FTS International, Inc. (Form: 10-Q, Received: 05/01/2018 17:03:01)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

☐ 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 001-38382

FTS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware		30-0780081
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

777 Main Street, Fort Worth, Texas (Address of principal executive offices)		76102 (Zip Code)

(817) 862-2000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 ☐ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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


Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☐
(Do not check if a 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 Exchange Act). Yes ☐ No ☒.

As of April 28, 2018, the registrant had 109,274,564 shares of common stock, $0.01 par value, outstanding.

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FTS INTERNATIONAL, INC.

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		Page
	Cautionary Statement Regarding Forward-Looking Statements	2

PART I -	FINANCIAL INFORMATION
Item 1 .	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Consolidated Statements of Stockholders’ Deficit	6
	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	21

PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	24

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Cautionary Statement Regarding Forward-Looking Statements

This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. Forward-looking statements may be identified by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “likely,” “may,” “project,” “potential,” “seek,” “should,” “will,” “would” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, investors should not unduly rely on such statements. The risks that could cause these forward-looking statements to be inaccurate include but are not limited to:

a decline in domestic spending by the onshore oil and natural gas industry;

volatility in oil and natural gas prices;

the effect of a loss of, or financial distress of, one or more significant customers;

actions of the Organization of the Petroleum Exporting Countries, or OPEC, its members and other state-controlled oil companies relating to oil price and production controls;

our inability to employ a sufficient number of key employees, technical personnel and other skilled or qualified workers;

the price and availability of alternative fuels and energy sources;

the discovery rates of new oil and natural gas reserves;

the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids; and

uncertainty in capital and commodities markets and the ability of oil and natural gas producers to raise equity capital and debt financing.

See the “Risk Factors” included in Item 1A of our annual report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties we face that could cause our forward-looking statements to be inaccurate. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this quarterly report and hereafter in our other filings with the Securities and Exchange Commission and other public communications.

We caution that the risks and uncertainties identified by us may not be all of the factors that are important to investors. Furthermore, the forward-looking statements included in this quarterly report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

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PART 1 – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

FTS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
	March 31,
(In millions, except per share amounts)	2018		2017
Revenue
Revenue	$	425.1	$	191.9
Revenue from related parties		42.4		21.6
Total revenue		467.5		213.5

Operating expenses
Costs of revenue (excluding depreciation of $18.4 and $18.8, respectively, included in depreciation and amortization below)		312.2		174.8
Selling, general and administrative		25.8		19.5
Depreciation and amortization		20.6		21.8
Impairments and other charges		2.0		0.1
Loss (gain) on disposal of assets, net		0.5		(0.4)
Gain on insurance recoveries		—		(2.6)
Total operating expenses		361.1		213.2

Operating income		106.4		0.3

Interest expense, net		(17.4)		(21.2)
Loss on extinguishment of debt, net		(9.3)		—
Equity in net income of joint venture affiliate		—		0.9

Income (loss) before income taxes		79.7		(20.0)
Income tax expense		1.0		0.1

Net income (loss)	$	78.7	$	(20.1)

Net income (loss) attributable to common stockholders	$	501.9	$	(71.4)

Basic and diluted earnings (loss) per share attributable to common stockholders	$	5.68	$	(1.38)
Shares used in computing basic and diluted earnings (loss) per share		88.4		51.8

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

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FTS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
(In millions, except share amounts)	2018		2017
ASSETS
Current assets
Cash and cash equivalents	$	155.5	$	208.1
Accounts receivable, net		263.2		231.1
Accounts receivable from related parties		37.2		3.0
Inventories		53.3		44.5
Prepaid expenses and other current assets		8.8		19.9
Total current assets		518.0		506.6

Property, plant, and equipment, net		278.3		270.9
Intangible assets, net		29.5		29.5
Investment in joint venture affiliate		21.2		21.0
Other assets		7.5		3.0
Total assets	$	854.5	$	831.0

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	158.1	$	138.3
Accrued expenses and other current liabilities		53.0		44.4
Total current liabilities		211.1		182.7

Long-term debt		727.2		1,116.4
Other liabilities		1.4		0.4
Total liabilities		939.7		1,299.5

Commitments and contingencies (Note 11)
Series A convertible preferred stock, $0.01 par value, 350,000 shares authorized, issued and outstanding at December 31, 2017		—		349.8

Stockholders’ deficit
Preferred stock, $0.01 par value, 25,000,000 shares authorized at March 31, 2018
Common stock, $0.01 par value, 320,000,000 shares authorized, 109,274,564 shares issued and outstanding at March 31, 2018 and 51,782,735 shares issued and outstanding at December 31, 2017		36.4		35.9
Additional paid-in capital		4,366.0		3,712.1
Accumulated deficit		(4,487.6)		(4,566.3)
Total stockholders’ deficit		(85.2)		(818.3)
Total liabilities and stockholders’ deficit	$	854.5	$	831.0

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

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FTS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 31,
(In millions)	2018		2017
Cash flows from operating activities
Net income (loss)	$	78.7	$	(20.1)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		20.6		21.8
Stock-based compensation		1.6		—
Amortization of debt discounts and issuance costs		0.9		0.9
Loss (gain) on disposal of assets, net		0.5		(0.4)
Loss on extinguishment of debt, net		9.3		—
Gain on insurance recoveries		—		(2.6)
Other non-cash items		0.1		(0.7)
Changes in operating assets and liabilities:
Accounts receivable		(32.1)		(28.2)
Accounts receivable from related parties		(34.2)		(23.1)
Inventories		(9.1)		(9.7)
Prepaid expenses and other assets		(0.3)		0.5
Accounts payable		28.7		18.1
Accrued expenses and other liabilities		9.6		12.2
Net cash provided by (used in) operating activities		74.3		(31.3)

Cash flows from investing activities
Capital expenditures		(37.8)		(6.7)
Proceeds from disposal of assets		0.3		0.6
Proceeds from insurance recoveries		—		3.8
Net cash used in investing activities		(37.5)		(2.3)

Cash flows from financing activities
Repayments of long-term debt		(399.3)		—
Net proceeds from issuance of common stock		303.0		—
Payments of revolving credit facility issuance costs		(2.2)		—
Net cash used in financing activities		(98.5)		—

Net decrease in cash, cash equivalents, and restricted cash		(61.7)		(33.6)
Cash, cash equivalents, and restricted cash at beginning of period		217.2		169.4
Cash, cash equivalents, and restricted cash at end of period	$	155.5	$	135.8

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

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FTS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Unaudited)


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
(Dollars in millions and shares in thousands)	Shares	Amount		Capital		Deficit		Deficit

Balance at December 31, 2017	51,783	$	35.9	$	3,712.1	$	(4,566.3)	$	(818.3)

Net income	—		—		—		78.7		78.7
Activity related to stock plans	—		—		1.6		—		1.6
Recapitalization of convertible preferred stock to common stock	39,415		0.4		349.4		—		349.8
Issuance of common stock	18,077		0.1		302.9		—		303.0
Balance at March 31, 2018	109,275	$	36.4	$	4,366.0	$	(4,487.6)	$	(85.2)

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

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FTS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

Unless the context requires otherwise, the use of the terms “FTSI,” “Company”, “we,” “us,” “our” or “ours” in these Notes to Condensed Consolidated Financial Statements refer to FTS International, Inc., together with its consolidated subsidiaries. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017. In our opinion, the condensed consolidated financial statements included herein contain all adjustments of a normal, recurring nature considered necessary for a fair presentation of the interim periods. The results of operations of the interim periods are not necessarily indicative of the results of operations to be expected for the full year. There were no items of other comprehensive income in the periods presented.

Initial Public Offering and Related Events

In February 2018, the Company completed an initial public offering (“IPO”) of its common stock, recapitalized its convertible preferred stock into shares of common stock, and effected a reverse stock split of its common stock. See Note 4 – “Stockholders’ Deficit” for information about our IPO and these related events.

New Accounting Standards Updates

In May 2014, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”), 2014-09, Revenue from Contracts with Customers . The FASB has subsequently issued a number of additional ASUs to update this guidance. This guidance supersedes substantially all existing accounting guidance related to the accounting for revenue transactions. This guidance establishes a core principle that an entity should record revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. We adopted this standard on January 1, 2018. Our approach to adopting this standard included performing a review of key contracts and comparing historical accounting policies and practices to the new accounting guidance. The accounting for revenue under the new ASU is materially consistent with our previous revenue recognition process. These condensed consolidated financial statements have been prepared in accordance with the new ASU utilizing the modified retrospective method, which did not require a cumulative effect of accounting change at January 1, 2018. The required disclosures have been reflected in Note 5 – “Revenue.”

In February 2016, the FASB issued ASU 2016-02, Leases . This standard was issued to increase transparency and comparability among organizations by requiring that most leases be included on the balance sheet and by expanding disclosure requirements. This standard is scheduled to be effective for our financial statements beginning on January 1, 2019. We are in the process of determining the effects that the new standard will have on our consolidated financial statements. Our approach includes a review of existing leases and other executory contracts that may contain embedded leases and identifying the key terms that will be necessary for us to calculate the right-of-use asset and corresponding lease liability. Based upon our expected future lease payments on existing leases that are longer than twelve months, we expect that the adoption of this standard will have a material effect on our total assets and total liabilities; however, we have not yet completed the quantification of the amount of the change.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments . This standard was issued to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. We adopted this standard on January 1, 2018, and it had no effect on our statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash . This standard was issued to change the presentation of amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement

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of cash flows. We adopted this standard on January 1, 2018, and the effects of this standard and related required disclosures have been reflected in our condensed consolidated statements of cash flows and Note 2 – “Restricted Cash.”

