UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

the Securities Exchange Act of 1934

For the quarterly period ended ~~June 30, 2016~~March 31, 2017

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

the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number: 001-36053

Frank’s International N.V.

(Exact name of registrant as specified in its charter)



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

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

Registrant’s telephone number, including area code: +31 (0)22 367 0000

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

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

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



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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

As of ~~July~~April 27, ~~2016,~~2017, there were ~~156,200,925~~222,854,705 shares of common stock, €0.01 par value per share, outstanding.



TABLE OF CONTENTS
		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three ~~and Six~~ Months
	Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three ~~and Six~~ Months
	Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~	5
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the ~~Six~~Three Months
	Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months
	Ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	2526

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3534

Item 4.	Controls and Procedures	3735

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3836

Item 1A.	Risk Factors	3836

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 6.	Exhibits	3836

Signatures		3937

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

	June 30,			December 31,			March 31,			December 31,
	2016			2015			2017			2016
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash and cash equivalents	$	581,371		$	602,359		$	283,940		$	319,526
Accounts receivables, net	168,909			246,191			178,411			167,417
Inventories	145,186			161,263			136,436			139,079
Assets held for sale							4,876			—
Other current assets	10,800			13,923			12,914			14,027
Total current assets	906,266			1,023,736			616,577			640,049

Property, plant and equipment, net	588,256			624,959			548,559			567,024
Goodwill and intangible assets, net	24,300			25,210			253,517			256,146
Deferred tax assets							80,743			79,309
Other assets	54,858			52,933			42,158			45,533
Total assets	$	1,573,680		$	1,726,838		$	1,541,554		$	1,588,061

Liabilities and Equity
Current liabilities:
Short-term debt	$	2,415		$	7,321		$	202		$	276
Accounts payable	10,840			12,784			17,334			16,081
Deferred revenue	36,409			57,637			14,356			18,072
Accrued and other current liabilities	90,042			111,884			71,499			64,950
Total current liabilities	139,706			189,626			103,391			99,379

Deferred tax liabilities	31,333			40,257			11,467			20,951
Other non-current liabilities	42,564			44,824			154,153			156,412
Total liabilities	213,603			274,707			269,011			276,742

Commitments and contingencies (Note 18)

Series A preferred stock, €0.01, par value, 52,976,000 shares authorized, issued and outstanding	705			705
Commitments and contingencies (Note 17)

Stockholders' equity:
Common stock, €0.01, par value, 745,120,000 shares authorized: 156,121,766 shares issued and 155,515,226 shares outstanding at 2016 and 155,661,150 shares issued and 155,146,338 shares outstanding at 2015	2,050			2,045
Common stock, €0.01, par value, 798,096,000 shares authorized, 223,682,683 shares issued and 222,775,566 shares outstanding at 2017 and 798,096,000 shares authorized, 223,161,356 shares issued and 222,401,427 shares outstanding at 2016							2,808			2,802
Additional paid-in capital	721,982			712,486			1,042,976			1,036,786
Retained earnings	452,608			531,621			273,904			317,270
Accumulated other comprehensive loss	(23,758		)	(25,555		)	(32,812		)	(32,977		)
Treasury stock (at cost), 606,540 at 2016 and 514,812 shares at 2015	(10,694		)	(9,298		)
Total stockholders' equity	1,142,188			1,211,299
Noncontrolling interest	217,184			240,127
Treasury stock (at cost), 907,117 shares at 2017 and 759,929 shares at 2016							(14,333		)	(12,562		)
Total equity	1,359,372			1,451,426			1,272,543			1,311,319
Total liabilities and equity	$	1,573,680		$	1,726,838		$	1,541,554		$	1,588,061

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

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2016			2015			2016			2015			2017			2016
Revenues:
Equipment rentals and services	$	95,177		$	201,282		$	226,434		$	433,687		$	86,322		$	131,257
Products	25,769			53,022			47,998			98,054			24,409			22,229
Total revenue	120,946			254,304			274,432			531,741			110,731			153,486

Operating expenses:
Cost of revenues, exclusive of depreciation
and amortization
Cost of revenues, exclusive of depreciation and amortization
Equipment rentals and services	52,564			76,692			108,365			170,292			57,107			68,349
Products	17,028			33,060			29,357			55,907			16,845			15,491
General and administrative expenses	70,310			73,797			129,262			143,594			42,725			43,242
Depreciation and amortization	28,283			27,710			57,733			51,711			31,099			29,450
Severance and other charges	3,718			1,049			4,324			13,022			1,037			606
(Gain) loss on sale of assets	(279		)	687			(1,049		)	871
Operating income (loss)	(50,678		)	41,309			(53,560		)	96,344
Gain on sale of assets													(1,472		)	(770		)
Operating loss													(36,610		)	(2,882		)

Other income (expense):
Other income	1,658			971			1,161			2,058
Interest income (expense), net	198			(31		)	404			(23		)
Foreign currency loss	(4,170		)	(2,767		)	(4,211		)	(1,234		)
Other income (expense)													134			(497		)
Interest income, net													398			206
Mergers and acquisition expense													(449		)	—
Foreign currency gain (loss)													746			(41		)
Total other income (expense)	(2,314		)	(1,827		)	(2,646		)	801			829			(332		)

Income (loss) before income tax expense (benefit)	(52,992		)	39,482			(56,206		)	97,145
Income tax expense (benefit)	(7,705		)	10,629			(8,511		)	21,891
Net income (loss)	(45,287		)	28,853			(47,695		)	75,254
Net income (loss) attributable to noncontrolling interest	(13,889		)	8,023			(15,525		)	20,145
Net income (loss) attributable to Frank's International N.V.	(31,398		)	20,830			$	(32,170	)	$	55,109
Preferred stock dividends	(1		)	(2		)	(1		)	(2		)
Net income (loss) available to Frank's International N.V.
common shareholders	$	(31,399	)	$	20,828		$	(32,171	)	$	55,107
Loss before income tax benefit													(35,781		)	(3,214		)
Income tax benefit													(9,118		)	(806		)
Net loss													(26,663		)	(2,408		)
Net loss attributable to noncontrolling interest													—			(1,636		)
Net loss attributable to Frank's International N.V. common shareholders													$	(26,663	)	$	(772	)

Earnings (loss) per common share:
Dividends per common share													$	0.075		$	0.15

Loss per common share:
Basic	$	(0.20	)	$	0.14		$	(0.21	)	$	0.36		$	(0.12	)	$	—
Diluted	$	(0.20	)	$	0.14		$	(0.21	)	$	0.35		$	(0.12	)	$	—

Weighted average common shares outstanding:
Basic	155,440			154,344			155,342			154,337			222,564			155,244
Diluted	155,440			209,114			155,342			208,804			222,564			155,244

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

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2016			2015			2016			2015			2017			2016

Net income (loss)	$	(45,287	)	$	28,853		$	(47,695	)	$	75,254
Net loss													$	(26,663	)	$	(2,408	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(912		)	3,173			1,750			(8,574		)	483			2,662
Marketable securities:
Unrealized gain (loss) on marketable securities	700			(1,413		)	1,116			(1,291		)	(81		)	415
Reclassification to net income													(395		)	—
Deferred tax asset / liability change	(235		)	5			(460		)	237			158			(224		)
Unrealized gain (loss) on marketable securities, net of tax	465			(1,408		)	656			(1,054		)	(318		)	191
Total other comprehensive income (loss)	(447		)	1,765			2,406			(9,628		)
Total other comprehensive income													165			2,853
Comprehensive income (loss)	(45,734		)	30,618			(45,289		)	65,626			(26,498		)	445
Less: Comprehensive income (loss) attributable to noncontrolling interest	(14,003		)	8,475			(14,916		)	17,689
Less: Comprehensive loss attributable to noncontrolling interest													—			(913		)
Comprehensive income (loss) attributable to Frank's International N.V.	$	(31,731	)	$	22,143		$	(30,373	)	$	47,937		$	(26,498	)	$	1,358

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

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

	Six Months Ended June 30, 2015																						Three Months Ended March 31, 2016
											Accumulated																						Accumulated
					Additional						Other						Non-			Total							Additional						Other						Non-			Total
	Common Stock				Paid-In			Retained			Comprehensive			Treasury			controlling			Stockholders'			Common Stock				Paid-In			Retained			Comprehensive			Treasury			controlling			Stockholders'
	Shares		Value		Capital			Earnings			Income (Loss)			Stock			Interest			Equity			Shares		Value		Capital			Earnings			Income (Loss)			Stock			Interest			Equity
Balances at December 31, 2014	154,327		$	2,033	$	683,611		$	545,357		$	(14,210	)	$	(4,801	)	$	260,546		$	1,472,536
Net income	—		—		—			55,109			—			—			20,145			75,254
Balances at December 31, 2015																							155,146		$	2,045	$	712,486		$	531,621		$	(25,555	)	$	(9,298	)	$	240,127		$	1,451,426
Net loss																							—		—		—			(772		)	—			—			(1,636		)	(2,408		)
Foreign currency translation adjustments	—		—		—			—			(6,386		)	—			(2,188		)	(8,574		)	—		—		—			—			1,987			—			675			2,662
Unrealized loss on marketable securities	—		—		—			—			(786		)	—			(268		)	(1,054		)
Unrealized gain on marketable securities																							—		—		—			—			143			—			48			191
Equity-based compensation expense	—		—		18,657			—			—			—			—			18,657			—		—		4,208			—			—			—			—			4,208
Distributions to noncontrolling interest	—		—		—			—			—			—			(32,479		)	(32,479		)	—		—		—			—			—			—			(5,012		)	(5,012		)
Common stock dividends ($0.30 per share)	—		—		—			(46,305		)	—			—			—			(46,305		)
Preferred stock dividends	—		—		—			(2		)	—			—			—			(2		)
Common stock dividends ($0.15 per share)																							—		—		—			(23,300		)	—			—			—			(23,300		)
Common shares issued upon vesting of restricted stock units	72		1		(1		)	—			—			—			—			—			224		3		(3		)	—			—			—			—			—
Common shares issued for employee stock purchase plan																							29		—		388			—			—			—			—			388
Treasury shares withheld	(26	)	—		—			—			—			(533		)	—			(533		)	(41	)	—		—			—			—			(584		)	—			(584		)
Balances at June 30, 2015	154,373		$	2,034	$	702,267		$	554,159		$	(21,382	)	$	(5,334	)	$	245,756		$	1,477,500
Balances at March 31, 2016																							155,358		$	2,048	$	717,079		$	507,549		$	(23,425	)	$	(9,882	)	$	234,202		$	1,427,571

	Six Months Ended June 30, 2016																						Three Months Ended March 31, 2017
											Accumulated																						Accumulated
					Additional						Other						Non-			Total							Additional						Other						Non-			Total
	Common Stock				Paid-In			Retained			Comprehensive			Treasury			controlling			Stockholders'			Common Stock				Paid-In			Retained			Comprehensive			Treasury			controlling			Stockholders'
	Shares		Value		Capital			Earnings			Loss			Stock			Interest			Equity			Shares		Value		Capital			Earnings			Income (Loss)			Stock			Interest			Equity
Balances at December 31, 2015	155,146		$	2,045	$	712,486		$	531,621		$	(25,555	)	$	(9,298	)	$	240,127		$	1,451,426
Balances at December 31, 2016																							222,401		$	2,802	$	1,036,786		$	317,270		$	(32,977	)	$	(12,562	)	$	—		$	1,311,319
Net loss	—		—		—			(32,170		)	—			—			(15,525		)	(47,695		)	—		—		—			(26,663		)	—			—			—			(26,663		)
Foreign currency translation adjustments	—		—		—			—			1,306			—			444			1,750			—		—		—			—			483			—			—			483
Unrealized gain on marketable securities	—		—		—			—			491			—			165			656
Change in marketable securities																							—		—		—			—			(318		)	—			—			(318		)
Equity-based compensation expense	—		—		8,528			—			—			—			—			8,528			—		—		5,701			—			—			—			—			5,701
Distribution to noncontrolling interest	—		—		—			—			—			—			(8,027		)	(8,027		)
Common stock dividends ($0.30 per share)	—		—		—			(46,842		)	—			—			—			(46,842		)
Preferred stock dividends	—		—		—			(1		)	—			—			—			(1		)
Common stock dividends ($0.075 per share)																							—		—		—			(16,703		)	—			—			—			(16,703		)
Common shares issued upon vesting of restricted stock units	384		4		(4		)	—			—			—			—			—			471		5		(5		)	—			—			—			—			—
Common shares issued for ESPP	76		1		972															973
Common shares issued for employee stock purchase plan																							50		1		525			—			—			—			—			526
Treasury shares issued upon vesting of restricted stock units																							1		—		(31		)	—			—			23			—			(8		)
Treasury shares withheld	(91	)	—		—			—			—			(1,396		)	—			(1,396		)	(147	)	—		—			—			—			(1,794		)	—			(1,794		)
Balances at June 30, 2016	155,515		$	2,050	$	721,982		$	452,608		$	(23,758	)	$	(10,694	)	$	217,184		$	1,359,372
Balances at March 31, 2017																							222,776		$	2,808	$	1,042,976		$	273,904		$	(32,812	)	$	(14,333	)	$	—		$	1,272,543

