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Nature of Business

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

The impact of the Coronavirus Disease 2019 (“COVID-19”) pandemic and related economic, business and market disruptions is evolving rapidly and its future effects are uncertain. The actual impact of these recent developments on our business will depend on many factors, many of which are beyond management's control and knowledge. It is therefore difficult for management to assess or predict with precision the broad future effect of this health crisis on the global economy, the energy industry or us. As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

Basis of Presentation

The condensed consolidated financial statements of FINV for the three months ended March 31, 2020 and 2019 include the activities of FINV, Frank’s International C.V. (“FICV”), Blackhawk Group Holdings, LLC (“Blackhawk”) and their wholly owned subsidiaries (either individually or together, as context requires, the “Company,” “we,” “us” or “our”). All intercompany accounts and transactions have been eliminated for purposes of preparing these condensed consolidated financial statements.

Our accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. The consolidated balance sheet at December 31, 2019 is derived from audited financial statements. However, certain information and footnote disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2019, which are included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2020 (“Annual Report”). In the opinion of management, these condensed consolidated financial statements, which have been prepared pursuant to the rules of the SEC and GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments that were necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year.

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

Reclassifications

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

Recent Accounting Pronouncements

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

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

In June 2016, the FASB issued new accounting guidance for credit losses on financial instruments. The guidance includes the replacement of the “incurred loss” approach for recognizing credit losses on financial assets, including trade receivables, with a methodology that reflects expected credit losses, which considers historical and current information as well as reasonable and supportable forecasts. We adopted the guidance on January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements. The new credit loss standard is expected to accelerate recognition of credit losses on our accounts receivable. See Note 3—Accounts Receivable, net for additional information regarding allowance for credit losses on our accounts receivable.

Amounts reported in the condensed consolidated balance sheets and condensed consolidated statements of cash flows as cash, cash equivalents and restricted cash at March 31, 2020 and December 31, 2019 were as follows (in thousands):

	March 31,				December 31,
	2020				2019
Cash and cash equivalents	$	170,897			$	195,383
Restricted cash	1,358				1,357
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	172,255			$	196,740

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

Accounts receivable at March 31, 2020 and December 31, 2019 were as follows (in thousands):

	March 31,				December 31,
	2020				2019
Trade accounts receivable, net of allowance for credit losses of $7,103 and $5,129, respectively	$	106,659			$	101,718
Unbilled receivables	36,302				43,422
Taxes receivable	29,615				18,516
Affiliated (1)	549				549
Other receivables	2,924				2,489
Total accounts receivable, net	$	176,049			$	166,694

(1)	Amounts represent expenditures on behalf of non-consolidated affiliates.

We estimate current expected credit losses on our accounts receivable at each reporting date. We estimate current expected credit losses based on our credit loss history, adjusted for current factors including global economic and business conditions, oil and natural gas industry and market conditions and customer mix.

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Inventories at March 31, 2020 and December 31, 2019 were as follows (in thousands):

	March 31,				December 31,
	2020				2019
Pipe and connectors, net of allowance of $17,957 and $18,287, respectively	$	21,251			$	21,779
Finished goods, net of allowance of $485 and $485, respectively	24,959				25,628
Work in progress	4,083				3,663
Raw materials, components and supplies	27,795				27,759
Total inventories, net	$	78,088			$	78,829

The following is a summary of property, plant and equipment at March 31, 2020 and December 31, 2019 (in thousands):

	Estimated Useful Lives in Years		March 31, 2020				December 31, 2019
Land	—		$	29,292			$	30,724
Land improvements	8-15		7,179				7,193
Buildings and improvements	13-39		113,637				116,182
Rental machinery and equipment	5-7		881,637				882,979
Machinery and equipment - other	7		58,993				60,182
Furniture, fixtures and computers	5		16,982				17,251
Automobiles and other vehicles	5		28,201				28,734
Leasehold improvements	7-15, or lease term if shorter		14,098				14,258
Construction in progress - machinery      and equipment	—		41,632				46,564
			1,191,651				1,204,067
Less: Accumulated depreciation			(888,747		)		(875,635		)
Total property, plant and equipment, net			$	302,904			$	328,432

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, which is included in severance and other charges, net on our condensed consolidated statements of operations. During the first quarter of 2020, the results of the Company's test for impairment of goodwill in the Cementing Equipment segment as a result of negative market indicators was a triggering event that indicated that our long-lived tangible assets in this segment were impaired. Impairment testing performed in the first quarter resulted in the determination that certain long-lived assets were not recoverable and that the estimated fair value was below the carrying value. No impairments were recognized during the three months ended March 31, 2019 for assets held for use. Please see Note 16—Severance and Other Charges, net for additional details.