NOTE 2 — RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated statements of cash flows:


	March 31,		December 31,
(In millions)	2018		2017
Cash and cash equivalents	$	155.5	$	208.1
Restricted cash included in prepaid expenses and other current assets		—		9.1
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	155.5	$	217.2

As of December 31, 2017, we had amounts included in restricted cash that represented amounts required to be set aside by contractual agreement with our casualty and general liability insurance provider and corporate credit card provider. In February 2018, these contractual agreements to set aside cash were terminated. Therefore, as of March 31, 2018, we had no restricted cash balance.

As a result of our adoption of ASU 2016-18, we recasted certain balances in our condensed consolidated statement of cash flows for the three months ended March 31, 2017. The following table reflects the recasted balances:


	Three Months Ended March 31, 2017
(In millions)	As Reported		Adjustments		Recasted
Cash, cash equivalents, and restricted cash at beginning of period	$	160.3	$	9.1	$	169.4
Cash, cash equivalents, and restricted cash at end of period	$	126.7	$	9.1	$	135.8

The amount of restricted cash at both January 1, 2017, and March 31, 2017, was $9.1 million.

NOTE 3 — INDEBTEDNESS AND BORROWING FACILITY

The following table summarizes our long-term debt:


	March 31,		December 31,
(In millions)	2018		2017
Senior floating rate notes due June 2020	$	—	$	290.0
Term loan due April 2021		331.0		431.0
Senior notes due May 2022		404.0		409.0
Total principal amount		735.0		1,130.0
Less unamortized discount and debt issuance costs		(7.8)		(13.6)
Total long-term debt	$	727.2	$	1,116.4
Estimated fair value of long-term debt	$	740.1	$	1,113.8

Estimated fair values for our term loan and senior notes were determined using recent trading activity and/or bid-ask spreads and are classified as Level 2 in the FASB’s fair value hierarchy. We believe we were in compliance with all of the covenants in our debt agreements at March 31, 2018.

Debt Repayments

In February 2018, we repaid all $290.0 million remaining principal amount of senior floating rate notes due June 2020 (“2020 Senior Notes”) using cash on hand and proceeds received from our IPO. See Note 4 – “Stockholders’ Deficit” for more information about our IPO. We recognized a loss on this debt extinguishment of $8.3 million.

In the first three months 2018, we repaid $100.0 million of aggregate principal amount of term loan due April 2021 (“Term Loan”) using cash on hand and proceeds received from our IPO. We recognized a loss on this debt extinguishment of $1.0 million.

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In January 2018, we repurchased $5.0 million of aggregate principal amount of senior notes due May 2022 (“2022 Senior Notes”) in the qualified institutional market using cash on hand. We recognized an immaterial gain on debt extinguishment.

As of March 31, 2018, we had $735.0 million aggregate principal amount of long-term debt still outstanding. In April 2018, we repaid $50.0 million of aggregate principal amount of Term Loan using cash on hand. We recognized an immaterial loss on this debt extinguishment for a portion of unamortized discount and debt issuance costs.

Revolving Credit Facility

On February 22, 2018, we entered into a $250 million revolving credit facility, with an initial maturity date of February 22, 2023, with a group of lenders with Wells Fargo, N.A., as administrative agent. The maturity date of the facility could be accelerated to January 16, 2021 or January 31, 2022, if we do not repay or refinance our Term Loan or 2022 Senior Notes, respectively, before these dates.

LIBOR borrowings under the credit facility bear interest at LIBOR plus a margin of 1.75% to 2.00% per annum, depending on facility utilization. Base rate loans are also available at our option. The credit facility includes a $50 million sub-limit for the issuance of letters of credit. The issuance of letters of credit reduces the amount available under the facility. We also pay a commitment fee on the unused amount of the facility of 0.25% to 0.375% per annum, depending on facility utilization.

The obligations under the credit facility are secured by substantially all of our accounts receivable, inventory, deposit accounts, intellectual property and the equity of some current and future wholly-owned domestic and foreign subsidiaries.

The maximum availability of credit under the credit facility is limited at any time to the lesser of $250 million or a borrowing base. The borrowing base is based on percentages of eligible accounts receivable and eligible inventory and is subject to certain reserves. In an event of default or if the amount available under the credit facility is less than either 10% of our maximum availability or $12.5 million, we will be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0. If at any time borrowings and letters of credit issued under the credit facility exceed the borrowing base, we will be required to repay an amount equal to such excess.

The credit facility contains covenants that could, in certain circumstances, limit our ability to issue additional debt, repurchase or pay dividends on our common stock, sell substantially all of our assets, make certain investments, or enter into certain other transactions.

As of March 31, 2018, our borrowing base was $177.2 million and therefore our maximum availability under the credit facility was $177.2 million. As of March 31, 2018, there were no borrowings outstanding under the credit facility, and letters of credit totaling $5.9 million had been issued, resulting in $171.3 million of availability under the credit facility. The borrowing base will be adjusted in the second quarter using eligible accounts receivable and eligible inventory information as of March 31, 2018.

NOTE 4 — STOCKHOLDERS’ DEFICIT

Initial Public Offering of Common Stock

We completed an IPO of 22.4 million shares of common stock at a price to the public of $18.00 per share, of which 18.1 million shares were sold by the Company and 4.3 million shares were sold by one of our stockholders, a subsidiary of Chesapeake Energy Corporation. The shares began trading on The New York Stock Exchange on February 2, 2018, under the ticker symbol “FTSI.” The Company received net proceeds from the offering of $303.0 million, after offering costs. We used the net proceeds from the offering for general corporate purposes, primarily debt repayments. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

Reverse Stock Split

In connection with the IPO, we amended and restated our certificate of incorporation to effect a 69.258777:1 reverse stock split of our common stock.

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Recapitalization of Convertible Preferred Stock

In connection with the IPO, a number of shares of our convertible preferred stock (“Preferred Stock”) converted into common stock at the rate of 155.944841 shares of common stock per each share of Preferred Stock. All remaining shares of Preferred Stock were cancelled. We refer to this conversion and the cancelation together as the recapitalization of the Preferred Stock. The conversion rate of the Preferred Stock and shares canceled were calculated so that following the recapitalization, stockholders that did not own Preferred Stock would own 7% of our common stock prior to the IPO. The recapitalization of all outstanding shares of our Preferred Stock resulted in 39.4 million shares of common stock.

NOTE 5 — REVENUE

Historically, the Company has contracted with its customers to perform hydraulic fracturing services on one or more oil or natural gas wells. Under these arrangements, we satisfy our performance obligations as services are rendered, which is generally upon the completion of a fracturing stage. We typically complete one or more stages per day. A stage is considered complete when we have met the specifications set forth by the customer, at which time we have the right to invoice the customer and the customer is obligated to pay us for the services rendered. The price for our services typically includes an equipment charge and product charges for proppant, chemicals and other products actually consumed during the course of providing our services. The price for each stage of a particular well does not vary significantly. Payment terms average approximately two months from the date a stage is completed. All consideration owed to us for services performed during a period is fixed and our right to receive it is unconditional.

We have recently entered into new pricing arrangements for our services with some customers. Under these arrangements, we provide our customer with exclusive use of a fracturing fleet for a period of time and satisfy our performance obligation as services are rendered, which is based on the passage of time rather than the completion of a stage. Under these arrangements, we have the right to receive consideration from a customer even if circumstances outside of our control prevent us from performing our work. All consideration owed to us for services performed during a period is fixed and our right to receive it is unconditional.

Pricing for our services is frequently negotiated with our customers and is based on prevailing market rates during each reporting period. The amounts we invoice our customers for services performed during a period are directly related to the value received by the customers for the period. There is no inherent uncertainty to the amount of consideration we will receive for services performed during a period and no judgment is required to allocate a portion of the transaction price to a future period. Accordingly, we are not required to identify any unsatisfied performance obligations nor attribute any revenue to them.

During the period ended March 31, 2018, we acted as a principal, rather than as an agent, for all of the goods and services that we provided to our customers; our customer arrangements did not include obligations for refunds or warranties of our work; and we did not incur incremental costs to obtain or fulfill contracts with our customers.

To comply with the FASB disclosure objective, we are required to disaggregate our revenue into categories if it will provide an enhanced understanding of how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. To evaluate an appropriate level of disaggregation of revenue, we considered the following aspects of our business:

We provide a single service to our customers.

We only generate revenue in the U.S. onshore market.

We have a homogeneous customer base, which is comprised of large oil and gas exploration companies.

We provide our service over a short period of time.

We do not disaggregate our revenue into categories for any external communications nor to make resource allocation decisions.

We do not have separate operating segments.

Based on the above factors, we concluded that no additional disaggregation of revenue was necessary or meaningful to help depict the nature, amount, timing and uncertainty of our revenues and cash flows.

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NOTE 6 — STOCK-BASED COMPENSATION

Our board of directors and stockholders have adopted the 2018 Equity and Incentive Compensation Plan (“2018 Plan”) to attract and retain officers, employees, directors, consultants and other key personnel and to provide those persons incentives and awards for performance. The 2018 Plan permits the grant of up to 2.8 million common shares in the form of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, or other stock-based awards. Any shares that become available as a result of forfeiture, cancellation, expiration or cash settlement of an award are allowed to be granted again at a future date under the 2018 Plan. In the first three months of 2018, the compensation committee of our board of directors granted 2.8 million shares to employees and a non-employee director in the form of restricted stock units (“RSUs”).