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

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

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2016			2015			2017			2016
Cash flows from operating activities
Net income (loss)	$	(47,695	)	$	75,254
Adjustments to reconcile net income (loss) to cash provided by operating activities
Net loss							$	(26,663	)	$	(2,408	)
Adjustments to reconcile net loss to cash (used in) provided by operating activities
Depreciation and amortization	57,733			51,711			31,099			29,450
Equity-based compensation expense	8,528			18,657			5,701			4,208
Amortization of deferred financing costs	82			82			205			41
Deferred tax provision (benefit)	(9,071		)	9,727
Provision for bad debts	10,374			335
(Gain) loss on sale of assets	(1,049		)	871
Changes in fair value of marketable securities	(329		)	(404		)
Unrealized gain on derivative	(319		)	—
Deferred tax benefit							(11,060		)	(3,303		)
Provision for (recovery of) bad debts							(91		)	381
Gain on sale of assets							(1,472		)	(770		)
Changes in fair value of investments							(1,013		)	94
Realized loss on sale of investment							478			—
Unrealized loss on derivatives							456			974
Other	—			(3,909		)	(1,876		)	—
Changes in operating assets and liabilities
Accounts receivable	68,766			66,188			(10,030		)	33,005
Inventories	11,378			17,499			4,732			828
Other current assets	3,058			8,669			1,045			189
Other assets	188			2,148			547			(13		)
Accounts payable	(2,166		)	1,778			2,112			(2,862		)
Deferred revenue	(21,223		)	(18,574		)	(3,716		)	(5,156		)
Accrued and other current liabilities	(17,958		)	(16,854		)	2,374			(6,466		)
Other non-current liabilities	(2,260		)	2,734			(2,263		)	(2,029		)
Net cash provided by operating activities	58,037			215,912
Net cash (used in) provided by operating activities							(9,435		)	46,163

Cash flows from investing activities
Acquisition of Timco Services, Inc. (net of acquired cash)	—			(78,676		)
Purchases of property, plant and equipment	(18,371		)	(70,843		)	(11,720		)	(8,268		)
Proceeds from sale of assets and equipment	1,957			214			1,636			1,181
Purchase of marketable securities	(838		)	—
Purchase of investments							(59		)	(736		)
Proceeds from sale of investments							2,899			—
Net cash used in investing activities	(17,252		)	(149,305		)	(7,244		)	(7,823		)

Cash flows from financing activities
Repayments of borrowings	(4,960		)	(37		)	(72		)	(2,782		)
Proceeds from borrowings	256			—			4			96
Dividends paid on common stock	(46,842		)	(46,305		)	(16,703		)	(23,300		)
Dividends paid on preferred stock	(1		)	(2		)
Distribution to noncontrolling interest	(8,027		)	(32,479		)	—			(5,012		)
Treasury shares withheld	(1,396		)	(533		)
Net treasury shares withheld							(1,802		)	(584		)
Proceeds from the issuance of ESPP shares	973			—			526			388
Net cash used in financing activities	(59,997		)	(79,356		)	(18,047		)	(31,194		)
Effect of exchange rate changes on cash	(1,776		)	(1,860		)	(860		)	(707		)
Net increase (decrease) in cash	(20,988		)	(14,609		)
Net increase (decrease) in cash and cash equivalents							(35,586		)	6,439
Cash and cash equivalents at beginning of period	602,359			489,354			319,526			602,359
Cash and cash equivalents at end of period	$	581,371		$	474,745		$	283,940		$	608,798

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

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

Nature of Business

Frank’s International N.V. ("FINV"), 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 to leading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells.

Basis of Presentation

The condensed consolidated financial statements of FINV for the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2015~~2016 include the activities of Frank's International C.V. ("FICV") and its wholly owned subsidiaries (collectively, 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~~consolidated balance sheet at December 31, ~~2015~~2016 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, ~~2015,~~2016, which are included in our most recent Annual Report on Form 10-K filed with the Securities Exchange Commission ("SEC") on February ~~29, 2016.~~24, 2017 ("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.

Reclassifications

Historically, and through December 31, 2016, certain direct and indirect costs related to operations and manufacturing were classified and reported as general and administrative expenses ("G&A"). The historical classification was consistent with the information used by the Company’s chief operating decision maker ("CODM") to assess performance of the Company’s segments and make resource allocation decisions, and the classification of such costs within the condensed consolidated statements of income was aligned with the segment presentation. Effective January 1, 2017, the company changed the classification of certain of these costs in its segment reporting disclosures and within the condensed consolidated statements of income to reflect a change in the presentation of the information used by the Company’s CODM.

This reclassification of costs between cost of revenue ("COR") and G&A has no net impact to the condensed consolidated statements of income or to total segment reporting. The change will better reflect the CODM's philosophy on assessing performance and allocating resources, as well as improve comparability to the Company's peer group. This is a change in costs classification and has been reflected retrospectively for all periods presented.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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



	Three Months Ended March 31, 2016
	As previously reported		Reclassifications			As currently reported
Condensed Consolidated Statements of Operations
Cost of revenues, exclusive of depreciation and amortization
Equipment rentals and services	$	55,801	$	12,548		$	68,349
Products	12,329		3,162			15,491
General and administrative expenses	58,952		(15,710		)	43,242

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.

Recent Accounting Pronouncements

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

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

In January 2017, the FASB issued guidance that simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. The new standard will be applied prospectively, and is effective for public companies for their annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company has adopted the provisions of this new accounting guidance for the Company's annual goodwill impairment analysis for the year ended December 31, 2017.

In January 2017, the FASB issued new accounting guidance for business combinations clarifying the definition of a business. The objective of the guidance is to help companies and other organizations which have acquired or sold a business to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public entities, the guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted under certain circumstances. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In October 2016, the FASB issued new accounting guidance for recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The objective of the guidance is to eliminate the exception for an intra-entity transfer of an asset other than inventory and requires an entity to recognize the income tax consequences at the time of transfer rather than when the asset is sold to a third party. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not yet been issued. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

In August 2016, the FASB issued new accounting guidance for classification of certain cash receipts and cash payments in the statement of cash flows. The objective of the guidance is to reduce the existing diversity in practice related to the presentation and classification of certain cash receipts and cash payments. The guidance addresses eight

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specific cash flow issues including but not limited to, debt prepayment or extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and proceeds from the settlement of corporate-owned life insurance policies. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and is retrospective for all periods presented. Early adoption is permitted including for interim periods. Management is evaluating the provisions of this new accounting guidance, including which period to adopt, and has not determined what impact the adoption will have on our consolidated financial statements.

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

In March 2016, the FASB issued accounting guidance on equity compensation, which simplifies the accounting for the taxes related to equity-based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The ASU also gives an option to recognize actual forfeitures when

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

they occur and clarifies the statement of cash flow presentation for certain components of share-based awards. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 31, 2016. We adopted this guidance on January 1, 2017 and have elected to recognize actual forfeitures when they occur. The adoption ~~of this guidance is~~did not ~~expected to~~ have a material impact on our consolidated financial statements.

In February 2016, the FASB issued accounting guidance for leases. The main objective of the accounting guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and the new guidance is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The new guidance requires lessees to recognize assets and liabilities arising from leases on the balance sheet and further defines a lease as a contract that conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefit from the use of the asset and (2) the right to direct the use of the asset. The accounting guidance requires disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; early application is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements.

In January 2016, the FASB issued accounting guidance on the recognition and measurement of financial assets and financial liabilities. Under this guidance, equity investments will be measured at fair value with changes in fair value recognized in net income. The guidance requires public businesses to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. The guidance also eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The guidance is not applicable to equity investments accounted for under the equity method of accounting. The guidance is effective for interim and annual periods beginning after December 15, 2017. Management does not believe the adoption will have a material impact on our consolidated financial statements.

In July 2015, the FASB issued accounting guidance on simplifying the measurement of inventory. Under this guidance, inventory will be measured at the lower of cost and net realizable value. Options that currently exist for market value will be eliminated. The guidance defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This guidance will be effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. ~~Management is evaluating the provisions of this statement and has not determined what impact the adoption of the new accounting guidance will have on our consolidated financial statements.~~

In February 2015, the FASB issued guidance on the amendments to the consolidation analysis, which affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities; (2) eliminate the presumption that a general partner should consolidate a limited partnership; (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) provide a scope exception from consolidation guidance for reporting entities with interest in legal entities that are required to comply with or operate in accordance with requirements that are similar to those for registered money market funds. We adopted this guidance on January 1, ~~2016~~2017, and the adoption did not have a material impact on our consolidated financial statements.

In January 2015, the FASB issued guidance on the income statement presentation, which eliminates the concept of extraordinary items while retaining certain presentation and disclosure guidance for items that are unusual in nature

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~or occur infrequently. We adopted this guidance on January 1, 2016 and the adoption did not have a material impact on our consolidated financial statements.~~

In May 2014, the FASB issued amendments to guidance on the recognition of revenue based upon the entity’s contracts with customers to transfer goods or services. Under the new standard, ~~update,~~ an entity should recognize revenue to

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard creates a five step model that requires companies to exercise judgment when considering the terms of a contract and all relevant facts and circumstances. The standard allows for several transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) a modified retrospective adoption in which the standard is applied only to the most current period presented in the financial statements, including additional disclosures of the standard’s application impact to individual financial statement line items. On July 9, 2015, the FASB deferred the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. ~~The FASB will also permit early adoption of the standard, but not before the original effective date of December 15, 2016.~~

We are currently ~~evaluating~~determining the impacts of the new standard on our contract portfolio. Our implementation efforts to date include the identification of revenue streams with similar contract structures, performing a detailed review of key contracts by revenue stream and comparing historical policies and practices to the new standard. Our evaluation of the impact of ~~this accounting standard update~~the new guidance on our consolidated financial ~~statements.~~statements is ongoing and we continue to evaluate the quantitative and qualitative impacts of the standard on timing of recognition for various revenues, which may be accelerated or deferred depending on the features of the customer arrangements and the presentation of contract costs (whether presented gross or offset against revenues).

Note 2—Noncontrolling Interest

We hold an economic interest in FICV and are responsible for all operational, management and administrative decisions relating to FICV’s business. ~~As a result,~~Effective with the ~~financial results~~August 2016 conversion of all of Mosing Holdings' Series A preferred stock, Mosing Holdings transferred all its interest in FICV ~~are consolidated~~to us and the noncontrolling interest associated with ~~ours and~~Mosing Holdings was eliminated.

Historically we ~~record~~recorded a noncontrolling interest on our condensed consolidated balance sheet with respect to the remaining economic interest in FICV held by Mosing ~~Holdings, Inc. ("MHI").~~Holdings. Net ~~income (loss)~~loss attributable to noncontrolling interest on the statements of operations ~~represents~~represented the portion of earnings or losses attributable to the economic interest in FICV held by ~~MHI.~~Mosing Holdings. The allocable domestic ~~income (loss)~~loss from FICV to FINV iswas subject to U.S. taxation.

A reconciliation of net ~~income (loss)~~loss attributable to noncontrolling interest is detailed as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Net income (loss) $ (45,287 ) $ 28,853
$ (47,695 ) $ 75,254
Add: Provision (benefit) for U.S. income taxes of FINV (1) (9,609 ) 813
(13,493 ) 7,076
Less: (Income) of FINV (2) 88
1,773
(74 ) (3,390 )
Net income (loss) subject to noncontrolling interest (54,808 ) 31,439
(61,262 ) 78,940
Noncontrolling interest percentage (3) 25.3 % 25.5 % 25.3 % 25.5 %
Net income (loss) attributable to noncontrolling interest $ (13,889 ) $ 8,023
$ (15,525 ) $ 20,145



	Three Months Ended
	March 31,
	2016
Net loss	$	(2,408	)
Add: Benefit for U.S. income taxes of FINV ⁽¹⁾	(3,884		)
Less: Income of FINV ⁽²⁾	(162		)
Net loss subject to noncontrolling interest	(6,454		)
Noncontrolling interest percentage ⁽³⁾	25.4		%
Net loss attributable to noncontrolling interest	$	(1,636	)


⁽¹⁾	Represents income tax ~~expense (benefit)~~benefit of entities outside of FICV as well as income tax attributable to our proportionate share of the U.S. operations of our partnership interests in FICV.


⁽²⁾	Represents results of operations for entities outside of FICV.


⁽³⁾	Represents the economic interest in FICV held by ~~MHI.~~Mosing Holdings at March 31, 2016. This percentage ~~will change~~changed as additional shares of FINV common stock ~~are~~were issued. Effective August 26, 2016, Mosing Holdings delivered its economic interest in FICV to us.

~~Note 3—Acquisition~~

On April 1, 2015, Frank’s International, LLC, a Texas limited liability company (“Frank’s LLC”) and an indirect wholly-owned subsidiary of FICV closed on a transaction, which was not a significant acquisition, to purchase all of the outstanding equity interests of Timco Services, Inc. ("Timco"), a Louisiana corporation with a strong presence in the Permian Basin and Eagle Ford Shale regions, in exchange for consideration consisting of (i) approximately $81.0 million inclusive of a tax reimbursement payment of $8.0 million as well as closing adjustments for normal operating activity and customary purchase price adjustments and (ii) contingent consideration of up to $20.0 million, payable in two separate payments of $10.0 million based upon exceeding certain targets of the United States land rotary rig count, as reported by Baker Hughes, over prescribed time periods. As of June 30, 2016, the contingent consideration had a fair value of approximately $7.0 thousand. In addition, each party agreed to indemnify the other for breaches of representations and warranties, breaches of covenants and certain other matters, subject to certain exceptions.

