to be diminished, our ability to respond quickly to customer demands or strong market conditions may be inhibited
and our growth potential could be impaired, any of which could have a material adverse effect on our business, financial condition and results of operations.
Our operations and our customers’ operations are subject to a variety of governmental laws and regulations that may increase our costs, limit the demand for our services and products or restrict our operations.
Our business and our customers’ businesses may be significantly affected by:
federal, state and local restrictions on business activity and travel including stay at home orders and quarantines such as those enacted in response to COVID-19;
federal, state and local and non-U.S. laws and other regulations relating to oilfield operations, worker safety and protection of the environment and natural resources;
changes in these laws and regulations; and
the level of enforcement of these laws and regulations.
In addition, we depend on the demand for our services and products from the oil and gas industry. This demand is affected by changing taxes, price controls and other laws and regulations relating to the oil and gas industry in general. For example, the adoption of laws and regulations curtailing exploration and development drilling for oil and gas for economic or other policy reasons could adversely affect our operations by limiting demand for our products. In addition, some non-U.S. countries may adopt regulations or practices that give advantage to indigenous oil companies in bidding for oil leases, or require indigenous companies to perform oilfield services currently supplied by international service companies. To the extent that such companies are not our customers, or we are unable to develop relationships with them, our business may suffer. We cannot determine the extent to which our future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.
Because of our non-U.S. operations and sales, we are also subject to changes in non-U.S. laws and regulations that may encourage or require hiring of local contractors or require non-U.S. contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. If we fail to comply with any applicable law or regulation, our business, financial condition and results of operations may be adversely affected.
Our business is dependent on capital spending by our customers, and reductions in capital spending in response to declining commodity prices will have a material adverse effect on our business.
Any change in capital expenditures by our customers or reductions in their capital spending could directly impact our business by reducing demand for our products and services and could have a material adverse effect on our business. Our customers are subject to risks which, in turn, could impact our business, including recent volatile oil and gas prices caused by COVID-19 and increased oil production from Russia and Saudi Arabia, difficulty accessing capital on economically advantageous terms and adverse developments in their own business or operations. With respect to national oil company customers, we are also subject to risk of policy, regime and budgetary changes.
We face risks related to natural disasters, which could result in severe property damage or materially and adversely disrupt our operations and affect travel required for our worldwide operations.
Some of our operations involve risks of, among other things, property damage, which could curtail our operations. For example, disruptions in operations or damage to a manufacturing plant could reduce our ability to produce products and satisfy customer demand. In particular, we have offices and manufacturing facilities in Houston, Texas and Houma and Lafayette, Louisiana as well as in various places throughout the Gulf Coast region of the United States. These offices and facilities are particularly susceptible to severe tropical storms, hurricanes and flooding, which may disrupt our operations. If one or more manufacturing facilities we own are damaged by severe weather or any other disaster, accident, catastrophe or event, our operations could be significantly interrupted. Similar interruptions could result from damage to production or other facilities that provide supplies or other raw materials to our plants or other stoppages arising from factors beyond our control. These interruptions might involve significant damage to, among other things, property, and repairs might take from a week or less for a minor incident to many months or more for a major interruption.
In addition, a portion of our business involves the movement of people and certain parts and supplies to or from foreign locations. Any restrictions on travel or shipments to and from foreign locations, due to the occurrence of natural disasters such as earthquakes, floods or hurricanes, in these locations, could significantly disrupt our operations and decrease our ability to provide services to our customers. If a natural disaster were to impact a location where we have a high concentration of business and resources, our local facilities and workforce could be affected by such an occurrence or outbreak which could also significantly disrupt our operations and decrease our ability to provide services and products to our customers.
Events outside of our control, including a pandemic, epidemic or outbreak of an infectious disease, such as the recent global outbreak of COVID-19, have materially adversely affected, and may further materially adversely affect, our business.