RSUs are valued at the market price of a share of our common stock on the date of grant. Substantially all of these awards will vest in 25% increments over a four-year period from the date of grant and are expensed on a straight-line basis over that period, which is considered to be the requisite service period.

Stock-based compensation expense for these RSUs was $1.6 million for the three months ended March 31, 2018. The weighted-average grant-date fair value per share of RSUs granted was $19.90 for the three months ended March 31, 2018. At March 31, 2018, there was $51.1 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted average period of 3.9 years. The following table summarizes transactions related to the RSUs granted under the 2018 Plan.


		Weighted-
	Number	Average
	of Units	Grant Date
	(In thousands)	Fair Value
Unvested balance at January 1, 2018	—	$	—
Granted	2,825		19.90
Vested	—		—
Forfeited	(175)		19.90
Unvested balance at March 31, 2018	2,650	$	19.90

As of March 31, 2018, 2.7 million shares of unvested RSUs were outstanding under this plan, and up to 0.2 million shares were available for future grants under the plan.

Immediately prior to the IPO, there were approximately 111,000 stock-settled RSUs and approximately 94,000 cash- settled RSUs outstanding under our 2014 Long-Term Incentive Plan (“2014 LTIP”). All RSUs vested upon the completion of our IPO, which qualified as the final vesting condition for these RSUs. The Company elected to settle all RSUs on a cash basis. The compensation expense recognized in the first three months of 2018 for the stock-settled and cash-settled RSUs was $3.7 million. The 2014 LTIP was terminated after the payout of the RSUs.

NOTE 7 — IMPAIRMENTS AND OTHER CHARGES

The following table summarizes our impairments and other charges:


	Three Months Ended
	March 31,
(In millions)	2018		2017
Supply commitment charges	$	2.0	$	—
Lease abandonment charges		—		0.1
Total impairments and other charges	$	2.0	$	0.1

Supply commitment charges relate to contractual inventory purchase commitments to certain proppant suppliers. During the first quarter of 2018, we recorded an aggregate charge under these supply arrangements of $2.0 million. These charges were attributable to a shortfall of purchases from these suppliers due to customer requirements for specific types of proppant that differed from our contracted supply.

We continuously work with our vendors to adjust our contracted amounts to match anticipated demand. While we have successfully worked with our vendors to minimize charges related to these purchase commitments in the past, if we

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do not meet the minimum purchase commitments in the future and we are unable to work with our vendors to adjust our contracted amounts, we may incur additional supply commitment charges in future periods.

During 2015 and 2016, we vacated certain leased facilities to consolidate our operations. During the first three months of 2017, we recognized $0.1 million in connection with these actions.

NOTE 8 — GAIN ON INSURANCE RECOVERIES

In January 2017, a fire destroyed certain equipment in one of our fleets. These assets were insured at values greater than their carrying values. In the first three months of 2017, we received $3.8 million of insurance recovery proceeds for these assets, which exceeded their carrying values by $2.6 million.

NOTE 9 — INCOME TAXES

In 2012, we established a full valuation allowance with respect to our U.S. federal deferred tax assets and state deferred tax assets in excess of our deferred tax liabilities. We have continued to record a valuation allowance for these net deferred tax assets since 2012. As a result, we only recorded income tax expense for the first three months ended March 31, 2018 and 2017, for states that limit or disallow the deduction of net operating loss carryforwards. Please see Note 13 – “Income Taxes” in notes to consolidated financial statements included in our consolidated financial statements for the year ended December 31, 2017, for more information regarding our income taxes and valuation allowance. Deferred tax assets related to our U.S. federal and state operating losses are still available to us to offset future taxable income, subject to limitations in the event of a change of control under Section 382 of the Internal Revenue Code. At March 31, 2018, we had not incurred such an ownership change.

At each reporting date, we consider all available positive and negative evidence to evaluate whether our deferred tax assets are more likely than not to be realized. A significant piece of negative evidence that we consider is our cumulative losses (generally defined as losses before income taxes) incurred in recent years. Such evidence limits our ability to consider other subjective evidence such as our projections of future taxable income.

The Company generated income before income taxes in 2017 and the first quarter of 2018. This represents positive evidence that we may be able to realize some or all of our deferred tax assets; however, due to the negative evidence of our cumulative losses in recent years and the significant cyclicality of our business, we believe that the earliest period when we may adjust the valuation allowance is the fourth quarter of 2018.

In December 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 that, among other things, changed the taxation of certain foreign earnings beginning January 2018. We are still in the process of evaluating these new foreign tax law provisions, although we believe any effect of these provisions will be immaterial to our financial statements.

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NOTE 10—EARNINGS (LOSS) PER SHARE

The numerators and denominators of the basic and diluted earnings (loss) per share (“EPS”) computations for our common stock are calculated as follows:


	Three Months Ended
	March 31,
(In millions, except per share amounts)	2018		2017
Numerator:
Net income (loss)	$	78.7	$	(20.1)
Convertible preferred stock accretion		—		(51.3)
Net reversal of convertible preferred stock accretion due to recapitalization of convertible preferred stock to common stock (1)		423.2		—
Net income (loss) attributable to common stockholders used for basic EPS computation		501.9		(71.4)
Add back the effect of dilutive securities:
Convertible preferred stock accretion (2)		—		—
Net income (loss) attributable to common stockholders used for diluted EPS computation	$	501.9	$	(71.4)

Denominator:
Weighted average shares used for basic EPS computation		88.4		51.8
Effect of dilutive securities:
Convertible preferred stock (2)		—		—
Restricted stock units (3) (4)		—		—
Dilutive potential common shares		—		—
Number of shares used for diluted EPS computation		88.4		51.8

Basic and diluted EPS	$	5.68	$	(1.38)

_________________________

(1)

The accreted value of our Preferred Stock was $1,132.7 million at December 31, 2017. In connection with the IPO, the Preferred Stock was recapitalized into 39.4 million shares of common stock. These common shares had a value of $709.5 million at the IPO share price of $18.00, which resulted in a net reversal of $423.2 million of convertible preferred stock accretion previously recognized.

(2)

Dilutive securities in our diluted EPS calculation for 2017 do not include the effects of converting the convertible preferred stock because the effect would be antidilutive. The number of common stock equivalents attributable to convertible preferred stock was 13.0 million shares as of March 31, 2017.

(3)

Dilutive securities in our diluted EPS calculation do not include RSUs granted under our 2014 LTIP. Vesting of these RSUs was dependent upon the satisfaction of both a service condition and a corporate liquidity event such as an initial public offering of our common stock. As of March 31, 2017, a corporate liquidity event had not occurred and the holders of these RSUs had no rights to our undistributed earnings. Therefore, they were excluded from the effect of dilutive securities. The number of common stock equivalents attributable to these RSUs was approximately 129,000 shares as of March 31, 2017.

(4)

The dilutive effect of RSUs granted under our 2018 Plan was immaterial for the first quarter of 2018

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NOTE 11 — COMMITMENTS AND CONTINGENCIES

Purchase Obligations

We have purchase commitments with certain vendors to supply a significant portion of the proppant used in our operations and to assist us with the delivery of proppant to our job locations. There have been no significant changes to these purchase obligations since December 31, 2017.

Litigation

In the ordinary course of business, we are subject to various legal proceedings and claims, some of which may not be covered by insurance. Many of these legal proceedings and claims are in early stages, and many of them seek an indeterminate amount of damages. We estimate and provide for potential losses that may arise out of legal proceedings and claims to the extent that such losses are probable and can be reasonably estimated. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different from these estimates. When preparing our estimates, we consider, among other factors, the progress of each legal proceeding and claim, our experience and the experience of others in similar legal proceedings and claims, and the opinions and views of legal counsel. We believe that costs associated with our legal matters will not have a material adverse effect on our consolidated financial statements.

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

Unless the context requires otherwise, the use of the terms “FTSI,” “Company”, “we,” “us,” “our” or “ours” refer to FTS International, Inc., together with its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes that appear elsewhere in this quarterly report on Form 10-Q as well as information in our annual report on Form 10-K for the year ended December 31, 2017. Unless otherwise specified, all comparisons made are to the corresponding period of 2017.

Overview

We are one of the largest providers of hydraulic fracturing services in North America. Our services enhance hydrocarbon flow from oil and natural gas wells drilled by exploration and production companies in shale and other unconventional resource formations. Our customers include leading exploration and production companies that specialize in unconventional oil and natural gas resources in North America. We operate in five of the most active major unconventional basins in the United States: the Permian Basin, the SCOOP/STACK Formation, the Marcellus/Utica Shale, the Eagle Ford Shale and the Haynesville Shale. Substantially all of our business activities support our well completion services.

Significant developments in 2018

We activated one fleet in response to increased customer demand, which brought our total active fleet count to 28 at March 31, 2018.

In February 2018, we completed an IPO of 22.4 million shares of common stock of which 18.1 million shares were sold by the Company. The Company received net proceeds from the offering of $303.0 million, and we used the net proceeds from the offering for general corporate purposes, primarily debt repayments.

We repaid $395.0 million of aggregate principal amount of long-term debt in the first quarter using cash on hand and proceeds received from the IPO. Our remaining principal amount of long-term debt after these repayments was $735.0 million as of March 31, 2018.

In February 2018, we entered into a $250 million asset-based revolving credit facility to increase our available liquidity.