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Note 3—Acquisition and Divestiture

Blackhawk Acquisition

On November 1, 2016, we completed a transaction to acquire all outstanding shares in Blackhawk Group Holdings, Inc., the ultimate parent company of Blackhawk Specialty Tools LLC, ("Blackhawk") pursuant to the terms of a definitive merger agreement dated October 6, 2016. Blackhawk is a leading provider of well construction and well intervention services and products and the acquisition will allow us to combine Blackhawk’s cementing tool expertise and well intervention services with our global tubular running services. In conjunction with the acquisition, FI Tools Holdings, LLC, our newly formed subsidiary, merged with and into Blackhawk, with Blackhawk surviving the merger as our wholly-owned subsidiary. The merger consideration was comprised of a combination of $150.4 million of cash on hand and 12.8 million shares of our common stock ("Common Stock"), on a cash-free, debt-free basis, for total consideration of $294.6 million (based on our closing share price on October 31, 2016 of $11.25 and including working capital adjustments).

The ~~Timco~~unaudited pro forma financial information presented below includes adjustments for amortization expense for identified intangible assets and depreciation expense based on the fair value and estimated lives of acquired property, plant and equipment. In addition, acquisition related costs are excluded from the unaudited pro forma financial information.

The following table shows our unaudited pro forma financial information assuming the transaction occurred on January 1, 2015 (in thousands, except per share amounts):



	Three Months Ended
	March 31, 2016
Revenue	$	174,380
Net loss applicable to common shares	(3,611		)
Loss per common share:
Basic	$	(0.02	)
Diluted	$	(0.02	)

The Blackhawk acquisition was accounted for as a business ~~combination in accordance with accounting guidance.~~combination. The purchase price is allocated to the fair value of assets acquired and liabilities assumed based on a discounted cash flow model and goodwill is recognized for the excess consideration transferred over the fair value of the net assets. ~~We recognized $4.9 million of goodwill.~~

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The ~~goodwill was assigned to the U.S. Services segment and is deductible for tax purposes. The~~preliminary purchase price allocation was ~~finalized during~~prepared in connection with our annual financial statements filed on our Annual Report. During the ~~fourth~~first quarter of ~~2015.~~2017 we adjusted the purchase price allocation for a litigation settlement and the final valuation report. The following table summarizes the preliminary and the final purchase price allocations of the fair values of the assets acquired and liabilities assumed as part of the Blackhawk acquisition as of November 1, 2016 as determined in accordance with business combination accounting guidance (in thousands):



	Preliminary purchase price allocation		Purchase price adjustments			Final purchase price allocation
Current assets, excluding cash	$	23,626	$	—		$	23,626
Property, plant and equipment	45,091		55			45,146
Other long-term assets	3,139		—			3,139
Intangible assets	41,972		153			42,125
Assets acquired	$	113,828	$	208		$	114,036
Current liabilities assumed	11,132		185			11,317
Other long-term liabilities	542		—			542
Liabilities assumed	$	11,674	$	185		$	11,859
Fair value of net assets acquired	102,154		23			102,177
Total consideration transferred	294,563		—			294,563
Goodwill	$	192,409	$	(23	)	$	192,386

In ~~connection~~conjunction with the ~~Timco acquisition,~~merger, we ~~acquired intangible assets~~created a fourth segment, Blackhawk, and have recorded goodwill of $192.4 million in ~~the amount~~that segment.

Divestiture

On March 15, 2017, we sold a fully depreciated aircraft for a total sales price of $7.9 million related to customer relationships, trade names and non-compete clauses. The intangible assets are amortized over their estimated useful lives. Amortization expense for the intangible assets for the Timco acquisition was $0.4 million for each of the three months ended June 30, 2016 and 2015 and $0.9$1.3 million and ~~$0.4 million for the six months ended June 30, 2016 and 2015, respectively.~~recorded a gain on sale of $1.3 million.

Note 4—Accounts Receivable, net

Accounts receivable at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 were as follows (in thousands):


	June 30,		December 31,		March 31,		December 31,
	2016		2015		2017		2016
Trade accounts receivable, net of allowance
of $12,421 and $2,528, respectively	$	99,620	$	166,256
Trade accounts receivable, net of allowance of $13,867 and $14,337, respectively					$	103,393	$	89,096
Unbilled revenue	32,815		40,033		32,246		30,882
Taxes receivable	32,849		34,163		39,196		42,870
Affiliated (1)	608		3,966		772		717
Other receivables	3,017		1,773		2,804		3,852
Total accounts receivable	$	168,909	$	246,191	$	178,411	$	167,417


⁽¹⁾	Amounts represent expenditures on behalf of non-consolidated affiliates and receivables for aircraft charter income.

~~Note 5—Inventories~~

~~Inventories at~~ ~~June 30, 2016~~ ~~and~~ ~~December 31, 2015~~ ~~were as follows (in thousands):~~

June 30, December 31,
2016 2015
Pipe and connectors $ 119,818
$ 137,245
Finished goods 4,245
4,020
Work in progress 5,955
5,230
Raw materials, components and supplies 15,168
14,768
Total inventories $ 145,186
$ 161,263

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5—Inventories

Inventories at March 31, 2017 and December 31, 2016 were as follows (in thousands):



	March 31,		December 31,
	2017		2016
Pipe and connectors	$	96,821	$	102,360
Finished goods	14,770		14,257
Work in progress	7,122		7,099
Raw materials, components and supplies	17,723		15,363
Total inventories	$	136,436	$	139,079

Note 6—Property, Plant and Equipment

The following is a summary of property, plant and equipment at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 (in thousands):


	Estimated Useful Lives in Years	June 30, 2016			December 31, 2015			Estimated Useful Lives in Years	March 31, 2017			December 31, 2016
Land	—	$	14,176		$	10,119		—	$	15,871		$	15,730
Land improvements	8-15	9,378			9,289			8-15	9,379			9,379
Buildings and improvements	39	70,615			74,152			39	71,719			73,211
Rental machinery and equipment	7	906,542			898,134			7	935,619			933,667
Machinery and equipment - other	7	60,223			60,250			7	59,298			60,182
Furniture, fixtures and computers	5	18,272			18,240			5	20,250			19,073
Automobiles and other vehicles	5	43,896			48,402			5	35,073			36,796
Aircraft	7	16,267			16,267			7	—			16,267
Leasehold improvements	7-15, or lease term if shorter	8,314			7,947			7-15, or lease term if shorter	10,135			8,027
Construction in progress - machinery and equipment and buildings	—	106,907			102,432			—	128,819			120,937
		1,254,590			1,245,232				1,286,163			1,293,269
Less: Accumulated depreciation		(666,334		)	(620,273		)		(737,604		)	(726,245		)
Total property, plant and equipment, net		$	588,256		$	624,959			$	548,559		$	567,024

Note 7—Other Assets

Other assets at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 consisted of the following (in thousands):


	June 30,		December 31,		March 31,		December 31,
	2016		2015		2017		2016
Marketable securities held in Rabbi Trust (1)	$	46,406	$	45,254
Deferred tax asset	177		536
Cash surrender value of life insurance policies⁽¹⁾					$	37,168	$	36,269
Deposits	2,150		2,031		2,161		2,343
Other	6,125		5,112		2,829		6,921
Total other assets	$	54,858	$	52,933	$	42,158	$	45,533


⁽¹⁾	See Note 10 – Fair Value Measurements

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8—Accrued and Other Current Liabilities

Accrued and other current liabilities at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 consisted of the following (in thousands):


	June 30,		December 31,		March 31,		December 31,
	2016		2015		2017		2016

Accrued compensation	$	18,019	$	25,281	$	13,495	$	10,250
Accrued property and other taxes	22,991		23,790		22,011		19,740
Accrued severance and other charges	19,939		22,244		4,417		6,150
Income taxes	4,317		7,385		4,684		6,857
Accrued inventory	491		5,281
Accrued medical claims	3,440		4,141		723		604
Accrued purchase orders	4,425		5,562		5,445		2,083
Other	16,420		18,200		20,724		19,266
Total accrued and other current liabilities	$	90,042	$	111,884	$	71,499	$	64,950

Note 9—Debt

Credit Facility

We have a $100.0 million revolving credit facility with certain financial institutions, including up to $20.0 million in letters of credit and up to $10.0 million in swingline loans, which matures in August 2018 (the “Credit Facility”). Subject to the terms of the Credit Facility, we have the ability to increase the commitments byto $150.0 million. At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016, we ~~did not have any~~had no outstanding indebtedness under the Credit Facility. In addition, we had ~~$3.9~~$3.6 million and ~~$4.7~~$3.7 million in letters of credit outstanding as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively. On April 28, 2017, the Company obtained a limited waiver under its Credit Agreement of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abide by certain restrictions regarding the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company paid a waiver fee to each lender that executed the Waiver equal to five basis points of the respective lender’s commitment under the Credit Agreement.

Borrowings under the Credit Facility bear interest, at our option, at either a base rate or an adjusted Eurodollar rate. Base rate loans under the Credit Facility bear interest at a rate equal to the higher of (i) the prime rate as published in the Wall Street Journal, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the adjusted Eurodollar rate plus 1.00%, plus an applicable margin ranging from 0.50% to 1.50%, subject to adjustment based on a leverage ratio. Interest is in each case payable quarterly for base-rate loans. Eurodollar loans under the Credit Facility bear interest at an adjusted Eurodollar rate equal to the Eurodollar rate for such interest period multiplied by the statutory reserves, plus an applicable margin ranging from 1.50% to 2.50%. Interest is payable at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at the end of each three-month period. The unused portion of the Credit Facility is subject to a commitment fee ranging from 0.250% to 0.375% based on certain leverage ratios.

The Credit Facility contains various covenants that, among other things, limit our ability to grant certain liens, make certain loans and investments, enter into mergers or acquisitions, enter into hedging transactions, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions, incur additional indebtedness or engage in certain asset dispositions.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in our ~~credit agreement)~~Credit Agreement) of not more than 2.50 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0. ~~As of~~ ~~June 30, 2016, we were in compliance with all financial covenants under the Credit Facility.~~

In addition, the Credit Facility contains customary events of default, including, among others, the failure to make required payments, the failure to comply with certain covenants or other agreements, breach of the representations and

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

covenants contained in the agreements, default of certain other indebtedness, certain events of bankruptcy or insolvency and the occurrence of a change in control.

~~AFCO~~Citibank Credit ~~Corporation - Insurance Notes Payable~~Facility

In ~~2015,~~2016, we entered into a ~~note~~three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for the issuance of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest of 1.25% per annum for amounts outstanding up to ~~finance annual insurance premiums for $7.6 million. The note bears~~one year. Amounts outstanding more than one year bear interest at ~~an annual rate~~1.5% per annum. As of ~~1.9% and will mature in October 2016. At June 30, 2016~~March 31, 2017 and December 31, ~~2015, the total outstanding balance was $2.1~~2016, we had $3.0 million and ~~$6.9~~$2.2 million ~~respectively.~~in letters of credit outstanding.

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 10 - Fair ~~value is the price that would be received to sell an asset or paid to transfer a liability~~Value Measurements in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. We are able to classify fair value balances based on the observability of these inputs. The authoritative guidanceour Annual Report for ~~fair value measurements establishes three levels of the fair value hierarchy, defined as follows:~~

~~Level 1: Unadjusted, quoted prices for identical assets or liabilities in active markets.~~

Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly for substantially the full term of the asset or liability.

~~Level 3: Significant, unobservable inputs for use when little or no market data exists, requiring a significant degree of judgment.~~

The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements. Depending on the particular asset or liability, input availability can vary depending on factors such as product type, longevity of a product in the market and other particular transaction conditions. In some cases, certain inputs used to measure fair value may be categorized into different levels of the fair value hierarchy. For disclosure purposes under the accounting guidance, the lowest level that contains significant inputs used in valuation should be chosen.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Financial Assets and Liabilities~~further discussion.

A summary of financial assets and liabilities that are measured at fair value on a recurring basis, as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 were as follows (in thousands):

Quoted Prices
in Active
Markets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

(Level 1) (Level 2) (Level 3) Total
June 30, 2016
Assets:
Derivative financial instruments $ —
$ 529
$ —
$ 529
Investments available-for-sale:
Marketable securities - deferred
compensation plan —
46,406
—
46,406
Marketable securities - other 3,664
—
—
3,664
Liabilities:
Marketable securities - deferred
compensation plan —
41,262
—
41,262



	Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2017
Assets:
Investments:
Cash surrender value of life insurance policies - deferred compensation plan	$	—	$	37,168	$	—	$	37,168
Marketable securities - other	62		—		—		62
Liabilities:
Derivative financial instruments	—		309		—		309
Deferred compensation plan	—		27,994		—		27,994

December 31, 2016
Assets:
Derivative financial instruments	$	—	$	146	$	—	$	146
Investments:
Cash surrender value of life insurance policies - deferred compensation plan	—		36,269		—		36,269
Marketable securities - other	3,692		—		—		3,692
Liabilities:
Deferred compensation plan	—		30,307		—		30,307

December 31, 2015
Assets:
Derivative financial instruments $ —
$ 210
$ —
$ 210
Investments available-for-sale:
Marketable securities - deferred
compensation plan —
45,254
—
45,254
Marketable securities - other 2,387
—
—
2,387
Liabilities:
Marketable securities - deferred
compensation plan —
43,568
—
43,568

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our derivative financial instruments consist of short-duration foreign currency forward contracts. The fair value of 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. At ~~both June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, derivative financial instruments are included in accrued and other current liabilities and accounts receivable, net, respectively, in our condensed consolidated balance sheets.