We face risks related to pandemics, epidemics, outbreaks or other public health events that are outside of our control, and could significantly disrupt our operations and adversely affect our financial condition. For example, the recent global outbreak of COVID-19 has reduced demand for oil and natural gas because of significantly reduced global and national economic activity. In addition, the impact of COVID-19 or other public health events may adversely affect our operations or the health of our workforce and the workforces of our customers and service providers by rendering employees or contractors unable to work or unable to access our and their facilities for an indefinite period of time. On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency, and several states, including Texas and Louisiana, and municipalities have declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Our business involves movement of people and certain parts and supplies to or from foreign locations, and the travel restrictions many governments have imposed due to COVID-19 have significantly disrupted such movement and decreased our ability to provide products and services to our customers. To the extent COVID-19 continues or worsens, governments may impose additional similar restrictions.
In addition, the technology required for the corresponding transition to remote work increases our vulnerability to cybersecurity threats, including threats to gain unauthorized access to sensitive information or to render data or systems unusable, the impact of which may have material adverse effects on our business and operations. See “Item 1A. Risk Factors—Risks Related to Our Business-Our business could be negatively affected by cybersecurity threats and other disruptions” in our Annual Report on Form 10-K for the year ended December 31, 2019.
As the potential impact from COVID-19 is difficult to predict, the extent to which it may negatively affect our operating results or the duration of any potential business disruption is uncertain. Any potential impact will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to new information thatwhich may emerge regardingconcerning the severity and duration of COVID-19 and the nature and extent of governmental actions taken by authorities to contain it or treat its impact, allthe availability of which are beyond our control. These potential impacts, while uncertain, could adversely affect oureffective treatments and vaccines, the ultimate duration of the pandemic, and how quickly and to what extent normal economic and operating results.conditions can resume. COVID-19 and official actions in response to it have made it more challenging for Frank’s, Expro and relevant third parties to adequately staff their respective businesses and operations, and may cause delay in the companies’ ability to obtain the relevant approvals for the consummation of the Merger.
Customer credit risks could result in losses.
The concentration of our customers in the energy industry may impact our overall exposure to credit risk as customersMerger may be similarly affected by prolongedcompleted even though material adverse changes in economic and industry conditions. Those countries that rely heavily upon income from hydrocarbon exports would be hit particularly hard by a drop in oil pricessubsequent to the announcement of the Merger, such as industry-wide changes or other events, may occur.
In general, either party can refuse to complete the drop that has occurred in recent months. The impactMerger if there is a material adverse change affecting the other party. However, some types of the most recent downturn on our customers and their ability to continue operations and pay for our services is uncertain. Further, laws in some jurisdictions in which we operate could make collection difficult or time consuming. We perform ongoing credit evaluations of our customers andchanges do not generally require collateral in support of our trade receivables. While we maintain reserves for potential credit losses, we cannot assure such reserves will be sufficientpermit either party to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.
Furthermore, some of our customers may be highly leveraged and subjectrefuse to their own operating and regulatory risks, which increasescomplete the risk that they may default on their obligations to us. To the extent one or more of our key
customers is in financial distress or commences bankruptcy proceedings, contracts with these customers may be subject to renegotiation or rejection under applicable provisions of the United States Bankruptcy Code and similar international laws. Any material nonpayment or nonperformance by our key customers could adversely affect our business, financial condition and results of operations. The current downturn in our industry as a result of the COVID-19 pandemic along with the market volatility due to increased oil production from Russia and Saudi Arabia has exacerbated these credit risks.
In addition, customers experiencing financial difficulty may delay payment for our products and services. Such delays,Merger, even if accounts are ultimately paid in full, could reduce our cash resources available and materially and adversely impact our credit available from suppliers and financial institutions.
Our executive officers and certain key personnel are critical to our business, and these officers and key personnel may not remain with us in the future.
Our future success depends in substantial part on our ability to hire and retain our executive officers and other key personnel who possess extensive expertise, talent and leadership and are critical to our success. The diminution or loss of the services of these individuals, or other integral key personnel affiliated with entities that we acquire in the future, couldsuch changes would have a material adverse effect on either of the parties. For example, a worsening of Frank’s or Expro’s financial condition or results of operations due to a decrease in commodity prices or general economic conditions would not give the other party the right to refuse to complete the Merger. If adverse changes occur that
affect either party but the parties are still required to complete the Merger, Frank’s share price, business and financial results after the Merger may suffer.