We repaid $50.0 million of aggregate principal amount of long-term debt in April 2018 using cash on hand. After this repayment, our remaining principal amount of long-term debt was $685.0 million.

Industry trends and business outlook

Our business depends on the willingness of our customers to make expenditures to explore for, develop, and produce oil and natural gas in the United States. The willingness of our customers to undertake these activities is predominantly influenced by current and expected future prices for oil and natural gas.

In the first quarter of 2018, the price of West Texas Intermediate crude oil averaged $62.91 compared with an average of $55.27 for the fourth quarter of 2017 and an average of $51.66 for the first quarter of 2017. This has led to an increase in our customer activity levels, which is commonly measured by the active rig count. In the first quarter of 2018, the horizontal rig count averaged 831 compared with an average of 786 for the fourth quarter of 2017 and an average of 605 for the first quarter of 2017, according to a report by Baker Hughes, a GE company. These increased customer activity levels in 2018 contributed to a strong demand for our services during the period.

Based on conversations with our customers and industry forecasts of stable commodity prices and rig count, we expect demand for our services to remain strong throughout 2018. This market environment should provide us with the opportunity to activate additional equipment and increase our average active fleet count as the year progresses. We believe that expected market conditions will allow for continued profitability and substantial cash generation for the remainder of 2018.

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Results of Operations

Revenue

Total revenue consists of revenue from hydraulic fracturing and wireline services. The following table includes certain operating statistics that affect our revenue:


	Three Months Ended
	March 31,
(Dollars in millions)	2018		2017
Revenue	$	425.1	$	191.9
Revenue from related parties		42.4		21.6
Total revenue	$	467.5	$	213.5

Total fracturing stages		8,152		6,523
Active fleets (1)		27.5		20.0
Total fleets (2)		32.0		32.0

_____________________________

(1)

Active fleets is the average number of fleets operating during the period. We had 28 and 22 active fleets at March 31, 2018 and 2017, respectively.

(2)

Total fleets is the total number of fleets owned during the period.

Total revenue for the first quarter of 2018 increased by $254.0 million from the same period in 2017. This increase was primarily due to an increase in the pricing of our services, an increase in the number of average fleets active during the period, and an increase in the number of fracturing stages completed, all of which were driven by increased customer demand.

The number of fracturing stages completed per active fleet for the first quarter of 2018 decreased by 9% from the same period in 2017. This decrease was primarily due to increased winter weather delays in the first quarter of 2018 when compared with the same period in 2017.

Costs of revenue

Costs of revenue as a percentage of total revenue is as follows:


	Three Months Ended March 31,
	2018				2017
			As a Percent				As a Percent
(Dollars in millions)	Dollars		of Revenue		Dollars		of Revenue
Costs of revenue, excluding depreciation	$	312.2	66.8	%	$	174.8	81.9	%
Depreciation — costs of revenue		18.4	3.9	%		18.8	8.8	%
Total costs of revenue	$	330.6	70.7	%	$	193.6	90.7	%

Total costs of revenue in the first quarter of 2018 increased by $137.0 million from the same period in 2017. This increase was primarily due to an increase in our costs of revenue, excluding depreciation, which were partially offset by a decrease in the depreciation expense for our service equipment.

Costs of revenue, excluding depreciation, in the first quarter of 2018 increased by $137.4 million from the same period in 2017. This increase was due to our higher number of active fleets, an increased number of stages completed during 2018, a decrease in the portion of customers who provided their own proppant, and an increase in the costs for materials used in the fracturing process.

Depreciation for our service equipment in the first quarter of 2018 decreased by $0.4 million from the same period in 2017. Depreciation for our service equipment has been declining in recent periods due to asset disposals, certain assets becoming fully depreciated, and the fact that we generally refurbish our equipment as it approaches the end of its useful life rather than replace it by purchasing new equipment. Because of our increased capital expenditures in recent periods

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and the fact that refurbished assets now make up a larger portion of our service equipment fleet, we believe that the trend for depreciation should be more consistent in future periods.

Total costs of revenue as a percentage of total revenue decreased by 20.0 percentage points from 90.7% in the first quarter of 2017 to 70.7% in the first quarter of 2018. This change was primarily due to an increase in the pricing for our services in the first quarter of 2018, which was partially offset by increased costs for materials used in the fracturing process.

Selling, general and administrative expense

Selling, general and administrative (“SG&A”) expense in the first quarter of 2018 increased by $6.3 million from the same period in 2017. This increase was primarily due to stock-based compensation expense incurred in 2018. We incurred $3.7 million of expense to settle all remaining unvested awards from our 2014 Long Term Incentive Plan, which vested upon the completion of our IPO. We also incurred $1.6 million of non-cash expense related to RSU awards granted in the first quarter of 2018. The increase in SG&A expense was also partly driven by a higher average employee headcount in the first quarter of 2018.

Depreciation and amortization

The following table summarizes our depreciation and amortization:


	Three Months Ended
	March 31,
(In millions)	2018		2017
Depreciation — costs of revenue (1)	$	18.4	$	18.8
Depreciation — other (2)		2.2		3.0
Total depreciation and amortization	$	20.6	$	21.8

_________________________

(1)

Related to service equipment included in “Property, plant, and equipment, net” on our consolidated balance sheets discussed under the “Costs of revenue” heading of this discussion and analysis.

(2)

Related to all long-lived assets other than service equipment included in “Property, plant, and equipment, net” on our consolidated balance sheets.

Depreciation and amortization in the first quarter of 2018 decreased by $1.2 million from the same period in 2017. This decrease was partially due to a decrease in depreciation for our service equipment, which has been previously discussed under “costs of revenue.” The remaining decrease was primarily due to asset disposals and certain assets becoming fully depreciated.

Impairments and other charges

The following table summarizes our impairments and other charges:


	Three Months Ended
	March 31,
(In millions)	2018		2017
Supply commitment charges	$	2.0	$	—
Lease abandonment charges		—		0.1
Total impairments and other charges	$	2.0	$	0.1

Supply commitment charges relate to contractual inventory purchase commitments to certain proppant suppliers. During the first quarter of 2018, we recorded an aggregate charge under these supply arrangements of $2.0 million. These charges were attributable to our decreased volume of purchases from these suppliers due to customer requirements for specific types of proppant that differed from our contracted supply and certain customers choosing to procure their own proppants.

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do not meet the minimum purchase commitments in the future and we are unable to work with our vendors to adjust our contracted amounts, we may incur supply commitment charges in future periods.

During 2015 and 2016, we vacated certain leased facilities to consolidate our operations. During the first three months of 2017, we recognized $0.1 million in connection with these actions.

Gain on insurance recoveries

Interest expense, net

Interest expense, net of interest income, in the first quarter 2018 decreased by $3.8 million from the same period in 2017. The decrease was due to lower average long term debt balances, which were partially offset by higher average interest rates for our Term Loan and 2020 Senior Notes in 2018.

Gain (loss) on extinguishment of debt, net

In February 2018, we repaid all $290.0 million remaining principal amount of 2020 Senior Notes using cash on hand and proceeds received from our IPO. We recognized a loss on this debt extinguishment of $8.3 million.

In the first quarter of 2018, we repaid $100.0 million of aggregate principal amount of Term Loan using cash on hand and proceeds received from our IPO. We recognized a loss on this debt extinguishment of $1.0 million.

In January 2018, we repurchased $5.0 million of aggregate principal amount of 2022 Senior Notes in the qualified institutional market using cash on hand. We recognized an immaterial gain on debt extinguishment.

Income taxes

Adjusted EBITDA

The following table reconciles our net income or loss to Adjusted EBITDA:


	Three Months Ended
	March 31,
(In millions)	2018		2017
Net income (loss)	$	78.7	$	(20.1)
Interest expense, net		17.4		21.2
Income tax expense		1.0		0.1
Depreciation and amortization		20.6		21.8
Loss (gain) on disposal of assets, net		0.5		(0.4)
Loss on extinguishment of debt, net		9.3		—
Stock-based compensation		1.6		—
Gain on insurance recoveries		—		(2.6)
Adjusted EBITDA (1)	$	129.1	$	20.0

_____________________________

(1)

Adjusted EBITDA is a non-GAAP financial measure that we define as earnings before interest, income taxes, and depreciation and amortization; as well as, the following items, if applicable: gain or loss on disposal of assets; debt extinguishment gains or losses; inventory write-downs, asset and goodwill impairments; gain on insurance recoveries; acquisition earn-out adjustments; stock-based compensation;

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and acquisition or disposition transaction costs. The most comparable financial measure to Adjusted EBITDA under GAAP is net income or loss. Adjusted EBITDA is used by management to evaluate the operating performance of our business for comparable periods and it is a metric used for management incentive compensation. Adjusted EBITDA should not be used by investors or others as the sole basis for formulating investment decisions, as it excludes a number of important items. We believe Adjusted EBITDA is an important indicator of operating performance because it excludes the effects of our capital structure and certain non-cash items from our operating results. Adjusted EBITDA is also commonly used by investors in the oilfield services industry to measure a company’s operating performance, although our definition of Adjusted EBITDA may differ from other industry peer companies.

Liquidity and Capital Resources

Sources of Liquidity

At March 31, 2018, we had $155.5 million of cash and $171.3 million of availability under our revolving credit facility, which resulted in a total liquidity position of $326.8 million. We believe that our cash and cash provided by operations will be sufficient to fund our operations and capital expenditures.

