The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report.
This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" of this Form 10-Q.
Overview of Business
We are a global provider of highly engineered tubular services, tubular fabrication and specialty well construction and well intervention solutions to the oil and gas industry and have been in business for over 80 years. We provide our services and products to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.
We conduct our business through three operating segments:
•Tubular Running Services. The Tubular Running Services ("TRS") segment provides
tubular running services globally. Internationally, the TRS segment operates in
the majority of the offshore oil and gas markets and also in several onshore
regions with operations in approximately 40 countries on six continents. In the
•Tubulars. The Tubulars segment designs, manufactures and distributes connectors and casing attachments for large outside diameter ("OD") heavy wall pipe. Additionally, the Tubulars segment sells large OD pipe originally manufactured by various pipe mills, as plain end or fully fabricated with proprietary welded or thread-direct connector solutions and provides specialized fabrication and welding services in support of offshore deepwater projects, including drilling and production risers, flowlines and pipeline end terminations, as well as long-length tubular assemblies up to 400 feet in length. The Tubulars segment also specializes in the development, manufacture and supply of proprietary drilling tool solutions that focus on improving drilling productivity through eliminating or mitigating traditional drilling operational risks.
•Cementing Equipment. The Cementing Equipment ("CE") segment provides specialty equipment to enhance the safety and efficiency of rig operations. It provides specialized equipment, services and products utilized in the construction of the wellbore in both onshore and offshore environments. The product portfolio includes casing accessories that serve to improve the installation of casing, centralization and wellbore zonal isolation, as well as enhance cementing operations through advance wiper plug and float equipment technology. The CE segment also provides services and products utilized in the construction, completion or abandonment of the wellbore. These solutions are primarily used to isolate portions of the wellbore through the setting of barriers downhole to allow for rig evacuation in case of inclement weather, maintenance work on other rig equipment, squeeze cementing, pressure testing within the wellbore, hydraulic fracturing and temporary and permanent abandonments. These offerings improve operational efficiencies and limit non-productive time if unscheduled events are encountered at the wellsite.
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Merger Agreement with Expro
On
In connection with the Merger Agreement, FINV,
Outlook
As we look toward recovery from the COVID-19 pandemic and balancing of
In the short term, uncertainty around further lockdowns may temper continued
activity improvement. However, current indicators are supportive of improved
market conditions for the remainder of 2021 as compared to the same period in
2020. We expect that crude oil demand and associated customer activity will
continue to ramp up in the mid to long term toward pre-pandemic levels. However,
we remain vigilant to the uncertainty that
While the
We anticipate our
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.
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Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net income (loss) before interest income, net,
depreciation and amortization, income tax benefit or expense, asset impairments,
gain or loss on disposal of assets, foreign currency gain or loss, equity-based
compensation, unrealized and realized gains or losses, the effects of the tax
receivable agreement ("TRA"), other non-cash adjustments and other charges or
credits. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of
our revenue. We review Adjusted EBITDA and Adjusted EBITDA margin on both a
consolidated basis and on a segment basis. We use Adjusted EBITDA and Adjusted
EBITDA margin to assess our financial performance because it allows us to
compare our operating performance on a consistent basis across periods by
removing the effects of our capital structure (such as varying levels of
interest expense), asset base (such as depreciation and amortization), income
tax, foreign currency exchange rates and other charges and credits. Adjusted
EBITDA and Adjusted EBITDA margin have limitations as analytical tools and
should not be considered as an alternative to net income (loss), operating
income (loss), cash flow from operating activities or any other measure of
financial performance presented in accordance with generally accepted accounting
principles in the
The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods presented (in thousands):
Three Months Ended March 31, 2021 2020 Net loss$ (23,886) $ (85,978) Goodwill impairment - 57,146 Severance and other charges, net 7,376 20,725 Interest (income) expense, net 287 (533) Depreciation and amortization 16,107 19,718 Income tax expense (benefit) 1,070 (15,563) (Gain) loss on disposal of assets (182) 60 Foreign currency loss 2,868 9,892 Charges and credits (1) 3,013 1,592 Adjusted EBITDA$ 6,653 $ 7,059 Adjusted EBITDA margin 7.0 % 5.7 %
(1) Comprised of Equity-based compensation expense (for the three months ended
For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see "Operating Segment Results."
Safety and Quality Performance
Safety is one of our primary core values. Maintaining a strong safety record is a critical component of our operational success. Many of our customers have safety standards we must satisfy before we can perform services. As a result, we continually monitor our safety performance through the evaluation of safety observations, job and customer surveys, and safety data. The primary measure for our safety performance is the tracking of the Total Recordable Incident Rate which is reviewed on both a monthly and rolling twelve-month basis.
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