Our investments associated with our deferred compensation plan consist primarily of ~~marketable securities that~~the cash surrender value of life insurance policies and are ~~held~~included in other assets on the condensed consolidated balance sheets. Our investments change as a result of contributions, payments, and fluctuations in the ~~form of investments in mutual funds and insurance contracts.~~market. 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. ~~Other~~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 as well as impairment related to goodwill and other long-lived assets. For business combinations (see Note 3 - Acquisition and Divestiture), the purchase price is allocated to the assets acquired and liabilities assumed based on a discounted cash flow model for most intangibles as well as market assumptions for the valuation of equipment and other fixed assets.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

We utilize a discounted cash flow model in evaluating impairment considerations related to goodwill and long-lived assets. 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 sheet of our cash and cash equivalents, trade accounts receivable, other current assets, accounts payable, accrued and other current liabilities and lines of credit ~~approximates~~approximate fair values due to their short maturities.

Note 11—~~Preferred Stock~~

At June 30, 2016 and December 31, 2015, we had 52,976,000 shares of Series A preferred stock, par value €0.01 per share (the "Preferred Stock"), issued and outstanding, all of which were held by MHI. Each share of Preferred Stock has a liquidation preference equal to its par value of €0.01 per share and is entitled to an annual dividend equal to 0.25% of its par value. We paid the annual dividend for the year ended December 31, 2015 of $1,476 on June 3, 2016. Additionally, each share of Preferred Stock entitles its holder to one vote. Preferred stockholders vote with the common stockholders as a single class on all matters presented to FINV's shareholders for their vote.

MHI has the right to convert all or a portion of its Preferred Stock into shares of our common stock by delivery of an equivalent portion of its interest in FICV to us. Accordingly, the increase in our interest in FICV in connection with a conversion will decrease the noncontrolling interest in our financial statements that is attributable to MHI's interest in FICV. As of June 30, 2016 and December 31, 2015, there have been no conversions of the Preferred Stock or exchanges of the FICV limited partner interests. Exchanges are subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.

The Preferred Stock is classified outside of permanent equity in our condensed consolidated balance sheet at its redemption value of par plus accrued and unpaid dividends because the conversion provisions are not solely within our control.

~~Note 12—~~ Derivatives

In December 2015, we began entering 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.

1617

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, we had the following foreign currency derivative contracts outstanding in U.S. dollars (in thousands):


	June 30, 2016				March 31, 2017
	Notional		Contractual	Settlement	Notional		Contractual	Settlement
Derivative Contracts	Amount		Exchange Rate	Date	Amount		Exchange Rate	Date
Canadian dollar	$	3,765	1.2749	9/13/2016	$	5,785	1.3483	6/13/2017
Euro	4,420		1.1334	9/13/2016	5,657		1.0674	6/14/2017
Euro	3,470		1.1192	7/14/2016
Norwegian kroner	5,891		8.1482	9/13/2016	7,192		8.6204	6/14/2017
Pound sterling	3,620		1.4480	9/13/2016	5,958		1.2160	6/14/2017


	December 31, 2015				December 31, 2016
	Notional		Contractual	Settlement	Notional		Contractual	Settlement
Derivative Contracts	Amount		Exchange Rate	Date	Amount		Exchange Rate	Date
Canadian dollar	$	5,091	1.3751	1/13/2016	$	4,553	1.3179	3/14/2017
Euro	19,706		1.0948	1/13/2016	4,753		1.0563	3/14/2017
Euro					2,558		1.0659	1/13/2017
Norwegian kroner	11,498		8.6973	1/13/2016	3,643		8.5101	3/14/2017
Pound sterling	7,516		1.5031	1/13/2016	3,908		1.2607	3/14/2017

The following table summarizes the location and fair value amounts of all derivative contracts in the condensed consolidated balance sheets as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 (in thousands):


Derivatives not Designated as Hedging Instruments	Consolidated Balance Sheet Location	June 30, 2016		December 31, 2015		Consolidated Balance Sheet Location	March 31, 2017			December 31, 2016
Foreign currency contracts	Accounts receivable, net	$	529	$	210	Accounts receivable, net	$	—		$	146
Foreign currency contracts						Accrued and other current liabilities	(309		)	—

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


		Three Months Ended					Six Months Ended							Three Months Ended
		June 30,					June 30,							March 31,
Derivatives not Designated as Hedging Instruments	Location of Loss Recognized in Income on Derivative Contracts	2016			2015		2016			2015			Location of Gain (Loss) Recognized in Income on Derivative Contracts	2017			2016
Unrealized gain on foreign currency contracts	Other income	$	1,293		$	—	$	319		$	—
Realized loss on foreign currency contracts	Other income	(865		)	—		(1,579		)	—
Unrealized gain (loss) on foreign currency contracts												Unrealized gain (loss) on foreign currency contracts	Other income (expense)	$	(456	)	$	(974	)
Realized gain (loss) on foreign currency contracts													Other income (expense)	255			(714		)
Total net income (loss) on foreign currency contracts		$	428		$	—	$	(1,260	)	$	—			$	(201	)	$	(1,688	)

Our derivative transactions are governed through International Swaps and Derivatives Association ("ISDA") 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.

1718

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the gross and net fair values of our derivatives at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 (in thousands):


	Derivative Asset Positions						Derivative Liability Positions						Derivative Asset Positions					Derivative Liability Positions
	June 30, 2016			December 31, 2015			June 30, 2016			December 31, 2015			March 31, 2017		December 31, 2016			March 31, 2017			December 31, 2016
Gross position - asset / (liability)	$	551		$	316		$	(22	)	$	(106	)	$	—	$	181		$	(309	)	$	(35	)
Netting adjustment	(22		)	(106		)	22			106			—		(35		)	—			35
Net position - asset / (liability)	$	529		$	210		$	—		$	—		$	—	$	146		$	(309	)	$	—

Note ~~13—~~12—Treasury Stock

At ~~June 30,~~March 31, 2017, common shares held in treasury totaled 907,117 with a cost of $14.3 million and at December 31, 2016, common shares held in treasury totaled ~~606,540 with a cost of $10.7 million and at December 31, 2015, common shares held in treasury totaled 514,812~~759,929 shares with a cost of ~~$9.3~~$12.6 million. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested.

Note ~~14—~~13—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 office space from an affiliated company. Rent expense related to these leases was ~~$1.8~~$1.8 million and ~~$2.0~~$2.7 million for ~~each of~~ the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and~~ ~~2015, respectively, and $4.5 million and $4.0 million for the six months ended June 30, 2016 and 2015,~~ respectively.

We are a party to certain agreements relating to the rental of aircraft to Western Airways ("WA"), an entity owned by the Mosing family. The WA agreements reflect both dry lease and wet lease rental, whereby we are charged a flat monthly fee primarily for crew, hangar, maintenance and administration costs in addition to other variable costs for fuel and maintenance. We also earn charter income from third party usage through a revenue sharing agreement. We recorded an immaterial amount of net charter ~~expense of $0.5 million and $0.4 million~~revenue for the three months ended ~~June 30, 2016~~March 31, 2017 and ~~2015, respectively,~~2016.

During the first quarter of 2017, we committed to a formal plan to sell two aircrafts and ~~$0.5 million and $0.8 million~~determined those assets met the criteria to be classified as held for ~~the six months ended June 30, 2016 and 2015, respectively.~~sale in our unaudited condensed consolidated balance sheet.

Tax Receivable Agreement

~~MHI~~Mosing Holdings and its permitted transferees ~~may convert~~converted all ~~or a portion~~ of ~~its~~their Preferred Stock into shares of our common stock on a one-for-one basis on August 26, 2016, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, by delivery of an equivalent portion of ~~its interest~~their interests in FICV to us (a(the “Conversion”). FICV ~~has made~~will make an election under Section 754 of the Code. Pursuant to the Section 754 election, ~~each future~~the Conversion ~~is expected to~~will result in an adjustment to the tax basis of the tangible and intangible assets of FICV ~~and these~~with respect to the portion of FICV now held by FINV. These adjustments will be allocated to FINV. ~~Certain of the~~The adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent ~~these future Conversions.~~this Conversion. The ~~anticipated~~ basis adjustments are expected to 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 (the "TRA") that we entered into with FICV and ~~MHI~~Mosing Holdings in connection with our ~~IPO~~initial public offering ("IPO") generally provides for the payment by FINV of 85% of the amount of the actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as “cash savings”) in periods after our IPO as a result of (i) the tax basis increases resulting from the ~~Conversions~~Conversion and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, payments under the TRA. In addition, the TRA provides for payment by us of interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the TRA. The payments under the TRA will not be conditioned upon a holder of rights under the TRA having a continued ownership interest in either FICV or FINV. We will retain the remaining 15% of cash savings, if any.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of both March 31, 2017 and December 31, 2016, our estimated TRA liability was $124.6 million. This represents 85% of the future cash savings expected from the utilization of the original basis adjustments plus subsequent basis adjustments that will result from payments under the TRA agreement. The estimation of the TRA liability is by its nature imprecise and subject to significant assumptions regarding the amount and timing of taxable income in the future and the tax rates then applicable. The time period over which the cash savings is expected to be realized is estimated to be over 20 years. Based on FINV’s estimated tax position, we expect to make a TRA payment in 2017 of approximately $2.1 million for the tax year ending December 31, 2016.

The payment obligations under the TRA are our obligations and are not obligations of FICV. The term of the TRA will continue until all such tax benefits have been utilized or expired, unless weFINV elects to exercise ~~our~~its sole right to terminate the ~~TRA.~~

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Estimating the amount of payments that may be made under the~~ TRA is by its nature imprecise. The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of Conversions, the relative value of our U.S. and international assets at the time of the Conversion, the price of our common stock at the time of the Conversion, the extent to which such Conversions are taxable, the amount and timing of the taxable income FINV realizes in the future and the tax rate then applicable, FINV’s use of loss carryovers and the portion of its payments under the TRA constituting imputed interest or depreciable or amortizable basis. FINV expects that the payments that it will be required to make under the TRA will be substantial but that it will be able to fund such payments. There may be a negative impact on our liquidity if, as a result of timing discrepancies, the payments under the TRA exceed the actual benefits we realize in respect of the tax attributes subject to the TRA. The payments under the TRA will not be conditioned upon a holder of rights under a TRA having a continued ownership interest in either FICV or FINV.

~~The TRA provides that FINV may terminate it~~ early. If FINV elects to terminate the TRA early, which it may do so in its sole discretion, it would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that ~~MHI~~Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control. In these situations, FINV’s obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For example, if the TRA were terminated on ~~June 30, 2016,~~March 31, 2017, the estimated termination payment would be approximately ~~$85.6~~$98.4 million (calculated using a discount rate of ~~4.86%~~5.71%). The foregoing number is merely an estimate and the actual payment could differ materially.

Because FINV is a holding company with no operations of its own, its ability to make payments under the TRA is dependent on the ability of FICV to make distributions to it in an amount sufficient to cover FINV’s obligations under such agreements; this ability, in turn, may depend on the ability of FICV’s subsidiaries to provide payments to it. The ability of FICV and its 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 ofor 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.

Note ~~15—Earnings (Loss)~~14 - Loss Per Common Share

Basic ~~earnings (loss)~~loss per common share is determined by dividing net ~~income (loss), less preferred stock dividends,~~loss by the weighted average number of common shares outstanding during the period. Diluted ~~earnings (loss)~~loss per share is determined by dividing ~~net income (loss)~~loss attributable to common stockholders by the weighted average number of common shares outstanding, assuming all potentially dilutive shares were issued.

We apply the treasury stock method to determine the dilutive weighted average common shares represented by the unvested restricted stock units and ~~ESPP~~employee stock purchase plan shares. ~~The~~Through August 26, 2016, the date of the conversion of all of Mosing Holdings' Preferred Stock and Mosing Holdings' transfer of interest in FICV to us, the diluted ~~earnings (loss)~~loss per share calculation ~~assumes~~assumed the conversion of 100% of our outstanding Preferred Stock on an as if converted basis. Accordingly, the numerator iswas also adjusted to include the earnings allocated to the noncontrolling interest after taking into account the tax effect of such exchange.

1920

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Numerator - Basic
Income (loss) from continuing operations $ (45,287 ) $ 28,853
$ (47,695 ) $ 75,254
Less: Net (income) loss attributable to noncontrolling interest 13,889
(8,023 ) 15,525
(20,145 )
Less: Preferred stock dividends (1 ) (2 ) (1 ) (2 )
Net income (loss) available to common shareholders $ (31,399 ) $ 20,828
$ (32,171 ) $ 55,107

Numerator - Diluted
Income (loss) from continuing operations attributable to common shareholders $ (31,399 ) $ 20,828
$ (32,171 ) $ 55,107
Add: Net income attributable to noncontrolling interest (1), (2) —
7,664
—
17,602
Add: Preferred stock dividends (2) —
2
—
2
Dilutive net income (loss) available to common shareholders $ (31,399 ) $ 28,494
$ (32,171 ) $ 72,711

Denominator
Basic weighted average common shares 155,440
154,344
155,342
154,337
Exchange of noncontrolling interest for common stock (Note 11), (2) —
52,976
—
52,976
Restricted stock units (2) —
1,789
—
1,489
Stock to be issued pursuant to ESPP (2) —
5
—
2
Diluted weighted average common shares 155,440
209,114
155,342
208,804

Earnings (loss) per common share:
Basic $ (0.20 ) $ 0.14
$ (0.21 ) $ 0.36
Diluted $ (0.20 ) $ 0.14
$ (0.21 ) $ 0.35



	Three Months Ended
	March 31,
	2017			2016
Numerator - Basic
Net loss	$	(26,663	)	$	(2,408	)
Less: Net loss attributable to noncontrolling interest	—			1,636
Net loss available to common shareholders	$	(26,663	)	$	(772	)
Numerator - Diluted
Diluted net loss available to common shareholders	$	(26,663	)	$	(772	)
Denominator
Basic weighted average common shares	222,564			155,244
Diluted weighted average common shares⁽¹⁾	222,564			155,244
Loss per common share:
Basic	$	(0.12	)	$	—
Diluted	$	(0.12	)	$	—

(1) Adjusted for the additional tax expense upon the assumed conversion of the Preferred Stock $ —
$ 359
$ —
$ 2,543
(2) Approximate number of shares of potentially convertible preferred stock to common stock, unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted earnings (loss) per share as the effect would be anti-dilutive when the results from operations are at a net loss. 54,534
—
54,489
—

Note ~~16—~~15—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 expected annual tax rate.