The maximum availability of credit under the credit facility is limited at any time to the lesser of $250 million or the borrowing base. The borrowing base is based on percentages of eligible accounts receivable and eligible inventory and is subject to certain reserves. As of March 31, 2018, our borrowing base was $177.2 million and therefore our maximum availability under the credit facility was $177.2 million. As of March 31, 2018, there were no borrowings outstanding under the credit facility, and letters of credit totaling $5.9 million had been issued, resulting in $171.3 million of availability under the facility. The borrowing base will be adjusted in the second quarter using eligible accounts receivable and eligible inventory information as of March 31, 2018.

See Note 3 — “Indebtedness and Borrowing Facility” in notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for more information on our credit facility.

Cash Flows

The following table summarizes our cash flows:


	Three Months Ended
	March 31,
(In millions)	2018		2017
Net income (loss) adjusted for non-cash items	$	111.7	$	(1.1)
Changes in operating assets and liabilities		(37.4)		(30.2)
Net cash provided by (used in) operating activities		74.3		(31.3)
Net cash used in investing activities		(37.5)		(2.3)
Net cash used in financing activities		(98.5)		—
Net decrease in cash, cash equivalents, and restricted cash		(61.7)		(33.6)
Cash, cash equivalents, and restricted cash at beginning of period		217.2		169.4
Cash, cash equivalents, and restricted cash at end of period	$	155.5	$	135.8

Cash flows from operating activities have historically been a significant source of liquidity we use to fund capital expenditures and repay our debt. Changes in cash flows from operating activities are primarily affected by the same factors that affect our net income, excluding non-cash items such as depreciation and amortization, stock-based compensation, and impairments of assets.

Cash flows from operating activities: Net cash provided by operating activities was $74.3 million in the first quarter of 2018 compared to net cash used in operating activities of $31.3 million in the same period of 2017. Cash flows from operating activities consists of net income or loss adjusted for non-cash items and changes in operating assets and liabilities. Net income or loss adjusted for non-cash items resulted in a cash increase of $111.7 million and a cash decrease of $1.1 million in the first quarter of 2018 and 2017, respectively. This change was primarily due to higher earnings in 2018. The net change in operating assets and liabilities resulted in a cash decrease of $37.4 million and $30.2

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million in the first quarter of 2018 and 2017, respectively. The net change in operating assets and liabilities for 2018 was primarily due to an increase in working capital resulting from our increased activity level.

Cash flows from investing activities: Net cash used in investing activities was $37.5 million and $2.3 million in the first quarter of 2018 and 2017, respectively. This change was primarily due to increased capital expenditures in 2018. The increase in capital expenditures in 2018 was due to our increased operations, fleet reactivations, and costs incurred to date to build two additional fleets.

Cash flows from financing activities: Net cash used in financing activities was $98.5 million in the first quarter of 2018. We used $399.3 million of cash to repay debt which we mostly funded with $303.0 million of net proceeds received from our IPO.

Cash Requirements

Contractual Commitments and Obligations

During the first quarter of 2018, we repaid $395.0 million of aggregate principal amount of long-term debt using cash on hand and proceeds received from our IPO. As of March 31, 2018, we had $735.0 million aggregate principal amount of long-term debt still outstanding. In April 2018, we repaid $50.0 million of aggregate principal amount of Term Loan using cash on hand. See Note 3 — “Indebtedness and Borrowing Facility” in notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for more information on our debt repayments and remaining amounts of long-term debt. There have been no other significant changes to our contractual obligations outside the ordinary course of business since December 31, 2017.

Capital expenditures

The nature of our capital expenditures consists of a base level of investment required to support our current operations and amounts related to growth and company initiatives. Our capital expenditures for the first quarter of 2018 represented the amount necessary to support our current operations, fleet reactivations, and costs to-date to construct two additional fleets, which we expect to complete in 2018. We estimate our total capital expenditures in 2018 will range from $130 million to $150 million. Once completed, our total available fleet size will increase from 32 fleets to 34 fleets, representing a total of 1.7 million hydraulic horsepower. We expect our capital expenditures related to these two additional fleets to be approximately $50 million, of which approximately $10 million was spent in 2017 and the remainder will be spent in 2018. Our remaining estimate for capital expenditures will be used to support our current operations and fleet reactivations in 2018. Our cash and any cash provided by operations will be used to fund our capital expenditure needs, which we believe will be sufficient to support our operations in 2018. We continuously evaluate our capital expenditures and the amount we ultimately spend will primarily depend on industry conditions.

Off-Balance Sheet Arrangements

Except for our normal operating leases, we do not have any off balance sheet financing arrangements, transactions, or special purpose entities.

Recently Issued Accounting Pronouncements

See Note 1 — “Basis of Presentation” in the notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

At March 31, 2018, we held no derivative instruments that materially increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks.

We are subject to interest rate risk on a portion of our long-term debt. Our Term Loan bears interest at a variable rate based on LIBOR plus a margin of 4.75% per annum, with a 1.00% LIBOR floor. As of March 31, 2018, LIBOR was above the 1.00% floor. Therefore a 1.00% increase in LIBOR would increase the annual interest payments for this debt by approximately $3.3 million.

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We are subject to commodity price risk related to our diesel fuel usage. A $0.25 per gallon change in the price of diesel fuel would have changed our costs of revenue, excluding depreciation, by approximately $2 million.

During 2017, substantially all of our operations were conducted within the United States; therefore we had no significant exposure to foreign currency exchange rate risk.

Item 4. Controls and Procedures.

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of March 31, 2018, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2018, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

There has been no change in internal control over financial reporting that occurred during the quarter ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our legal proceedings, see Note 11 — “Commitments and Contingencies” in the notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Item 1A. Risk Factors.

Our investors should carefully consider the risks and other information discussed under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017, when evaluating us and our common stock.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.


Exhibit Number		Description
3.1***		Amended and Restated Certificate of Incorporation of the Company
3.2***		Amended and Restated Bylaws of the Company
4.1***		Indenture, dated as of April 16, 2014, among FTS International, Inc., as issuer, the guarantors named therein and U.S. Bank National Association, as collateral agent and trustee
4.3***		Registration Rights Agreement
4.4***		Investors’ Rights Agreement by and among FTS International, Inc., Maju Investments (Mauritius) Pte Ltd and CHK Energy Holdings, Inc.
4.5***		Investors’ Rights Agreement by and among FTS International, Inc., Senja Capital Ltd and Hampton Asset Holding Ltd.
10.13***†		Form of Indemnification Agreement between FTS International, Inc. and each of its directors and executive officers
10.24***†		FTS International, Inc. 2018 Equity and Incentive Compensation Plan
10.25*†		Form of Amended and Restated Restricted Stock Unit Agreement under the 2018 Equity and Incentive Compensation Plan
10.31***		Credit Agreement, dated February 22, 2018, among FTS International, Inc., Wells Fargo Bank, National Association, as administrative agent, and the several lenders party thereto
10.32***		Guaranty and Security Agreement, dated February 22, 2018, among FTS International Services, LLC, FTS International, Inc., FTS International Manufacturing, LLC and Wells Fargo Bank, National Association, as administrative agent
10.33***		Trademark Security Agreement, dated February 22, 2018, between FTS International Services, LLC and Wells Fargo Bank, National Association, as administrative agent
10.34***		Junior Lien Intercreditor Agreement Joinder, dated as of February 22, 2018, between FTS International, Inc., FTS International Services, LLC, FTS International Manufacturing, LLC, Wells Fargo Bank, National Association in its capacity as administrative agent under the Term Loan Agreement, US Bank National Association, as the notes collateral agent and Wells Fargo Bank, National Association, in its capacity as the ABL Facility Agent (as defined in the Junior Lien Intercreditor Agreement)
10.36*†		Form of Amended and Restated Restricted Stock Unit Agreement for Directors under the 2018 Equity and Incentive Compensation Plan
10.37***†		Description of 2018 Short-Term Incentive Plan
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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101.INS**		XBRL Instance Document
101.SCH**		XBRL Schema Document
101.CAL**		XBRL Calculation Linkbase Document
101.DEF**		XBRL Definition Linkbase Document
101.LAB**		XBRL Label Linkbase Document
101.PRE**		XBRL Presentation Linkbase Document

_____________________________

* Filed herewith
** Furnished herewith
*** Previously filed
† Management contract, compensatory plan or arrangement

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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.


	FTS INTERNATIONAL, INC.

Dated: May 1, 2018	By:	/s/ Michael J. Doss
		Michael J. Doss
		Chief Executive Officer and Director (Principal Executive Officer)

Dated: May 1, 2018	By:	/s/ Lance D. Turner
		Lance D. Turner
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 10.25

FTS INTERNATIONAL, INC.

2018 EQUITY AND INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT AGREEMENT

This AGREEMENT (this “ Agreement ”) is made as of February 6, 2018 (the “ Date of Grant ”), by and between FTS International, Inc., a Delaware corporation (the “ Company ”), and [•] (the “ Grantee ”).

1. Certain Definitions . Capitalized terms used, but not otherwise defined, in this Agreement will have the meanings given to such terms in the Company’s 2018 Equity and Incentive Compensation Plan (the “ Plan ”).

2. Grant of RSUs . Subject to and upon the terms, conditions and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee [•] Restricted Stock Units (the “ RSUs ”). Each RSU shall represent the right of the Grantee to receive one share of Common Stock subject to and upon the terms and conditions of this Agreement.