The opinion obtained by Frank’s Board from Moelis does not and will not reflect changes in circumstances after the date of such opinion.
On March 10, 2021, Moelis & Company LLC (“Moelis”), Frank’s financial advisor in connection with the Merger, delivered an opinion to Frank’s Board as to the fairness, as of the date of the opinion and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, of the Exchange Ratio in the Merger to Frank’s. Changes in the operations and prospects of Frank’s or Expro, general market and economic conditions and other factors that may be beyond the control of Frank’s or Expro, and on which the opinion of Moelis was based, may alter the value of Frank’s or Expro or the price of our business. The public health concerns posedcommon stock by COVID-19 could posethe time the Merger is completed. Frank’s has not obtained, and does not expect to request, an updated opinion from Moelis. Moelis’s opinion does not speak to the time when the Merger will be completed or to any date other than the date of such opinion. As a risk to our employeesresult, the opinion does not and may render our employees unable to work or travel. The extent to which COVID-19 may impact our employees, and subsequently our business, cannot be predicted at this time. We continue to monitor the situation, have actively implemented policies and practices towill not address the situation, and may adjust our current policies and practices as more information and guidance become available. Furthermore, we may not be able to enforce allfairness, from a financial point of view, of the provisions in agreements we have entered into with certain of our executive officers, and such agreements may not otherwise be effective in retaining such individuals. In addition, we may not be able to retain key employees of entities that we acquire inExchange Ratio at the future. This may impact our ability to successfully integratetime the Merger is completed or operate the assets we acquire.at any time other than March 10, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Following is a summary of our repurchases of our common stock during the three months ended March 31, 2020.
|
| | | | | | | | | | |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Program (2) |
January 1 - January 31 | — |
| $ | — |
| — |
| $ | 40,000,000 |
|
February 1 - February 29 | — |
| $ | — |
| — |
| $ | 40,000,000 |
|
March 1 - March 31 | 372,682 |
| $ | 2.73 |
| 372,682 |
| $ | 38,982,754 |
|
Total | 372,682 |
| $ | 2.73 |
| 372,682 |
| |
| | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Program (2) |
January 1 - January 31 | — | | $ | — | | — | | $ | 38,502,322 | |
February 1 - February 28 | — | | $ | — | | — | | $ | 38,502,322 | |
March 1 - March 31 | — | | $ | — | | — | | $ | 38,502,322 | |
Total | — | | $ | — | | — | | |
| |
(1)(1)This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. The Company administers cashless settlements and does not repurchase stock in connection with cashless settlements.
| This table excludes shares withheld from employees to satisfy tax withholding requirements on equity-based transactions. The Company administers cashless settlements and does not repurchase stock in connection with cashless settlements. |
| |
(2)
| Our Board of Directors has authorized a program to repurchase our common stock from time to time. Approximately $38,982,754 remained authorized for repurchases as of March 31, 2020. From the inception of this program in February 2020 through March 31, 2020, we repurchased 372,682 shares of our common stock for a total cost of approximately $1.0 million. This program was suspended during the second quarter of 2020. |
(2)Our Board has authorized a program to repurchase our common stock from time to time. Approximately $38,502,322 remained authorized for repurchases as of March 31, 2021; subject to the limitation set in our shareholder authorization for repurchases of our common stock, which is currently 10% of the common stock outstanding as of April 30, 2020. From the inception of this program in February 2020 to date, we repurchased 570,044 shares of our common stock for a total cost of approximately $1.5 million. This program was suspended during the second quarter of 2020.
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 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
*101.1 | The following materials from Frank’s International N.V.’s Quarterly Report on Form 10-Q for the period ended March 31, 20202021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Loss; (iv) Condensed Consolidated Statements of Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements. |
*104.1104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
| |
† | † Represents management contract or compensatory plan or arrangement. |
* Filed herewith.
** Furnished herewith.
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 INTERNATIONAL N.V. |
| | | |
Date: | May 4, 2021 | | FRANK’S INTERNATIONAL N.V. |
| | | |
Date: | May 11, 2020 | By: | /s/ Melissa Cougle |
| | | Melissa Cougle |
| | | Senior Vice President and Chief Financial Officer |
| | | (Principal Financial Officer) |