Our effective tax rate on ~~income~~loss from continuing operations before income taxes was ~~14.5%~~25.5% and ~~26.9%~~25.1% for the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015, respectively, and 15.1% and 22.5% for the six months ended June 30, 2016 and 2015,~~ respectively. The ~~lower rates are~~higher rate is due primarily ~~a result of a decrease in taxable income and~~to a change in

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

jurisdictional mix. In addition, the tax rate for all periods is lower than the U.S. statutory income tax rate of 35% due to lower statutory tax rates in certain foreign jurisdictions where we operate.

As of ~~June 30, 2016~~March 31, 2017, there were no significant changes to our unrecognized tax benefits as reported in our audited financial statements for the year ended December 31, ~~2015~~2016.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note ~~17—~~16—Severance and Other Charges

During ~~2015, we executed a workforce reduction plan as part of our cost savings initiatives due to depressed oil~~2016 and ~~gas prices. During 2016,~~continuing into 2017, we have ~~continued to take~~taken additional steps to adjust our workforce to meet the depressed demand in the industry. The reduction was communicated to affected employees on various dates. Also, the Chairman of the board of supervisory directors (who also held the role of Executive Chairman of our company) transitioned to a non-executive director of the supervisory board effective as of DecemberAt March 31, ~~2015. At June 30, 2016,~~2017, our outstanding accrual was approximately ~~$19.9~~$4.4 million and included severance payments, other employee-related termination costs and lease termination fees. Below is a reconciliation of the beginning and ending liability balance (in thousands):


	International Services			U.S. Services			Tubular Sales			Total			International Services			U.S. Services			Total
Beginning balance, December 31, 2015	$	78		$	22,166		$	—		$	22,244
Beginning balance, December 31, 2016													$	4,464		$	1,686		$	6,150
Additions for costs expensed	2,590			1,549			185			4,324			270			767			1,037
Other adjustments	—			(341		)	341			—			5			58			63
Severance and other payments	(2,167		)	(3,936		)	(526		)	(6,629		)	(1,376		)	(1,457		)	(2,833		)
Ending balance, June 30, 2016	$	501		$	19,438		$	—		$	19,939
Ending balance, March 31, 2017													$	3,363		$	1,054		$	4,417

We expect to pay a significant portion of the remaining liability ~~no later than~~in the ~~third~~second quarter of ~~2016.~~2017.

Note ~~18—~~17—Commitments and Contingencies

We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. We had no material accruals for loss contingencies, individually or in the aggregate, as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015.~~2016. 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, 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, ~~and~~ the United States Department of ~~Justice.~~Justice and other governmental entities. It is our intent 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 ~~does~~has not ~~currently indicate~~indicated that there has been any material impact on our previously filed financial statements, we ~~continue~~have continued to collect information and cooperate with the authorities, but at this time are unable to predict the ultimate resolution of these matters with these agencies. In addition, during the course of the investigation, we discovered historical business transactions (and bids to enter into business transactions) in certain countries that may have been subject to U.S. and other international sanctions. We have disclosed this information to various governmental entities (including those involved in our ongoing investigation), but at this time are unable to predict the ultimate resolution of these matters with these agencies, including any financial impact to us.

~~FRANK’S INTERNATIONAL N.V.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note ~~19—~~18—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 ~~chief operating decision maker (“CODM”)~~CODM in deciding how to allocate resources and assess performance. We are comprised of ~~three~~four reportable segments: International Services, U.S. Services, Tubular Sales and ~~Tubular Sales.~~Blackhawk.

The International Services segment provides tubular services in international offshore markets and in several onshore international regions. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies.

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The U.S. Services segment provides tubular services in ~~almost all of~~ the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, ~~Bakken Shale, Barnett Shale,~~ Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basin and Utica Shale, as well as in the U.S. Gulf of Mexico.

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

The Blackhawk segment provides well construction and well intervention rental equipment, services and products, in addition to cementing tool expertise, in the U.S. and Mexican Gulf of Mexico, onshore U.S. and other select international locations.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) ~~from continuing operations~~ before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss, equity-based compensation, unrealized and realized gain or loss, other non-cash adjustments and ~~unusual~~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) ~~and items outside the control of our management team (such as~~, income tax, ~~rates).~~foreign currency exchange rates and other charges and credits. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance ~~or liquidity~~ presented in accordance with ~~generally accepted accounting principles in~~GAAP. Previously reported Adjusted EBITDA for the ~~U.S. ("GAAP").~~three months ended March 31, 2016 has been adjusted for investigation-related matters ($1.9 million) and employee stock purchase plan expense ($0.1 million) as management believes removing the effect of these items allows for better comparability across periods.

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

2223

FRANK’S INTERNATIONAL N.V.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a reconciliation of Segment Adjusted EBITDA to ~~income (loss) from continuing operations~~net loss (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Segment Adjusted EBITDA:
International Services $ (4,159 ) $ 55,311
$ 27,220
$ 107,596
U.S. Services (11,318 ) 16,714
(10,500 ) 61,662
Tubular Sales 1,624
7,978
1,178
11,097
Corporate and other 180
31
202
24
Adjusted EBITDA Total (13,673 ) 80,034
18,100
180,379
Interest income (expense), net 198
(31 ) 404
(23 )
Income tax benefit (expense) 7,705
(10,629 ) 8,511
(21,891 )
Depreciation and amortization (28,283 ) (27,710 ) (57,733 ) (51,711 )
Gain (loss) on sale of assets 279
(687 ) 1,049
(871 )
Foreign currency loss (4,170 ) (2,767 ) (4,211 ) (1,234 )
Equity-based compensation expense (4,320 ) (8,308 ) (8,528 ) (16,373 )
Severance and other charges (3,718 ) (1,049 ) (4,324 ) (13,022 )
Unrealized and realized gains (losses) 695
—
(963 ) —
Income (loss) from continuing operations $ (45,287 ) $ 28,853
$ (47,695 ) $ 75,254



	Three Months Ended
	March 31,
	2017			2016
Segment Adjusted EBITDA:
International Services	$	5,286		$	31,379
U.S. Services	(7,215		)	2,730
Tubular Sales	2,254			(446		)
Blackhawk	1,211			—
	1,536			33,663
Interest income, net	398			206
Income tax benefit	9,118			806
Depreciation and amortization	(31,099		)	(29,450		)
Gain on sale of assets	1,472			770
Foreign currency gain (loss)	746			(41		)
Charges and credits ⁽¹⁾	(8,834		)	(8,362		)
Net loss	$	(26,663	)	$	(2,408	)

⁽¹⁾Comprised of Equity-based compensation expense (for the three months ended March 31, 2017 and 2016 : $5,701 and $4,208, respectively), Mergers and acquisition expense (for the three months ended March 31, 2017 and 2016 : $449 and none, respectively), Severance and other charges (for the three months ended March 31, 2017 and 2016 : $1,037 and $606, respectively), Unrealized and realized gains (losses) (for the three months ended March 31, 2017 and 2016 : $(608) and $(1,658), respectively) and investigation-related matters (for the three months ended March 31, 2017 and 2016 : $1,039 and $1,890, respectively).

The following tables set forth certain financial information with respect to our reportable ~~segments. Included in “Corporate and Other” are intersegment eliminations and costs associated with activities of a general nature~~segments (in thousands):

International
Services

U.S.
Services
Tubular Sales
Corporate
and Other
Total

Three Months Ended June 30, 2016
Revenue from external customers $ 57,350
$ 37,118
$ 26,478
$ —
$ 120,946
Inter-segment revenues 29
3,940
4,351
(8,320 ) —
Adjusted EBITDA (4,159 ) (11,318 ) 1,624
180
(13,673 )

Three Months Ended June 30, 2015
Revenue from external customers $ 122,640
$ 78,418
$ 53,246
$ —
$ 254,304
Inter-segment revenues 229
6,644
10,544
(17,417 ) —
Adjusted EBITDA 55,311
16,714
7,978
31
80,034

Six Months Ended June 30, 2016
Revenue from external customers $ 140,412
$ 85,898
$ 48,122
$ —
$ 274,432
Inter-segment revenues 45
8,050
10,017
(18,112 ) —
Adjusted EBITDA 27,220
(10,500 ) 1,178
202
18,100

Six Months Ended June 30, 2015
Revenue from external customers $ 246,841
$ 187,704
$ 97,196
$ —
$ 531,741
Inter-segment revenues 606
14,558
22,435
(37,599 ) —
Adjusted EBITDA 107,596
61,662
11,097
24
180,379



	International Services			U.S. Services			Tubular Sales			Blackhawk			Eliminations			Total
Three Months Ended March 31, 2017
Revenue	$	46,610		$	30,966		$	16,945		$	16,210		$	—		$	110,731
Inter-segment revenue	3			4,285			3,675			—			(7,963		)	—
Operating income (loss)	(9,513		)	(23,347		)	2,380			(6,130		)	—			(36,610		)
Adjusted EBITDA	5,286			(7,215		)	2,254			1,211			—			*

Three Months Ended March 31, 2016
Revenue	$	83,063		$	48,779		$	21,644		$	—		$	—		$	153,486
Inter-segment revenue	17			4,110			5,665			—			(9,792		)	—
Operating income (loss)	14,293			(15,658		)	(1,517		)	—			—			(2,882		)
Adjusted EBITDA	31,379			2,730			(446		)	—			—			*

* Non-GAAP financial measure not disclosed.

2324

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

our business strategy and prospects for growth;

our cash flows and liquidity;

our financial strategy, budget, projections and operating results;

the amount, nature and timing of capital expenditures;

the availability and terms of capital;

competition and government regulations; and

general economic conditions.

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

the level of activity in the oil and gas industry;

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

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

unique risks associated with our offshore operations;

political, economic and regulatory uncertainties in our 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; and

weather conditions and natural disasters.

These and other important factors that could affect our operating results and performance are described in (1) “Risk Factors” in Part II, Item IA 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, ~~2015,~~2016, filed with the SEC on February ~~29, 2016~~24, 2017 (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.

2425

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 75 years. We provide our services 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~~four operating segments:

International Services. We currently provide our services in approximately 60 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies.

U.S. Services. We service customers in the offshore areas of the U.S. Gulf of Mexico. In addition, we have a presence in ~~almost all of~~ the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, ~~Bakken Shale, Barnett Shale,~~ Eagle Ford Shale, Haynesville Shale, Marcellus Shale, DJ Basin and Utica Shale.

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

Blackhawk. We provide well construction and well intervention rental equipment, services and products, in addition to cementing tool expertise, in the U.S. and Mexican Gulf of Mexico, onshore U.S. and other select international locations.

Market Outlook

~~We expect to see further weakness in the demand~~The market for our products and services ~~for the remainder of 2016 as decreased spending~~continues to be challenged by ~~our customers on~~depressed oil and gas commodity prices and reduced customer spending on offshore exploration and ~~production activities persist across our operating areas. The current~~development projects. Despite improvements in commodity ~~price environment has led to numerous delayed, suspended or canceled projects,~~prices and increases in U.S. onshore activity and profitability, commodity prices remain below levels necessary for meaningful increases in offshore activity, particularly in ~~our core offshore~~the markets inof West Africa and the U.S. Gulf of Mexico. ~~These delays~~For 2017, we expect to see further deterioration of pricing and ~~cancellations have resulted in decreased revenues and profitability of our International and U.S. Services segments. Furthermore, we have seen material reductions~~activity in the ~~pricing~~U.S. Gulf of Mexico and, consequently, our ~~services~~Tubular Sales business segment. International markets are beginning to show signs of stabilization and the potential for reaching an activity bottom in the next twelve months. We expect to see growth in our recently acquired Blackhawk Specialty Tools LLC ("Blackhawk") business both in the U.S. onshore and ~~offshore and have been unable to offset these declines with cost reductions. All of our business segments will likely trend lower until such time~~in select international markets during the year as ~~our customers conclude that the commodity price conditions warrant new investment in exploration and production activities, which is currently unforeseeable. The company plans to attempt~~we expand its operational footprint. In order to offset some of the ~~lower~~declines in activity and pricing, ~~through~~we continue to look for ways to reduce our costs and grow share in markets we have historically been underrepresented, including international land and shelf opportunities. We also continue to evaluate potential acquisitions to broaden our well construction offering and position the company for revenue growth in a market ~~share gains and the potential for acquisitions of new products or services, but does not expect to fully offset the magnitude of the revenue and Adjusted EBITDA declines.~~recovery.