3. Restrictions on Transfer of RSUs . Neither the RSUs evidenced hereby nor any interest therein or in the shares of Common Stock underlying such RSUs shall be transferable prior to payment to the Grantee pursuant to Section 7 hereof, other than as described in Section 15 of the Plan.

4. Vesting of RSUs . Subject to the terms and conditions of Sections 5 and 6 hereof, the RSUs covered by this Agreement shall become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof with respect to 25% of the RSUs on the first anniversary of the Date of Grant, 25% of the RSUs on the second anniversary of the Date of Grant, 25% of the RSUs on the third anniversary of the Date of Grant, and 25% of the RSUs on the fourth anniversary of the Date of Grant (each such date, a “ Vesting Date ”), if the Grantee remains in the continuous employ of the Company or any Subsidiary as of each such Vesting Date.

5. Accelerated Vesting of RSUs . Notwithstanding the provisions of Section 4 hereof, the RSUs covered by this Agreement will become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof upon the occurrence of any of the following events at a time when the RSUs have not been forfeited (to the extent the RSUs have not previously become nonforfeitable) as set forth below.

(a) All of the RSUs shall become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof if the Grantee should die, become Disabled, is terminated without Cause or the Grantee terminates employment for Good Reason prior to the final Vesting Date while the Grantee is continuously employed by the Company or any of its Subsidiaries.

(b) In the event of a Change in Control that occurs prior to the final Vesting Date, the RSUs shall become nonforfeitable and payable as follows:

(i) The RSUs will become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof, except to the extent that a Replacement Award is provided to the Grantee to continue, replace or assume the RSUs covered by this Agreement (the “ Replaced Award ”).

(ii) If, after receiving a Replacement Award, the Grantee experiences a termination of employment with the Company or a Subsidiary (or any of their successors) (as applicable, the “ Successor ”) by reason of a termination by the Successor without Cause or by the Grantee for Good Reason, in each case within a period of two years after the Change in Control and during the remaining vesting period for the Replacement Award, the Replacement Award shall become nonforfeitable and payable with respect to the time-based restricted stock units covered by such Replacement Award upon such termination.

(iii) If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding RSUs that at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be nonforfeitable at the time of such Change in Control.

(i) “ Cause ” shall mean (A) the willful and continued failure of Grantee to perform his material job duties with the Company or one of its Subsidiaries (other than any such failure resulting from becoming Disabled), after a written demand for substantial performance is delivered to Grantee by the Company which specifically identifies the manner in which the Company believes that Grantee has not substantially performed Grantee’s duties and Grantee has had an opportunity for 30 days to cure such failure after receipt of such written demand; (B) engaging in an act of fraud, embezzlement, misappropriation or theft which results in damage to the Company or any of its Subsidiaries; (C) conviction of Grantee of, or Grantee pleading guilty or nolo contendere to, a felony (other than a violation of a motor vehicle or moving violation law) or a misdemeanor if such misdemeanor (1) materially damages the Company or any of its Subsidiaries or (2) involves the commission of a criminal act against the Company or any of its Subsidiaries; or (D) the breach by Grantee of any material provision of, or inaccuracy in any material respect of any representation made by Grantee in, the Company’s policies that is not cured within 30 days of written notice from the Company setting forth with reasonable particularity such breach or inaccuracy, provided that, if such breach or inaccuracy is not capable of being cured within 30 days after receipt of such notice, Grantee shall not be entitled to such cure period.

(ii) “ Change in Control ” shall have the meaning set forth in Section 12 of the Plan, except that a Change in Control shall not be deemed to have occurred

if either (A) Temasek Holdings (Private) Limited and each of its Affiliates (but not including any of its portfolio companies) or (B) Chesapeake Energy Corporation and each of its controlled Affiliates become, or continue to be, the beneficial owner of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities.

(iii) “ Disabled ” shall have the meaning set forth under applicable state or federal law, and no reasonable accommodation can be provided without undue hardship to the Company.

(iv) “ Good Reason ” shall mean, without the Grantee’s consent: (A) a material reduction in Grantee’s base salary, other than pursuant to a reduction applicable to all executives or employees of the Company generally; (B) a move of Grantee’s primary place of work more than 50 miles from its current location; or (C) a material diminution in Grantee’s normal duties and responsibilities, including, but not limited to, the assignment without Grantee’s consent of any diminished duties and responsibilities which are inconsistent with Grantee’s positions, duties and responsibilities with the Company and its Subsidiaries on the date of this Agreement, or a materially adverse change in Grantee’s reporting responsibilities or titles as in effect on the date of this Agreement, or any removal of Grantee from or any failure to re-elect Grantee to any of such positions, except in connection with the termination of the Grantee’s employment for Cause or upon death, the Grantee becoming Disabled, voluntary resignation or other termination of employment by the Grantee without Good Reason;

provided that, in each case, Grantee must provide at least 30 days’ prior written notice of termination for Good Reason within 30 days after the event that Grantee claims constitutes Good Reason, and the Company shall have the opportunity to cure such circumstances within 30 days of receipt of such notice. For the avoidance of doubt, Good Reason shall not exist hereunder unless and until the 30 day cure period following receipt by the Company of Grantee’s written notice expires and the Company shall not have cured such circumstances, and in such case Grantee’s employment shall terminate for Good Reason on the day following expiration of such 30 day notice period.

(v) “ Replacement Award ” shall mean an award (1) of the same type (e.g., time-based restricted stock units) as the Replaced Award, (2) that has a value at least equal to the value of the Replaced Award, (3) that relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (4) if the Grantee holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences of which to such Grantee under the Code are not less favorable to such Grantee than the tax consequences of the Replaced

Award, and (5) the other terms and conditions of which are not less favorable to the Grantee holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the two preceding sentences are satisfied. The determination of whether the conditions of this Section 5(c)(v) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.

6. Forfeiture of Awards . Except to the extent the RSUs covered by this Agreement have become nonforfeitable pursuant to Sections 4 or 5 hereof, the RSUs covered by this Agreement shall be forfeited automatically and without further notice, and shall no longer be considered covered by this Agreement, on the date that the Grantee ceases to be an employee of the Company or any Subsidiary.

7. Form and Time of Payment of RSUs . Payment in respect of the RSUs, after and to the extent they have become nonforfeitable, shall be made in the form of shares of Common Stock. Payment shall be made within ten days following the date that the RSUs become nonforfeitable pursuant to Section 4 or 5 hereof. Elections by the Grantee to defer receipt of the shares of Common Stock when the RSUs become nonforfeitable beyond the date of payment provided herein may be permitted in the discretion of the Committee pursuant to procedures established by the Committee in compliance with the requirements of Section 409A of the Code.

8. Dividend Equivalents; Other Rights .

(a) The Grantee shall have no rights of ownership in the shares of Common Stock underlying the RSUs and no right to vote the shares of Common Stock underlying the RSUs until the date on which the shares of Common Stock underlying the RSUs are issued or transferred to the Grantee pursuant to Section 7 hereof.

(b) From and after the Date of Grant and until the earlier of (i) the time when the RSUs become nonforfeitable and are paid in accordance with Section 7 hereof or (ii) the time when the Grantee’s right to receive shares of Common Stock in payment of the RSUs is forfeited in accordance with Section 6 hereof, on the date that the Company pays a cash dividend (if any) to holders of shares of Common Stock generally, the Grantee shall be paid cash per RSU equal to the amount of such dividend.

(c) The obligations of the Company under this Agreement will be merely that of an unfunded and unsecured promise of the Company to deliver shares of Common Stock in the future, and the rights of the Grantee will be no greater than that of an unsecured general creditor. No assets of the Company will be held or set aside as security for the obligations of the Company under this Agreement.

(d) If the Grantee ceases to be an employee of the Company or any Subsidiary before the time when the RSUs become nonforfeitable, the Company shall have the right to be repaid by Grantee the amount of any dividend equivalents previously paid to Grantee under Section 8(b) of this Agreement with respect to any RSUs that remain forfeitable as of the date Grantee ceases employment.

9. No Employment Contract . Nothing contained in this Agreement shall confer upon the Grantee any right to be employed or remain employed by the Company or any Subsidiary, nor limit or affect in any manner the right of the Company or any Subsidiary to terminate the employment or adjust the compensation of the Grantee.

10. Adjustments . The number of shares of Common Stock issuable for each RSU and the other terms and conditions of the grant evidenced by this Agreement are subject to adjustment as provided in Section 11 of the Plan.

11. Withholding Taxes . To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with the delivery to the Grantee of shares of Common Stock or any other payment to the Grantee or any other payment or vesting event under this Agreement, it shall be a condition to the obligation of the Company to make any such delivery or payment that the Grantee make payment of the balance of such taxes or other amounts required to be withheld. The withholding requirement will be satisfied by retention by the Company of a portion of the shares of Common Stock or cash to be delivered to the Grantee or, subject to approval by the Committee and upon Grantee’s election, by delivering to the Company other shares of Common Stock held by the Grantee. Any shares so retained shall be credited against such withholding requirement at the Market Value per Share on the date of such delivery. In no event will the Market Value per Share to be withheld and/or delivered pursuant to this Section 11 to satisfy applicable withholding taxes exceed the minimum amount of taxes required to be withheld, unless (a) an additional amount can be withheld and not result in adverse accounting consequences and (b) it is permitted by the Committee for a Grantee who is an “executive officer” under Item 401(b) of Regulation S-K under the Exchange Act.