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The following table presents the depreciation and amortization expense associated with each line item for the three months ended March 31, 2020 and 2019 (in thousands):

		Three Months Ended
		March 31,
		2020				2019
Services		$	17,263			$	21,505
Products		239				434
General and administrative expenses		2,216				3,303
Total		$	19,718			$	25,242

Goodwill

Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative assessment is allowed to determine if goodwill is potentially impaired. We have the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. The qualitative assessment determines whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then a quantitative impairment test is performed. The quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss. The test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference. We complete our assessment of goodwill impairment as of October 31 each year.

As a result of the decline in oil prices due to the ongoing COVID-19 pandemic and the Organization of Petroleum Exporting Countries (“OPEC”) and Russia price war, we identified that it was more likely than not that the fair value of goodwill within our Cementing Equipment reporting unit was less than its carrying value. Based on the result of our goodwill impairment test as of March 31, 2020, we recorded a $57.1 million impairment charge to goodwill, which is included in goodwill impairment on the condensed consolidated statements of operations.

We used the income approach to estimate the fair value of the Cementing Equipment reporting unit, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting the reporting unit’s estimated future cash flows using an estimated discount rate, or expected return, that a marketplace participant would have required as of the valuation date. The market approach includes the use of comparative multiples to corroborate the discounted cash flow results and involves significant judgment in the selection of the appropriate peer group companies and valuation multiples. The inputs used in the determination of fair value are generally level 3 inputs.

Some of the more significant assumptions inherent in the income approach include the estimated future net annual cash flows for the reporting unit and the discount rate. We selected the assumptions used in the discounted cash flow projections using historical data supplemented by current and anticipated market conditions and estimated growth rates. Our estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ from those used in our valuation which could result in additional impairment charges in the future. Assuming all other assumptions and inputs used in the discounted cash flow analysis were held constant, a 50 basis point increase in the discount rate assumption would have increased the goodwill impairment charge by approximately $4.3 million.

No goodwill impairment was recorded for the three months ended March 31, 2019. At March 31, 2020, goodwill is allocated to our reportable segments as follows: Cementing Equipment - approximately $24.1 million; Tubular Running Services - approximately $18.7 million.

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Intangible Assets

Identifiable intangible assets are amortized using the straight-line method over the estimated useful lives of the assets. We evaluate impairment of our intangible assets on an asset group basis whenever circumstances indicate that the carrying value may not be recoverable. Intangible assets deemed to be impaired are written down to their fair value using a discounted cash flow model and, if available, comparable market values.

The following table provides information related to our intangible assets as of March 31, 2020 and December 31, 2019 (in thousands):

		March 31, 2020												December 31, 2019
		Gross Carrying Amount				Accumulated Amortization				Total				Gross Carrying Amount				Accumulated Amortization				Total
Customer Relationships		$	28,301			$	(25,166	)		$	3,135			$	32,890			$	(23,946	)		$	8,944
Intellectual Property		13,910				(6,522		)		7,388				14,029				(6,002		)		8,027
Total intangible assets		$	42,211			$	(31,688	)		$	10,523			$	46,919			$	(29,948	)		$	16,971

Our intangible assets are primarily associated with our Cementing Equipment segment. Amortization expense for intangible assets was $1.7 million and $2.9 million for the three months ended March 31, 2020 and 2019, respectively. During the first quarter of 2020, the results of the Company's test for impairment of goodwill in the Cementing Equipment segment as a result of the negative market indicators described above was a triggering event that indicated that our intangible assets in this segment were impaired. Impairment testing performed in the first quarter resulted in the determination that certain intangible assets were not recoverable and that the estimated fair value was below the carrying value. As a result, during the three months ended March 31, 2020, impairment charges of $4.7 million were recorded associated with certain customer relationships and intellectual property intangible assets in our Cementing Equipment segment, which are included in severance and other charges, net on the condensed consolidated statements of operations. No intangible asset impairment was recorded during the three months ended March 31, 2019. Please see Note 16—Severance and Other Charges, net for additional details.