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) ~~from continuing operations~~ before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss, equity-based compensation, unrealized ~~and realized~~ gain or loss, other non-cash adjustments and ~~unusual~~other charges or credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues. 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) ~~and~~, items outside the control of our management team (such as income tax and foreign currency exchange rates). and other charges outside the normal course of business. 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 ~~or liquidity~~ presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Previously reported Adjusted EBITDA for the three months ended March 31, 2016 has been adjusted for investigation-related matters ($1.9 million) and employee stock purchase plan expense ($0.1 million) as management believes removing the effect of these items allows for better comparability across periods.

The following table presents a reconciliation of ~~income (loss) from continuing operations~~net loss to Adjusted EBITDA, our most directly comparable GAAP performance measure, as well as Adjusted EBITDA margin for each of the periods presented (in thousands):



	Three Months Ended
	March 31,
	2017			2016

Net loss	$	(26,663	)	$	(2,408	)
Interest income, net	(398		)	(206		)
Depreciation and amortization	31,099			29,450
Income tax benefit	(9,118		)	(806		)
Gain on sale of assets	(1,472		)	(770		)
Foreign currency (gain) loss	(746		)	41
Charges and credits⁽¹⁾	8,834			8,362
Adjusted EBITDA	$	1,536		$	33,663
Adjusted EBITDA margin	1.4		%	21.9		%

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015

Income (loss) from continuing operations $ (45,287 ) $ 28,853
$ (47,695 ) $ 75,254
Interest (income) expense, net (198 ) 31
(404 ) 23
Depreciation and amortization 28,283
27,710
57,733
51,711
Income tax (benefit) expense (7,705 ) 10,629
(8,511 ) 21,891
(Gain) loss on sale of assets (279 ) 687
(1,049 ) 871
Foreign currency loss 4,170
2,767
4,211
1,234
Equity-based compensation expense 4,320
8,308
8,528
16,373
Severance and other charges (See Note 17) 3,718
1,049
4,324
13,022
Unrealized and realized (gains) losses (695 ) —
963
—
Adjusted EBITDA $ (13,673 ) $ 80,034
$ 18,100
$ 180,379
Adjusted EBITDA margin (11.3 )% 31.5 % 6.6 % 33.9 %

⁽¹⁾Comprised of Equity-based compensation expense (for the three months ended March 31, 2017 and 2016 : $5,701 and $4,208, respectively), Mergers and acquisition expense (for the three months ended March 31, 2017 and 2016 : $449 and none, respectively), Severance and other charges (for the three months ended March 31, 2017 and 2016 : $1,037 and $606, respectively), Unrealized and realized (gains) losses (for the three months ended March 31, 2017 and 2016 : $608 and $1,658, respectively) and investigation-related matters (for the three months ended March 31, 2017 and 2016 : $1,039 and $1,890, respectively).

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

Safety Performance

Maintaining a strong safety record is a critical component of our operational success. Many of our ~~larger~~ customers have safety standards we must satisfy before we can perform ~~services for them. We~~services. As a result, we continually monitor and improve our safety ~~culture~~performance through the ~~use~~evaluation of ~~employee~~ safety observations, job and customer surveys, and ~~trend analysis, and we modify existing programs or develop new programs according~~safety data. The primary measure for our safety performance is the tracking of the Total Recordable Incident Rate ("TRIR") in addition to the ~~data obtained. One way to measure safety is by tracking the total recordable incident rate (“TRIR”) and the lost time incident rate~~Lost Time Incident Rate (“LTIR”), which are 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
	Three Months Ended						Six Months Ended						March 31,
	June 30,						June 30,						2017			2016
	2016			2015			2016			2015			(Unaudited)
Revenues:
Equipment rentals and services	$	95,177		$	201,282		$	226,434		$	433,687		$	86,322		$	131,257
Products (1)	25,769			53,022			47,998			98,054			24,409			22,229
Total revenue	120,946			254,304			274,432			531,741			110,731			153,486

Operating expenses:
Cost of revenues, exclusive of
depreciation and amortization
Cost of revenues, exclusive of depreciation and amortization
Equipment rentals and services(2)	52,564			76,692			108,365			170,292			57,107			68,349
Products(2)	17,028			33,060			29,357			55,907			16,845			15,491
General and administrative expenses(2)	70,310			73,797			129,262			143,594			42,725			43,242
Depreciation and amortization	28,283			27,710			57,733			51,711			31,099			29,450
Severance and other charges	3,718			1,049			4,324			13,022			1,037			606
Gain (loss) on sale of assets	(279		)	687			(1,049		)	871
Operating income (loss)	(50,678		)	41,309			(53,560		)	96,344
Gain on sale of assets													(1,472		)	(770		)
Operating loss													(36,610		)	(2,882		)

Other income (expense):
Other income	1,658			971			1,161			2,058
Interest income (expense), net	198			(31		)	404			(23		)
Foreign currency loss	(4,170		)	(2,767		)	(4,211		)	(1,234		)
Other income (expense)													134			(497		)
Interest income, net													398			206
Mergers and acquisition expense													(449		)	—
Foreign currency gain (loss)													746			(41		)
Total other income (expense)	(2,314		)	(1,827		)	(2,646		)	801			829			(332		)

Income (loss) before income tax expense (benefit)	(52,992		)	39,482			(56,206		)	97,145
Income tax expense (benefit)	(7,705		)	10,629			(8,511		)	21,891
Net income (loss)	(45,287		)	28,853			(47,695		)	75,254
Less: Net income (loss) attributable to noncontrolling interest	(13,889		)	8,023			(15,525		)	20,145
Loss before income tax benefit													(35,781		)	(3,214		)
Income tax benefit													(9,118		)	(806		)
Net loss													(26,663		)	(2,408		)
Less: Net loss attributable to noncontrolling interest													—			(1,636		)

Net income (loss) attributable to Frank's International N.V.	$	(31,398	)	$	20,830		$	(32,170	)	$	55,109
Net loss attributable to Frank's International N.V.													$	(26,663	)	$	(772	)


(1)	Consolidated products revenue includes a small amount of revenues attributable to the U.S. Services and International Services segments.


(2)	For the three months ended March 31, 2016, $12,548 and $3,162 have been reclassified from general and administrative expenses to equipment rentals and services and products, respectively. See Note 1 - Basis of Presentation in the Notes to Unaudited Condensed Consolidated Financial Statements.

Three Months Ended ~~June 30, 2016~~March 31, 2017 Compared to Three Months Ended ~~June 30, 2015~~March 31, 2016

Revenues. Revenues from external customers, excluding intersegment sales, for the three months ended ~~June 30, 2016~~March 31, 2017 decreased by ~~$133.4~~$42.8 million, or ~~52.4%~~27.9%, to ~~$120.9~~$110.7 million from ~~$254.3~~$153.5 million for the three months ended ~~June 30, 2015~~.March 31, 2016. The decrease was primarily attributable to lower revenues in ~~all~~the majority of our segments due to declining activity as depressed oil and gas prices resulted in reduced rig count, downward pricing pressures, rig cancellations and delays as well as deferred work scopes in the International and U.S. Services regions while revenues for Tubular Sales decreased due to lower international demand and decreased deep water fabrication revenue. The decrease in total revenues was partially offset by revenues in our Blackhawk segment of $16.2 millionfrom our recent acquisition. Revenues for our segments are discussed separately below under the heading "Operating Segment Results."

Cost of revenues, exclusive of depreciation and amortization. Cost of revenues for the three months ended ~~June 30, 2016~~March 31, 2017 decreased by ~~$40.2~~$9.9 million,, or ~~36.6%~~11.8%, to ~~$69.6~~$74.0 million from ~~$109.8~~$83.8 million for the three months ended ~~June 30, 2015~~.March 31, 2016. Our cost of revenues decline was consistent with our lower revenue and cost cutting initiative, which was slightly offset by our fixed cost structure.

~~General and administrative expenses.~~ ~~General and administrative expenses for the three months ended~~ ~~June 30, 2016~~ ~~decreased by~~ ~~$3.5 million, or~~ ~~4.7%, to $70.3 million from $73.8 million for the three months ended~~ ~~June 30, 2015~~. Excluding the bad debt expense of $9.7 million related to the collectability of receivables in Venezuela (see "Customer Credit Risk" in Part I, Item 3), general and administrative expenses for the three months ended June 30, 2016 decreased by $13.1 million, or 17.8%, as a result of cost initiatives, which included workforce reductions and lease terminations. Also, equity-based compensation expense decreased by $4.0 million as the IPO grants for retirement-eligible employees had a two year service requirement, which was completed during the third quarter of 2015. The lower costs were partially offset by an increase in higher professional fees of $2.6 million as a result of ~~ongoing global corporate initiatives and~~ ~~our investigation as mentioned in Note 18 - Commitments and Contingencies~~ ~~in the Notes to Unaudited Condensed Consolidated Financial Statements~~.

Severance and other charges. Severance and other charges for the three months ended ~~June 30, 2016~~March 31, 2017 increased by ~~$2.7~~$0.4 million, or ~~254.4%~~71.1%, to ~~$3.7~~$1.0 million from ~~$1.0~~$0.6 million for the three months ended ~~June 30, 2015~~March 31, 2016 as a result of a higher workforce reduction in the ~~second~~first quarter of ~~2016~~2017 compared to ~~2015~~2016 as we continued to take steps to adjust our workforce to meet the depressed demand in the industry. See Note 1716 - Severance and Other Charges in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

Income tax ~~expense (benefit).~~benefit. Income tax ~~expense (benefit)~~benefit for the three months ended ~~June 30, 2016~~ ~~decreased~~March 31, 2017 increased by ~~$18.3~~$8.3 million ~~or 172.5%,~~ to ~~$(7.7)~~$9.1 million from ~~$10.6~~$0.8 million for the three months ended ~~June 30, 2015~~March 31, 2016 primarily as a result of a decrease in taxable income and a change in jurisdictional mix. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits) and withholding taxes based on revenues; consequently, the relationship between our pre-tax income from operations and our income tax provision varies from period to period.

~~Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~

~~Revenues.~~ ~~Revenues from external customers, excluding intersegment sales, for the six months ended June 30, 2016 decreased by~~ ~~$257.3 million~~, or 48.4%, to $274.4 million from $531.7 million for the six months ended June 30, 2015. The decrease was primarily attributable to lower revenues in all of our segments due to declining activity as depressed oil and gas prices resulted in reduced rig count, downward pricing pressures, rig cancellations and delays as well as deferred work scopes in the International and U.S. Services regions while revenues for Tubular Sales decreased due to ~~lower international demand and decreased deep water fabrication revenue.~~ ~~Revenues for our segments are discussed separately below under the heading "Operating Segment Results."~~

~~Cost of revenues, exclusive of depreciation and amortization.~~ Cost of revenues for the six months ended June 30, 2016 decreased by $88.5 million, or 39.1%, to $137.7 million from $226.2 million for the six months ended June 30, 2015. Our cost of revenues decline was consistent with our lower revenue, which was slightly offset by our fixed cost structure.

~~General and administrative expenses.~~ General and administrative expenses for the six months ended June 30, 2016 decreased by $14.3 million, or 10.0%, to $129.3 million from $143.6 million for the six months ended June 30, 2015. Excluding the bad debt expense of $9.7 million related to the collectability of receivables in Venezuela (see "Customer Credit Risk" in Part I, Item 3), general and administrative expenses for the six months ended June 30, 2016 decreased by $24.0 million, or 16.7%, primarily as a result of cost initiatives, which included workforce reductions and lease terminations. Also, equity-based compensation expense decreased by $7.8 million as the IPO grants for retirement-eligible employees had a two year service requirement, which was completed during the third quarter of 2015. The decreased costs were partially offset by ~~$5.4 million of professional fees, which included costs related to our ongoing~~

~~global corporate initiatives and the investigation mentioned in Note 18 - Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements~~.

~~Depreciation and amortization.~~ Depreciation and amortization for the six months ended June 30, 2016 increased by $6.0 million, or 11.6%, to $57.7 million from $51.7 million for the six months ended June 30, 2015. The increase was primarily attributable to our Timco acquisition of $2.2 million in addition to a higher depreciable base resulting from property and equipment additions.

~~Severance and other charges~~. Severance and other charges for the six months ended June 30, 2016 decreased by $8.7 million, or 66.8%, to $4.3 million from $13.0 million for the six months ended June 30, 2015 as a result of an overall lower workforce reduction compared to the prior year although we continued to ~~take steps to adjust our workforce to meet the depressed demand in the industry.~~ ~~See Note 17 - Severance and Other Charges~~ ~~in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion~~.

~~Foreign currency loss. Foreign currency loss was $4.2 million for the six months ended June 30, 2016 compared to $1.2 million for the six months ended June 30, 2015 primarily due to the devaluation of the Nigerian Naira.~~

~~Income tax expense (benefit).~~ Income tax expense (benefit) for the six months ended June 30, 2016 decreased by $30.4 million, or 138.9%, to $(8.5) million from $21.9 million for the six months ended June 30, 2015 primarily as a result of a decrease in taxable income and a changechanges in jurisdictional mix. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits) and withholding taxes based on revenues; consequently, the relationship between our pre-tax income from operations and our income tax provision varies from period to period.