12. Compliance With Law . The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided , however , notwithstanding any other provision of the Plan and this Agreement, the Company shall not be obligated to issue any of the shares of Common Stock pursuant to this Agreement if the issuance thereof would result in violation of any such law.

13. Relation to Other Benefits . Any economic or other benefit to the Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or any Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or any Subsidiary.

14. Amendments . Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided , however , that (a) no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee’s written consent, and (b) the Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the Securities Exchange Commission or any national securities exchange or national securities association on which the Common Stock may be traded, including as a result of the implementation

of any recoupment policy the Company adopts to comply with the requirements set forth in Section 10D of the Exchange Act.

15. Severability . In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

16. Relation to Plan . This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this Agreement.

17. Successors and Assigns . Without limiting Section 3 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

18. Governing Law . This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

19. Notices . All notices, demands and other communications required or permitted hereunder or designated to be given with respect to the rights or interests covered by this Agreement shall be deemed to have been properly given or delivered when delivered personally or sent by certified or registered mail, return receipt requested, U.S. mail or reputable overnight carrier, with full postage prepaid and addressed to the parties as follows:

If to the Company, at:	777 Main Street, Suite 2900
	Fort Worth, TX 76102
	Attention: General Counsel

If to Grantee, at:	Grantee’s last known address reflected on the
Payroll records of the Company

The Company may change the above designated address by notice to the Grantee. The Grantee will maintain a current address with the payroll records of the Company.

20. Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the RSUs and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

21. No Right to Future Awards . The grant of the RSUs under this Agreement to the Grantee is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards.

22. Other Agreements . In connection with the delivery to the Grantee of shares of Common Stock or any other payment to the Grantee or any other payment or vesting event under this Agreement, it shall be a condition to the obligation of the Company to make any such delivery or payment that the Grantee execute a (a) non-competition agreement in substantially the form required by the Company for other Grantees receiving delivery or payment under the Plan and (b) lock-up agreement restricting sales and other transactions with respect to shares of Common Stock received under this Agreement for a period of one year after the Vesting Date.

23. Compliance With Section 409A of the Code . To the extent applicable, it is intended that any amounts payable under this Agreement and the Plan, and the Company’s and the Grantee’s exercise of authority or discretion hereunder, be exempt from or comply with the provisions of Section 409A of the Code so as to not subject the Grantee to the payment of the additional tax, interest and any tax penalty which may be imposed under Section 409A of the Code. In furtherance of this intent, to the extent that any provision hereof would result in the Grantee being subject to payment of the additional tax, interest and tax penalty under Section 409A of the Code, the parties agree to amend this Agreement in order to bring this Agreement into compliance with Section 409A of the Code; and thereafter interpret its provisions in a manner that complies with Section 409A of the Code. Each payment under this Agreement shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code. Notwithstanding the foregoing, no particular tax result for the Grantee with respect to any income recognized by the Grantee in connection with this Agreement is guaranteed, and the Grantee shall be responsible for any taxes, penalties and interest imposed on the Grantee under or as a result of Section 409A of the Code in connection with this Agreement.

24. Interpretation . Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to Section 409A of the Code by the U.S. Department of the Treasury or the Internal Revenue Service. Except as expressly provided in this Agreement, capitalized terms used herein will have the meaning ascribed to such terms in the Plan.

25. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and the Grantee has executed this Agreement, as of the Date of Grant first written above.


	FTS INTERNATIONAL, INC.

	By:
	Name:
	Title:


	GRANTEE’S SIGNATURE

Print Name:

FORM OF CONFIDENTIALITY, NON-COMPETE, AND NON-SOLICITATION AGREEMENT

This Confidentiality, Non-Compete, and Non-Solicitation Agreement (the “Agreement”) is made and entered into effective as of [•] (the “Effective Date”), by and between [•] (hereinafter referred to as “Employee”) and FTS International, Inc. (together with its subsidiaries, “FTSI”), jointly referred to as the “Parties.” In consideration of Employee receiving [•] Restricted Stock Units in FTSI, Employee’s continued employment on an at-will basis or by FTSI, FTSI’s promise to disclose certain confidential information to Employee, the mutual promises contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. Confidentiality. Employee agrees that, unless otherwise required by law, Employee will not disclose to any other person directly or indirectly any Confidential Information (defined in Paragraph 1.a) which has or shall come into Employee’s possession, and Employee will not use the same for Employee’s own private benefit, or directly or indirectly for the benefit of others.

a. For purposes of this Agreement, “Confidential Information” means all confidential or proprietary information concerning the business and affairs of FTSI, including without limitation, all trade secrets, knowhow and other information generally retained on a confidential basis by FTSI concerning its services, products, methods, know-how, techniques, cost and pricing information (including bid prices), pressure pumping and wireline equipment and specifications, formulae, inventions and discoveries, business plans, service plans and the identities of and the nature of FTSI’s dealings with its employees, vendors and customers, whether or not such information shall, in whole or in part, be subject to or capable of being protected by patent, copyright or trademark laws.

b. If Employee is legally compelled (by deposition, interrogatory, request for documents, subpoena or similar process) to disclose any Confidential Information, Employee shall provide FTSI with prompt prior written notice of such legal requirement so that FTSI may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Paragraph. In any event, Employee may furnish only that portion of the Confidential Information that legal counsel advises Employee is required to furnish, and Employee shall exercise Employee’s best efforts to obtain an order or assurance that any disclosed Confidential Information will be accorded confidential treatment.

c. Nothing in this Agreement is intended to prohibit Employee from reporting possible violations of federal, state, or local law or regulation to any federal, state, or local agency or entity charged with the enforcement of any laws, or making other disclosures that are protected under the whistleblower provisions of any law or regulation.

2. Non-Compete and Non-Solicitation of Employees and Customers.

a. Acknowledgments . Employee acknowledges that: (i) FTSI is engaged in the business of pressure pumping and wireline and perforating services (the “Business”); (ii) after the Effective Date of this Agreement, Employee will acquire and maintain Confidential Information relating to the Business; (iii) FTSI has devoted significant resources, including, but not limited to, financial investments, training, Confidential Information and other good and valuable resources to developing its Business and related goodwill, its brands, and its relationships with its employees, customers and vendors; (iv) FTSI’s goodwill is a legitimate business interest, and Employee agrees to assist in maintaining and further developing such goodwill in the course of Employee’s employment; and (v) because Employee will have access to and receive Confidential Information and will establish, maintain and increase FTSI’s goodwill with its employees, customers and others, and because the services

provided by Employee for FTSI are a significant factor in the creation of valuable, special and unique assets which are expected to provide FTSI with a competitive advantage, FTSI would suffer irreparable harm if Employee used or disclosed Confidential Information other than in the performance of his duties to FTSI or otherwise competed unfairly with FTSI (as described more fully below).

b. Agreement Not to Compete . Employee covenants and agrees that during Employee’s employment and for a period of twelve (12) months following Employee’s termination of employment, unless such termination is at the insistence of FTSI and without Cause, Employee (whether as an employee, officer, director, partner, proprietor, investor, associate, consultant, advisor or otherwise) will not, either directly or indirectly, for Employee or any third party, engage or invest in any business or activity which is directly or indirectly in competition with the Business (provided that Employee shall not be restricted hereby from owning or acquiring 5% or less of the outstanding voting securities of a publicly traded company). The geographic scope of the restriction contained in this Section 2.b. is limited to the states in which Employee provided services on behalf of FTSI (or in which Employee supervised, directly, indirectly, in whole or in part, any servicing activities) at any time during the two (2) years preceding Employee’s termination of employment with FTSI. “Cause” shall mean the Employee’s (i) failure or refusal to perform the material duties and responsibilities of the Employee’s job as required by FTSI, (ii) knowing violation of any fiduciary duty owed to FTSI, (iii) commission of an act of fraud, misappropriation, embezzlement or any other act involving moral turpitude or constituting a felony or misdemeanor, (iv) dishonesty, (v) theft, (vi) material violation of FTSI’s rules or policies, or (vii) other conduct which has or could have a serious or detrimental impact on FTSI and its employees, or is otherwise grossly unacceptable to FTSI. Employee shall have 30 days after receipt of notice to cure any material violation of FTSI’s rules or policies, provided that, if such violation is not capable of being cured within 30 days after receipt of such notice, Employee shall not be entitled to such cure period.

c. Agreement not to Solicit Employees . Employee covenants and agrees that during Employee’s employment and for a period of twelve (12) months following Employee’s termination of employment with FTSI for any reason, Employee will not, either directly or indirectly, participate in, or assist any third party in, recruiting or hiring away any employees or independent contractors of FTSI, or encourage or induce any employees, agents or independent contractors of FTSI to terminate their relationship with FTSI, without the prior written consent of FTSI’s Vice President of Human Resources. The geographic scope of the restriction contained in this Section 2.c. is limited to the states in which Employee provided services on behalf of FTSI (or in which Employee supervised, directly, indirectly, in whole or in part, any servicing activities) at any time during the two (2) years preceding Employee’s termination of employment with FTSI.

d. Agreement not to Solicit Customers . Employee covenants and agrees that during Employee’s employment and for a period of twelve (12) months following Employee’s termination of employment with FTSI for any reason, Employee shall not (a) for the purpose of providing services similar to those Employee provided while employed by FTSI, individually, or by assisting any other person to do so, directly or indirectly, solicit any customer of FTSI; or (b) directly or indirectly encourage, induce, or attempt to influence any customer to cancel, limit, reduce or postpone the customer’s business with FTSI. These restrictions (a) apply regardless of geographic location, FTSI and Employee acknowledging that the customers for whom Employee will provide services are not confined to a particular geographic area and (b) are limited to those customers of FTSI to whom Employee individually, or by assisting any person, directly or indirectly, provided services or about whom Employee received Confidential Information at any time during the two (2) years immediately preceding Employee’s termination of employment with FTSI.

e. Reasonable Scope of Restrictive Covenants . Employee and FTSI agree that the covenants contained in this Section 2 are reasonably necessary for the protection of FTSI and reasonably limit the

prohibited activities, their duration, their geographical scope 1 and their effect on Employee and the public.

