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Note 16 - Segment Information
 9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

Note 16—Segment Information

 

Reporting Segments

 

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker ("CODM"), which is our Chief Executive Officer, in deciding how to allocate resources and assess performance. Frank's is comprised of three reportable segments: Tubular Running Services (“TRS”) segment, Tubulars segment and Cementing Equipment (“CE”) segment. Post-Merger, the combined company is comprised of four regional-based segments.

 

The TRS segment provides tubular running services globally. Internationally, the TRS segment operates in the majority of the offshore oil and gas markets and also in several onshore regions with operations in approximately 40 countries on six continents. In the U.S., the TRS segment provides services in the active onshore oil and gas drilling regions, including the Permian Basin, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, and in the U.S. Gulf of Mexico. As the Merger did not close until after the quarter ended September 30, 2021, the historical financial statements presented in this Quarterly Report on Form 10-Q reflect the reporting segments of Frank's, the Predecessor Registrant. The Company's customers are primarily large exploration and production companies, including international oil and gas companies, national oil and gas companies, major independents and other oilfield service companies.

 

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

 

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

 

Revenue

 

Revenue from contracts with customers is disaggregated by geography for each of Frank's segments, as management believes this best depicts how the nature, amount, timing and uncertainty of Frank's revenue and cash flows are affected by economic factors. Intersegment revenue is immaterial.

 

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

 

  

Three Months Ended September 30, 2021

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $20,250  $13,701  $10,438  $44,389 

International

  57,375   5,083   8,094   70,552 

Total Revenue

 $77,625  $18,784  $18,532  $114,941 

 

  

Three Months Ended September 30, 2020

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $15,213  $12,483  $7,430  $35,126 

International

  37,713   4,000   7,578   49,291 

Total Revenue

 $52,926  $16,483  $15,008  $84,417 

 

  

Nine Months Ended September 30, 2021

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $58,863  $31,995  $30,996  $121,854 

International

  156,942   15,024   23,773   195,739 

Total Revenue

 $215,805  $47,019  $54,769  $317,593 

 

  

Nine Months Ended September 30, 2020

 
  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Consolidated

 

United States

 $64,256  $27,270  $28,245  $119,771 

International

  140,494   10,496   23,249   174,239 

Total Revenue

 $204,750  $37,766  $51,494  $294,010 

 

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

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

United States

 $44,389  $35,126  $121,854  $119,771 

Europe/Middle East/Africa

  33,902   20,082   91,727   77,402 

Latin America

  25,195   20,001   72,894   61,003 

Asia Pacific

  10,039   6,928   26,280   25,231 

Other countries

  1,416   2,280   4,838   10,603 

Total Revenue

 $114,941  $84,417  $317,593  $294,010 

 

Adjusted EBITDA

 

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

 

Frank's CODM uses Adjusted EBITDA as the primary measure of segment reporting performance.

 

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

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Segment Adjusted EBITDA:

                

Tubular Running Services

 $11,912  $982  $29,790  $18,336 

Tubulars

  2,735   1,806   7,481   3,883 

Cementing Equipment

  6,389   3,376   16,036   6,806 

Corporate (1)

  (7,258)  (7,151)  (20,464)  (24,645)
   13,778   (987)  32,843   4,380 

Goodwill impairment

  —   —   —   (57,146)

Severance and other charges, net

  (2,958)  (3,549)  (13,733)  (29,436)

Interest income (expense), net

  (167)  (93)  (555)  618 

Depreciation and amortization

  (14,092)  (15,950)  (45,531)  (52,920)

Income tax (expense) benefit

  (3,969)  (6,395)  (11,812)  182 

Gain on disposal of assets

  72   308   1,733   898 

Foreign currency gain (loss)

  (4,548)  2,334   (4,698)  (5,865)

Charges and credits (2)

  (3,197)  (3,459)  (9,830)  (8,725)

Net loss

 $(15,081) $(27,791) $(51,583) $(148,014)

(1)

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

(2)

Comprised of Equity-based compensation expense (for the three months ended September 30, 2021 and 2020: $3,307 and $2,773, respectively, and for the nine months ended September 30, 2021 and 2020: $9,604 and $8,434, respectively), Unrealized and realized gains (losses) (for the three months ended September 30, 2021 and 2020: $199 and $(113), respectively, and for the nine months ended September 30, 2021 and 2020: $(7) and $1,480, respectively) and Investigation-related matters (for the three months ended September 30, 2021 and 2020: $89 and $573, respectively, and for the nine months ended September 30, 2021 and 2020: $219 and $1,771, respectively).

 

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

 

  

Tubular Running Services

  

Tubulars

  

Cementing Equipment

  

Corporate

  

Total

 

Three Months Ended September 30, 2021

                    

Revenue from external customers

 $77,625  $18,784  $18,532  $—  $114,941 

Operating income (loss)

  902   837   3,680   (12,163)  (6,744)

Adjusted EBITDA

  11,912   2,735   6,389   (7,258)  * 

Three Months Ended September 30, 2020

                    

Revenue from external customers

 $52,926  $16,483  $15,008  $—  $84,417 

Operating income (loss)

  (13,717)  860   1,160   (12,049)  (23,746)

Adjusted EBITDA

  982   1,806   3,376   (7,151)  * 

Nine Months Ended September 30, 2021

                    

Revenue from external customers

 $215,805  $47,019  $54,769  $—  $317,593 

Operating income (loss)

  (7,148)  2,368   8,010   (38,625)  (35,395)

Adjusted EBITDA

  29,790   7,481   16,036   (20,464)  * 

Nine Months Ended September 30, 2020

                    

Revenue from external customers

 $204,750  $37,766  $51,494  $—  $294,010 

Operating income (loss)

  (28,284)  1,327   (78,824)  (39,459)  (145,240)

Adjusted EBITDA

  18,336   3,883   6,806   (24,645)  * 

* Non-GAAP financial measure not disclosed.