Other assets at March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

	March 31,				December 31,
	2020				2019
Cash surrender value of life insurance policies (1)	$	25,386			$	27,313
Deposits	2,131				2,119
Other	3,525				3,805
Total other assets	$	31,042			$	33,237

        

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

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Accounts payable and accrued liabilities at March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

	March 31,				December 31,
	2020				2019
Accounts payable	$	11,029			$	16,793
Accrued compensation	20,175				23,988
Accrued property and other taxes	11,334				20,099
Accrued severance and other charges	3,757				5,837
Income taxes	21,787				19,166
Affiliated (1)	2,159				1,694
Accrued purchase orders and other	33,729				32,744
Total accounts payable and accrued liabilities	$	103,970			$	120,321

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

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 5-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

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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, FINV had no borrowings outstanding under the ABL Credit Facility, letters of credit outstanding of $9.1 million and availability of $46.8 million.

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

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A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of March 31, 2020 and December 31, 2019, 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, 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,

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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.

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.

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

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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	)

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, 2020 and 2019, respectively. As of March 31, 2020, $5.7 million of our operating lease right-of-use assets and $6.4 million of our lease liabilities were associated with related party leases.

 

Tax Receivable Agreement

Mosing Holdings, LLC ("Mosing Holdings") and its permitted transferees converted all of their Preferred Stock into shares of our common stock on a one-for-one basis on August 26, 2016, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, by delivery of all of their 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. These adjustments are allocated to FINV. The adjustments to the tax basis of the tangible and intangible assets of FICV

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described above would not have been available absent this Conversion. The basis adjustments may reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

The tax receivable agreement ("TRA") that we entered into with FICV and Mosing Holdings in connection with our IPO generally provides for the payment by FINV 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 us 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 make 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 our actual tax liability to the amount we would have been required to pay had we not been able to utilize any of the tax benefits subject to the TRA. The 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 generate in the future. As of March 31, 2020, 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 our 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 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 make the termination payment specified in the TRA. If FINV elects to terminate the TRA early, which it may do in its sole discretion, (or if it terminates 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, the estimated termination payment would be approximately $57.0 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's 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’s 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.

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Basic loss per common share is determined by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is determined by dividing net loss by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued. We apply the treasury stock method to determine the dilutive weighted average common shares represented by 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
	March 31,
	2020				2019
Numerator
Net loss	$	(85,978	)		$	(28,287	)
Denominator
Basic and diluted weighted average common shares (1)	225,505				224,653
Loss per common share:
Basic and diluted	$	(0.38	)		$	(0.13	)

(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

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% and (52.8)% for the three months ended March 31, 2020 and 2019, respectively. The variance in effective tax rates compared to the same period last year is due to the beneficial impact in the current period of a provision 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 refund in the applicable carryback year. As a result 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. We are subject to tax in many U.S. and foreign jurisdictions. In many foreign jurisdictions we are taxed on bases such as deemed profits or withholding taxes based on revenue. Consequently, the relationship between our pre-tax income and our income tax provision varies from period to period.

We are under audit by certain foreign jurisdictions for the years 2008 - 2019. We do not expect the results of these audits to have any material effect on our financial statements.

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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, 2020 and December 31, 2019. 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 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 board and management are committed to continuously enhancing our internal controls that support improved compliance and transparency throughout our global operations.

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

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 March 31, 2020, our outstanding liability associated with our current program was approximately $3.8 million and included severance payments and other employee-related separation costs.

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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, 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. Please see Note 5—Property, Plant and Equipment for additional details.

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 impairment charge of $4.7 million. Please see Note 6—Goodwill and Intangible Assets for additional details.

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 three 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 50 countries on six continents. In the U.S., the TRS segment provides services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, and in the U.S. Gulf of Mexico. Our customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

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.

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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.

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, 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,
	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

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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.

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	)

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

(2)	Comprised of Equity-based compensation expense (for the three months ended 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).

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		)		*

* Non-GAAP financial measure not disclosed.

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•	our business strategy and prospects for growth;

•	our cash flows and liquidity;

•	our financial strategy, budget, projections and operating results;

•	the amount, nature and timing of capital expenditures;

•	the availability and terms of capital;

•	competition and government regulations; and

•	general economic conditions.

•	the continuation of a swift and material decline in global crude oil demand and crude oil prices for an uncertain period of time that correspondingly may lead to a significant reduction of domestic oil and gas activity, which in turn could result in significant declines in demand for our products and services;

•

uncertainty regarding the length of time it will take for 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 restrictions on various commercial and economic activities; 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.

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•

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.

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(1)	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).

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(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.

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(a)	Evaluation of Disclosure Controls and Procedures.

(b)	Change in Internal Control Over Financial Reporting.

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•	the level of worldwide oil and gas exploration and production;

•	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.

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•	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.

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(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.

(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.

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†	Represents management contract or compensatory plan or arrangement.

*	Filed herewith.

**	Furnished herewith.

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