Operating Segment Results

Revenue pertaining to our segments as stated in the following discussions include intersegment sales. Adjusted EBITDA includes the impact of intersegment operating activity. See Note 19 - Segment Information in the Notes to Unaudited Condensed Consolidated Financial Statements.

The following table presents revenues and Adjusted EBITDA by segment ~~and a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations, which is the most comparable GAAP financial measure~~ (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Revenue:
International Services $ 57,379
$ 122,869
$ 140,457
$ 247,447
U.S. Services 41,058
85,062
93,948
202,262
Tubular Sales 30,829
63,790
58,139
119,631
Intersegment sales (8,320 ) (17,417 ) (18,112 ) (37,599 )
Total $ 120,946
$ 254,304
$ 274,432
$ 531,741

Segment Adjusted EBITDA:
International Services $ (4,159 ) $ 55,311
$ 27,220
$ 107,596
U.S. Services (11,318 ) 16,714
(10,500 ) 61,662
Tubular Sales 1,624
7,978
1,178
11,097
Corporate and other (1) 180
31
202
24
Adjusted EBITDA Total (2) (13,673 ) 80,034
18,100
180,379
Interest income (expense), net 198
(31 ) 404
(23 )
Income tax benefit (expense) 7,705
(10,629 ) 8,511
(21,891 )
Depreciation and amortization (28,283 ) (27,710 ) (57,733 ) (51,711 )
Gain (loss) on sale of assets 279
(687 ) 1,049
(871 )
Foreign currency loss (4,170 ) (2,767 ) (4,211 ) (1,234 )
Equity-based compensation expense (4,320 ) (8,308 ) (8,528 ) (16,373 )
Severance and other charges (3,718 ) (1,049 ) (4,324 ) (13,022 )
Unrealized and realized gains (losses) 695
—
(963 ) —
Income (loss) from continuing operations $ (45,287 ) $ 28,853
$ (47,695 ) $ 75,254



	Three Months Ended
	March 31,
	2017			2016
Revenue:
International Services	$	46,610		$	83,063
U.S. Services	30,966			48,779
Tubular Sales	16,945			21,644
Blackhawk	16,210			—
Total	$	110,731		$	153,486

Segment Adjusted EBITDA ⁽¹⁾:
International Services	$	5,286		$	31,379
U.S. Services	(7,215		)	2,730
Tubular Sales	2,254			(446		)
Blackhawk	1,211			—
	$	1,536		$	33,663


⁽¹⁾	~~Corporate and other represents amounts not directly associated with an operating segment.~~


~~(2)~~	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").

Three Months Ended ~~June 30, 2016~~March 31, 2017 Compared to Three Months Ended ~~June 30, 2015~~March 31, 2016

International Services

Revenue for the International Services segment decreased by ~~$65.5~~$36.5 million for the three months ended ~~June 30, 2016~~March 31, 2017, or ~~53.3%~~43.9%, compared to the same period in ~~2015,~~2016, primarily due to depressed oil and gas prices, which challenged the economics of current development projects and caused the termination of ongoing drilling campaigns and the delay in the commencement of new projects, as well as cancellations or deferred work scopes. ~~The Africa region also incurred further revenue reductions in the second quarter of 2016 as a result of the significant decrease in deep water activity.~~

Adjusted EBITDA for the International Services segment decreased by ~~$59.5~~$26.1 million for the three months ended ~~June 30, 2016,~~March 31, 2017, or ~~107.5%~~83.2%, compared to the same period in ~~2015~~2016 primarily due to the ~~$65.5 million~~ decrease in revenue, ~~$9.7 million of bad debt expense primarily related to the collectability of receivables in Venezuela (see "Customer Credit Risk"in Part I, Item 3) and $2.5 million of additional payroll related costs for Nigeria and Mexico,~~ which ~~were~~was partially offset by lower expenses due to reduced activity and cost-cutting measures.

U.S. Services

Revenue for the U.S. Services segment decreased by ~~$44.0~~$17.8 million for the three months ended ~~June 30, 2016~~March 31, 2017, or ~~51.7%~~36.5%, compared to the same period in ~~2015.~~2016. Onshore services revenue ~~decreased~~increased by ~~$15.1~~$0.6 million as a result of ~~lower~~improved activity from ~~declining~~increased rig ~~counts and pricing discounts.~~counts. The offshore business saw a decrease in revenue of ~~$26.3~~$18.4 million as a result of overall lower activity from weaknesses seen in the Gulf of Mexico due to rig cancellations and delays, coupled with downward pricing pressures.

Adjusted EBITDA for the U.S. Services segment decreased by ~~$28.0~~$9.9 million for the three months ended ~~June 30, 2016, or 167.7%,~~March 31, 2017 compared to the same period in ~~2015~~2016 primarily due to higher pricing concessions and lower activity ~~of $22.0 million and~~in our Offshore services, along with higher corporate and other costs ~~of $6.2 million primarily due to increased professional fees, which were attributable to the investigation and ongoing global corporate initiatives.~~driven by one-time employee healthcare claims expense, partially offset by an increase in Onshore services profitability.

Tubular Sales

Revenue for the Tubular Sales segment decreased by ~~$33.0~~$4.7 million for the three months ended ~~June 30, 2016,~~March 31, 2017, or ~~51.7%~~21.7%, compared to the same period in ~~2015~~2016 primarily as a result of lower ~~international demand and decreased deep water fabrication revenue.~~Deepwater activity in the Gulf of Mexico.

Adjusted EBITDA for the Tubular Sales segment ~~decreased~~increased by ~~$6.4~~$2.7 million for the three months ended ~~June 30, 2016, or 79.6%,~~March 31, 2017 compared to the same period in ~~2015~~2016 as it was ~~negatively~~positively impacted by ~~fixed costs associated with the manufacturing division and decreased revenues.~~cost-cutting measures undertaken during 2016.

Blackhawk

~~Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~

~~International Services~~

~~Revenue for the International Services~~The Blackhawk segment ~~decreased by $107.0 million for the six months ended June 30, 2016, or 43.2%, compared to the same period in 2015, primarily due to depressed oil~~is comprised solely of our acquisition on November 1, 2016. Revenues and gas prices, which challenged the economics of current development projects and caused the termination of ongoing drilling campaigns and the delay in the commencement of new projects, as well as cancellations or deferred work scopes. The Africa region also encountered further revenue reductions as a result of a significant decline in deep water activity.

Adjusted EBITDA for the ~~International Services~~ segment ~~decreased by $80.4~~were $16.2 million and $1.2 million for the ~~six~~three months ended June 30, 2016, or 74.7%, compared to the same period in 2015 primarily due to the $107.0 million decrease in revenue, $9.7 million of bad debt expense related to the collectability of receivables in Venezuela (see "Customer Credit Risk"March 31, 2017~~in Part I, Item 3)~~. See Note 3 - Acquisition and ~~$2.5 million of additional payroll related costs for Nigeria and Mexico, which were partially offset by lower expenses due to reduced activity and cost-cutting measures~~.

~~U.S. Services~~

Revenue for the U.S. Services segment decreased by $108.3 million for the six months ended June 30, 2016, or 53.6%, compared to the same period in 2015. Onshore services revenue decreased by $34.8 million as a result of lower activity from declining rig counts and pricing discounts. The offshore business saw a decrease in revenue of $67.0 million as a result of overall lower activity from weaknesses seenDivestiture in the ~~Gulf of Mexico due~~Notes to ~~rig cancellations and delays, coupled with downward pricing pressures.~~

~~Adjusted EBITDA~~Consolidated Financial Statements for the U.S. Services segment decreased by $72.2 million for the six months ended June 30, 2016, or 117.0%, compared to the same period in 2015 primarily due to higher pricing concessions and lower activity of $58.7 million and higher corporate and other costs of $13.7 million primarily due to increased professional fees, which were attributable to the investigation and ongoing global corporate initiatives.

~~Tubular Sales~~

Revenue for the Tubular Sales segment decreased by $61.5 million for the six months ended June 30, 2016, or 51.4%, compared to the same period in 2015 primarily as a result of lower international demand and decreased deep water fabrication revenue.

Adjusted EBITDA for the Tubular Sales segment decreased by $9.9 million for the six months ended June 30, 2016, or 89.4%, compared to the same period in 2015 as it was negatively impacted by fixed costs associated with the manufacturing division and decreased revenues.additional information on our Blackhawk acquisition.

Liquidity and Capital Resources

Liquidity

At ~~June 30, 2016,~~March 31, 2017, we had cash and cash equivalents of ~~$581.4~~$283.9 million and debt of ~~$2.4~~$0.2 million. ~~Our primary sources of liquidity to date have been cash flows from operations.~~ Our primary uses of capital have been for organic growth capital ~~expenditures and acquisitions.~~expenditures. We continually monitor potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements.

Our total capital expenditures are estimated at ~~$60.0~~$40.0 million for ~~2016.~~2017. We expect to spend approximately ~~$25.0~~$22.0 million for the purchase and manufacture of equipment and ~~$35.0~~$18.0 million for other property, plant and equipment, inclusive of the purchase or construction of facilities. The actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions. During both the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 and ~~2015~~2016, capital expenditures were ~~$18.4~~$11.7 million, ~~and~~ ~~$70.8 million, respectively,~~ all of which were funded from internally generated funds. We believe our cash on hand ~~cash flows from operations~~ and potential borrowings under our Credit Facility (as defined below), should be sufficient to fund our capital expenditure and liquidity requirements for the remainder of ~~2016.~~2017.

We paid dividends on our common stock of ~~$46.8~~$16.7 million, or ~~an aggregate of $0.30~~$0.075 per common share ~~in addition to $8.0 million in distributions to our noncontrolling interests~~ during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017. ~~On July 22, 2016, our board of directors approved to decrease the quarterly dividend from $0.15 per share to $0.075 per share.~~ The timing, declaration, amount of, and payment of any dividends is within the discretion of our board of managing directors subject to the approval of our board of supervisory directors and will depend upon many factors, including our financial condition, earnings, capital requirements, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by our board of managing directors and our board of supervisory directors. We do not have a legal obligation to pay any dividend and there can be no assurance that we will be able to do so. The timing of distributions to our noncontrolling interests and the resulting tax arising from their membership interests in FICV is determined pursuant to the Limited Partnership Agreement of Frank's International C.V.

Credit Facility

On April 28, 2017, the Company obtained a limited waiver under its Credit Agreement of its leverage ratio and interest coverage ratio for the fiscal quarters ending March 31, 2017 and June 30, 2017 (the “Waiver”) in order to not be in default for first quarter of 2017 testing. The Company agreed to comply with the following conditions during the period from the effective date of the Waiver until the delivery of its compliance certificate with respect to the fiscal quarter ending September 30, 2017: (i) maintain no less than $250.0 million in liquidity; (ii) abide by certain restrictions regarding the issuance of senior unsecured debt; and (iii) pay interest and commitment fees based on the highest “Applicable Margin” (as defined in the Credit Agreement) level. In connection with the Waiver, the Company

3231

paid a waiver fee to each lender that executed the Waiver equal to five basis points of the respective lender’s commitment under the Credit Agreement. The foregoing summary of the Waiver is not complete and is qualified in its entirety by the full text of the Waiver, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q.

The Credit Facility also contains financial covenants, which, among other things, require us, on a consolidated basis, to maintain: (i) a ratio of total consolidated funded debt to adjusted EBITDA (as defined in the Credit ~~Facility)~~Agreement) of not more than 2.50 to 1.0 and (ii) a ratio of EBITDA to interest expense of not less than 3.0 to 1.0. ~~As of~~ ~~June 30, 2016, we were in compliance with all financial covenants under the Credit Facility.~~

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

Citibank Credit Facility

In 2016, we entered into a three-year credit facility with Citibank N.A., UAE Branch in the amount of $6.0 million for issuance of standby letters of credit and guarantees. The credit facility also allows for open ended guarantees. Outstanding amounts under the credit facility bear interest of 1.25% per annum for amounts outstanding up to one year. Amounts outstanding more than one year bear interest at 1.5% per annum. As of March 31, 2017 and December 31, 2016, we had $3.0 million and $2.2 million in letters of credit outstanding.

Tax Receivable Agreement

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

If we elect to execute our sole right to terminate the TRA early, we would be required to make an immediate payment equal to the present

value of the anticipated future tax benefits subject to the TRA (based upon certain assumptions and deemed events set forth in the TRA, including the assumption that it has sufficient taxable income to

fully utilize such benefits and that any FICV interests that ~~MHI~~Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.

In certain circumstances, we may be required to make payments under the TRA that we have entered into with

~~MHI.~~Mosing Holdings. In most circumstances, these payments will be associated with the actual cash savings that we recognize in connection with athe conversion of Preferred Stock, which would reduce the actual tax benefit to us. If we were to ~~choose~~elect to exercise our sole right to terminate the TRA early or enter into certain change of control transactions, we may incur payment obligations prior to the time we actually incur any tax benefit. In those circumstances, we would need to pay the amounts out of cash on hand, finance the payments or refrain from triggering the obligation. Though we do not have any present intention of triggering an advance payment under the TRA, based on our current liquidity and our expected ability to access debt and equity financing, we believe we would be able to make such a payment if necessary. Any such payment could

reduce our cash on hand and our borrowing availability, however, which would also reduce the amount of cash available to operate our business, to fund capital expenditures and to be paid as dividends to our stockholders, among other things. Please see Note 1413 - Related Party Transactions in the Notes to Unaudited Condensed Consolidated Financial Statements.

Cash Flows from Operating, Investing and Financing Activities

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

Six Months Ended
June 30,
2016 2015
Operating activities $ 58,037
$ 215,912

Investing activities (17,252 ) (149,305 )
Financing activities (59,997 ) (79,356 )
(19,212 ) (12,749 )
Effect of exchange rate changes on cash activities (1,776 ) (1,860 )
Decrease in cash and cash equivalents $ (20,988 ) $ (14,609 )



	Three Months Ended
	March 31,
	2017			2016
Operating activities	$	(9,435	)	$	46,163
Investing activities	(7,244		)	(7,823		)
Financing activities	(18,047		)	(31,194		)
	(34,726		)	7,146
Effect of exchange rate changes on cash	(860		)	(707		)
Net increase (decrease) in cash and cash equivalents	$	(35,586	)	$	6,439

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 ~~from~~used in operating activities was $9.4 million for the three months ended March 31, 2017 compared to cash flow provided by operating activities of $~~58.0~~46.2 million for the ~~six months ended June 30, 2016~~ ~~as compared to~~ ~~$215.9 million~~ ~~in the comparable~~same period in ~~2015.~~2016. The decrease in ~~2016~~cash flow in 2017 was due to aan increase in net loss ~~lower deferred tax provision~~and a use of working capital, primarily in accounts receivables. The net loss and changes in working capital ~~primarily in inventories, other current assets and other non-current liabilities. The changes~~ were a result of lower activity due to depressed oil and gas prices.

Investing Activities

Cash flow used in investing activities was ~~$17.3~~$7.2 million for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 as compared to $~~149.3~~7.8 million in the ~~comparable~~same period in ~~2015.~~2016. The decrease in net cash used in investing activities was ~~primarily~~ related to ~~the Timco acquisition that occurred~~an increase in the ~~prior year~~proceeds from the sale of investments, an increase in ~~addition to lower capital expenditures for~~the proceeds from sale of assets and equipment and a decrease in the purchase of investments, partially offset by an increase in purchases of property, plant and equipment ~~for~~during the ~~six~~three months ended June 30, 2016 in comparison to the same period in 2015 as a result of a reduction in the need for additional equipment and machinery to service our customers due to declining rig activity caused by lower oil and gas prices.March 31, 2017.

Financing Activities

Cash flow used in financing activities was ~~$60.0~~$18.0 million for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 as compared to $~~79.4~~31.2 million in the ~~comparable~~same period in ~~2015.~~2016. The decrease in cash flow used in financing activities was primarily due to lower dividend payments and the absence of a payment to our noncontrolling interest ~~payments~~ of ~~$24.5~~$5.0 million ~~due to less estimable income tax associated with~~made in the ~~partnership partially offset by repayments on borrowings of $4.9 million.~~three months ended March 31, 2016.

Off-Balance Sheet Arrangements

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

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

The following should be read in conjunction with the information provided in Part II, Item 7A of our Annual Report under the caption "Quantitative and Qualitative Disclosures About Market Risk".

We are exposed to certain market risks that are inherent in our financial instruments and arise from changes in foreign currency exchange ~~rates and interest~~ rates. A discussion of our market risk exposure in financial instruments is presented below.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The disclosures are not meant to be precise indicators of expected future losses or gains, but rather indicators of reasonably possible losses or gains. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

Foreign Currency Exchange Rates

We operate in virtually every oil and natural gas exploration and production region in the world. In some parts of the world, the currency of our primary economic environment is the U.S. dollar, and we use the U.S. dollar as our functional currency. In other parts of the world, such as Europe, Norway, Africa and Brazil, we conduct our business in currencies other than the U.S. dollar, and the functional currency is the applicable local currency. Assets and liabilities of entities for which the functional currency is the local currency are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected in accumulated other comprehensive income (loss) in the shareholders’ equity section on our condensed consolidated balance sheets. A portion of our net assets are impacted by changes in foreign currencies in relation to the U.S. dollar.

For the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, on a U.S. dollar-equivalent basis, approximately ~~24.8%~~23.5% of our revenue was represented by currencies other than the U.S. dollar. However, no single foreign currency poses a primary risk to us. A hypothetical 10% decrease in the exchange rates for each of the foreign currencies in which a portion of our revenues is denominated would result in a ~~2.3%~~2.1% decrease in our overall revenues for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017.

~~In December 2015, we began entering into short-duration foreign currency forward contracts.~~ We use these instruments to mitigate our exposure to non-local currency operating working capital. We are also exposed to market risk on our forward contracts related to potential non-performance by our counterparty. It is our policy to enter into derivative contracts with counterparties that are creditworthy institutions.

We account for our derivative activities under the accounting guidance for derivatives and hedging. Derivatives are recognized on the condensed consolidated balance sheet at fair value. Although the derivative contracts will serve as an economic hedge of the cash flow of our currency exchange risk exposure, they are not formally designated as hedge contracts for hedge accounting treatment. Accordingly, any changes in the fair value of the derivative instruments during a period will be included in our condensed consolidated statements of operations.

~~As of June 30, 2016 and December 31, 2015, we had the following foreign currency derivative contracts outstanding in U.S. dollars (thousands):~~

Fair Value at
Notional Contractual June 30,
Foreign Currency Amount Exchange Rate 2016
Canadian dollar $ 3,765
1.2749 $ 67
Euro 4,420
1.1334 73
Euro 3,470
1.1192 (22 )
Norwegian kroner 5,891
8.1482 150
Pound sterling 3,620
1.4480 261
$ 529

Fair Value at
Notional Contractual December 31,
Foreign Currency Amount Exchange Rate 2015
Canadian dollar $ 5,091
1.3751 $ 48
Euro 19,706
1.0948 (106 )
Norwegian kroner 11,498
8.6973 162
Pound sterling 7,516
1.5031 106
$ 210

Based on the derivative contracts that were in place as of ~~June 30, 2016,~~March 31, 2017, a simultaneous 10% devaluation of the Canadian dollar, Euro, Norwegian kroner, and Pound sterling compared to the U.S. dollar would result in a ~~$1.3~~$2.4 million increase in the market value of our forward contracts.

~~In February 2015, the Venezuelan government created a new open market~~ Please see Item 1. Financial Statements - Note 11 - Derivatives for additional information regarding our foreign ~~exchange system, the Marginal Currency System, or SIMADI, which was the third system~~currency derivative contracts outstanding in ~~a three-tier exchange control mechanism. SIMADI was a floating market rate for the conversion of Venezuelan Bolivar Fuertes ("Bolivars") to~~ U.S. dollars ~~based on supply and demand. The three-tier exchange rate mechanisms included the following: (i) the National Center~~as of Foreign Commerce official rate of 6.3 Bolivars per U.S. dollar, which remained unchanged; (ii) the SICAD I, which continued to hold periodic auctions for specific sectors of the economy; and (iii) the SIMADI.

On March 9, 2016, the Central Bank of Venezuela issued Exchange Agreement No. 35, which changed the three-tiered official currency control system to a dual foreign exchange system. The preferential exchange rate, now called DIPRO, has an official rate of 10 Bolivars to the U.S. dollar and replaces the official rate of 6.3 Bolivars. DIPRO is available for essential imports and transactions. All other transactions will be subject to the DICOM rate, which is the replacement for the SIMADI.

As of June 30, 2016, we applied the SIMADI exchange rate as we believed that this rate best represented the economics of our business activity in Venezuela. At June 30, 2016, we had approximately ($0.1) million in net monetary assets denominated in Bolivars using the SIMADI rate, which was approximately 628.34 Bolivars to the U.S. dollar. In the event of a devaluation of the current exchange mechanism in Venezuela or any other new exchange mechanism that might emerge for financial reporting purposes, it would result in our recording a devaluation charge in our condensed consolidated statements of operations.

~~Interest Rate Risk~~

As of June 30, 2016, we did not have an outstanding funded debt balance under the Credit Facility. If we borrow under the Credit Facility in the future, we will be exposed to changes in interest rates on our floating rate borrowings

~~under the Credit Facility. Although we do not currently utilize interest rate derivative instruments to reduce interest rate exposure, we may do so in the future.~~31, 2017.

Customer Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. International sales also present various risks including governmental activities that may limit or disrupt markets and restrict the movement of funds. We operate in more than 60 countries and as such our accounts receivables are spread over many countries and customers. As of ~~June 30, 2016,~~March 31, 2017, two customers in Venezuela and Angola accounted for approximately ~~13%~~12.4% of our gross accounts receivables balance. Our receivables in Venezuela and Angola are denominated in U.S. dollars. We have experienced payment delays from our national oil company customer in Venezuela and have been notified of a six month delay in payment from the national oil company in Angola as it is undergoing restructuring. These receivables are not disputed, and we have not historically had material write-offs relating to these customers. We maintain an allowance for uncollectible accounts receivables based on expected collectability and ongoing credit evaluations of our customers’ financial condition. If the financial condition of our customers were to diminish resulting in an impairment of their ability to make payments, adjustments to the allowance may be required. Due to the uncertainty of collection from our national oil company customer in Venezuela, we recorded an allowance of $9.7 million during the second quarter of 2016. In the first quarter of 2016, we also made a decision to curtail operations in Venezuela and operations in Angola are significantly down due to the drop in oil prices.

We are also exposed to credit risk because our customers are concentrated in the oil and natural gas industry. This concentration of customers may impact overall exposure to credit risk, either positively or negatively, because our customers may be similarly affected by changes in economic and industry conditions, including sensitivity to commodity prices. While current energy prices are important contributors to positive cash flow for our customers, expectations about future prices and price volatility are generally more important for determining future spending levels. However, any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development and production activity, as well as the entire health of the oil and natural gas industry, and can therefore negatively impact spending by our customers.

Item 4. Controls and Procedures


(a)	Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of ~~June 30, 2016~~March 31, 2017 at the reasonable assurance level.


(b)	Change in Internal Control Over Financial Reporting.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~June 30, 2016,~~March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3735

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

As part of our initial public offering in August 2013, we issued 52,976,000 shares of our Series A convertible preferred stock (the “Preferred Stock”) to Mosing Holdings, LLC, a Delaware corporation and affiliate of the Company with Mosing family entities as its shareholders ("Mosing Holdings"). Under our Amended Articles of Association, upon the written election of Mosing Holdings, each Preferred Share, together with a unit in Frank’s International C.V. (“FICV”), our subsidiary, was convertible into a share of our common stock on a one-for-one basis.

On August 19, 2016, we received notice from Mosing Holdings exercising its right to exchange (the “Exchange Right”) for an equivalent number of each of the following securities for common shares: (i) 52,976,000 Preferred Shares and (ii) 52,976,000 units in FICV. We issued 52,976,000 common shares to Mosing Holdings on August 26, 2016. As a result, there are no remaining issued or outstanding Preferred Shares and the Mosing family beneficially owns approximately 75% of our common shares.

The issuance of the common shares to Mosing Holdings in connection with the exercise of the Exchange Right was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.

Item 6. Exhibits

The Exhibit Index, which follows the signature page to this report and is incorporated by reference herein, sets forth a list of exhibits to this report.

3836

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: ~~July 28, 2016~~May 2, 2017	By:	/s/ ~~Jeffrey J. Bird~~Kyle McClure
		~~Jeffrey J. Bird~~Kyle McClure
		~~Executive~~Senior Vice President of Finance and Treasurer and interim Chief Financial Officer
		(Principal Financial Officer)

3937

EXHIBIT INDEX



3.1	Deed of Amendment to Articles of Association of Frank's International N.V., dated May 14, 2014 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-36053), filed on May 16, 2014).
*†10.1	~~Frank’s~~Separation Agreement and Release dated as of January 25, 2017 and effective as of January 25, 2017, by and between Frank's International, ~~N.V. 2013 Long-Term Incentive Plan Restricted Stock Unit Agreement (Non-Employee Director Form).~~LLC and Daniel Allinger.
*10.2	Limited Waiver of Financial Covenants by and among Frank's International C.V. (as Borrower), Amegy Bank National Association (as Administrative Agent), Capital One, National Association (as Syndication Agent) and the other lenders party thereto.
*31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.
*31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
**32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
**32.2	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
*101.INS	XBRL Instance Document.
*101.SCH	XBRL Taxonomy Extension Schema Document.
*101.CAL	XBRL Taxonomy Calculation Linkbase Document.
*101.DEF	XBRL Taxonomy Definition Linkbase Document.
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.


†	Represents management contract or compensatory plan or arrangement.


*	Filed herewith.


**	Furnished herewith.

4038




(1)	Adjusted for the additional tax expense upon the assumed conversion of the Preferred Stock	$	—	$	359	$	—	$	2,543
(2)	Approximate number of shares of potentially convertible preferred stock to common stock, unvested restricted stock units and stock to be issued pursuant to the ESPP have been excluded from the computation of diluted earnings (loss) per share as the effect would be anti-dilutive when the results from operations are at a net loss.	54,534		—		54,489		—



				Fair Value at
	Notional		Contractual	June 30,
Foreign Currency	Amount		Exchange Rate	2016
Canadian dollar	$	3,765	1.2749	$	67
Euro	4,420		1.1334	73
Euro	3,470		1.1192	(22		)
Norwegian kroner	5,891		8.1482	150
Pound sterling	3,620		1.4480	261
				$	529

Approximate number of shares of potentially convertible preferred stock to common stock up until the time of conversion on August 26, 2016, unvested restricted stock units and stock to be issued pursuant to the employee stock purchase plan have been excluded from the computation of diluted loss per share as the effect would be anti-dilutive when the results from operations are at a net loss.