3. At‑Will Employment . Employee understands and acknowledges that Employee’s employment with FTSI is for an unspecified duration and constitutes “at‑will” employment. Employee acknowledges that this employment relationship may be terminated at any time, with or without good cause or for any or no cause, at the option of either FTSI or Employee, with or without notice.

4. Entire Agreement; Amendments . This Agreement constitutes the entire agreement between the Parties and supersedes all previous or contemporaneous agreements and understandings, whether oral or written, express or implied, with respect to the matters stated herein. To the extent of any conflict between this Agreement and any other agreement to protect Confidential Information, the terms of this Agreement shall control. This Agreement may be amended only by an agreement in writing signed by Employee and an officer of FTSI.

5. Reformation and Severability . If any provision contained in this Agreement is held to be unreasonable, invalid, unenforceable or excessively broad as to time, geographical area, scope of activity or subject, any court or authority so finding shall have the authority to reform, redraft, blue pencil or otherwise modify any and all portions ruled to be unreasonable, invalid, unenforceable or excessively broad, whether as to time, geography, scope or otherwise, and the reformed provision, including but not limited to the covenant not to compete, shall be amended and reformed to the extent necessary for such provision to be held reasonable, and valid and enforceable to the fullest extent allowed by law. If any provision in this Agreement is held to be invalid, illegal, or unenforceable in any respect and such provision cannot be reformed under this Paragraph, such provision shall be deemed severable from the Agreement, and the remaining provisions will remain unaffected and in full force and effect.

6. Injunctive Relief . Employee agrees that any breach of this Agreement would cause FTSI to suffer irreparable harm, would be without right or entitlement, would damage FTSI, would leave FTSI without any adequate remedy at law, and that in addition to any other remedies FTSI may have, FTSI is entitled to obtain injunctive relief against Employee, including a temporary restraining order. Nothing herein shall be construed as limiting FTSI’s right to pursue any other available remedy at law or in equity, including recovery of damages.

7. No Waiver . Any failure or delay on the part of FTSI to exercise any remedy or right under this Agreement or any agreement with any other employee shall not operate as a waiver. No covenant or condition of this Agreement may be waived except by the written consent of the waiving party. Any such waiver of any term of this Agreement shall be effective only in the specific instance and for the specific purpose given.

8. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of FTSI and any other person, association, or entity that may acquire or succeed to all or substantially all of the business or assets of FTSI. FTSI may assign this Agreement to any affiliate or other entity. Employee’s rights and obligations under the Agreement are personal, and they shall not be assigned or transferred without FTSI’s prior written consent.

1 The restrictive covenants in Section 2 of this Agreement shall be enforceable in the following Louisiana parishes: Bossier, Caddo, Claiborne, Desoto, East Feliciana, Evangeline, Lincoln, Natchitoches, Rapides, Red River, Sabine, St. Helena, St. Tammany, Tangipahoa, Vernon, Washington, Webster, and West Feliciana.

9. Understand Agreement . Employee represents and warrants that he has read and understood each and every provision of this Agreement, that Employee understands that he is free to obtain advice from legal counsel of Employee’s choice, if necessary and desired, in order to interpret any and all provisions of this Agreement, and that Employee has freely and voluntarily entered into this Agreement.

10. Applicable Law & Venue . This Agreement shall be construed and enforced in accordance with, and governed for all purposes by, the substantive laws of the State of Texas, regardless of any choice-of-law or conflicts-of-law principles that might cause another jurisdiction’s law to apply.

FTS INTERNATIONAL, INC.		EMPLOYEE

		[•]
Signature

_______
Title		Signature

Date:
_______

		Date

FTS INTERNATIONAL, INC.

2018 EQUITY AND INCENTIVE COMPENSATION PLAN

FORM OF LOCK-UP AGREEMENT

This LOCK-UP AGREEMENT (this “ Lock-Up Agreement ”) is made as of [•], by and between FTS International, Inc., a Delaware corporation (the “ Company ”), and [•] (the “ Grantee ”).

The Grantee and the Company are entering into a Restricted Stock Unit Agreement, dated as of the date of this Lock-Up Agreement (the “ RSU Agreement ”), under the Company’s 2018 Equity and Incentive Compensation Plan (the “ Plan ”). Capitalized terms used, but not otherwise defined, in this Lock-Up Agreement will have the meanings given to such terms in the Plan.

As an inducement to the Company to enter into the RSU Agreement, Grantee hereby agrees that during the 12-month period after each Vesting Date under Section 4 of the RSU Agreement (the “ Lock-Up Period ”), the Grantee will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of Common Stock payable to or received by Grantee pursuant to Section 7 of the RSU Agreement with respect to such Vesting Date. The previous sentence also prohibits Grantee from entering into a transaction which would have the same effect, or entering into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the shares of Common Stock, whether any such aforementioned transaction is to be settled by delivery of shares of Common Stock, in cash or otherwise, without, in each case, the prior written consent of the Company.

This Lock-Up Agreement applies only to shares of Common Stock payable or received under the RSU Agreement, and not to any other shares of Common Stock owned by Grantee on the date hereof, or acquired in the open market or otherwise following the date of this Lock-Up Agreement. Additionally, the restrictions in this Lock-Up Agreement shall not apply to (a) entering into a written trading plan designed to comply with Rule 10b5-1 of the Exchange Act, provided that no sales are made pursuant to such trading plan during the Lock-Up Period, (b) transfers as a bona fide gift or gifts, (c) transfers to a family member, trust, family limited partnership or family limited liability company for the direct or indirect benefit of the Grantee or his or her “immediate family” members as defined in Rule 16a-1 under the Exchange Act, (d) transfers by testate or intestate succession, (e) transfers to the Company, (f) transfers for bona fide tax planning purposes, provided that in each transfer pursuant to clauses (b)-(f) the transferee (other than the Company) agrees to be bound in writing by the terms of this Lock-Up Agreement prior to such transfer.

The restrictions contained herein shall not apply to any transfers, sales, tenders or other dispositions of the Grantee’s shares of Common Stock pursuant to a bona fide third party tender offer, merger, amalgamation, consolidation or other similar transaction made to or involving all holders of shares of Common Stock pursuant to which ownership of all or substantially all of the Company is transferred to such third party (including, without limitation, the entering into any lock-up, voting or similar agreement pursuant to which the Grantee may agree to transfer, sell, tender or otherwise dispose of the Grantee’s shares of Common Stock in connection with such transaction, or vote any of the Grantee’s shares of Common Stock in favor of any such transaction); provided, that if such tender offer, merger, amalgamation, consolidation or other similar transaction is not completed, any of the Grantee’s shares of Common Stock subject to this Lock-Up Agreement shall remain subject to the restrictions contained in this Lock-Up Agreement.

In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Common Stock if such transfer would constitute a violation or breach of this Lock-Up Agreement.

This Lock-Up Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

This Lock-Up Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the Company has caused this Lock-Up Agreement to be executed on its behalf by its duly authorized officer and the Grantee has executed this Lock-Up Agreement, as of the date first written above.


	FTS INTERNATIONAL, INC.

	By:
	Name:
	Title:


	GRANTEE’S SIGNATURE
	Print Name: [•]

Exhibit 10.36

FTS INTERNATIONAL, INC.

2018 EQUITY AND INCENTIVE COMPENSATION PLAN

DIRECTOR RESTRICTED STOCK UNIT AGREEMENT

THIS AGREEMENT (this “ Agreement ”) is made as of [  ], 2018 (the “ Date of Grant ”), by and between FTS International, Inc., a Delaware corporation (the “ Company ”), and [  ] (the “ Grantee ”).

2. Grant of RSUs . Subject to and upon the terms, conditions and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee [  Restricted Stock Units (the “ RSUs ”). Each RSU shall represent the right of the Grantee to receive one share of Common Stock subject to and upon the terms and conditions of this Agreement.

4. Vesting of RSUs . Subject to the terms and conditions of Sections 5 and 6 hereof, the RSUs covered by this Agreement shall become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof on the first anniversary of the Date of Grant (the “ Vesting Date ”), conditioned upon the Grantee’s continuous service on the Board through the Vesting Date.

(a) All of the RSUs shall become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof if the Grantee should die or become Disabled prior to the Vesting Date while the Grantee is continuously serving on the Board.

(b) In the event of a Change in Control that occurs prior to the Vesting Date, and while the Grantee is continuously serving on the Board, the RSUs shall become nonforfeitable and payable to the Grantee pursuant to Section 7 hereof.

(i) “ Change in Control ” shall have the meaning set forth in Section 12 of the Plan, except that a Change in Control shall not be deemed to have occurred

(ii) “ Disabled ” shall have the meaning set forth under applicable state or federal law, and no reasonable accommodation can be provided without undue hardship to the Company.

8. Dividend Equivalents; Other Rights .

(d) If the Grantee ceases to serve as a director of the Company before the time when the RSUs become nonforfeitable, the Company shall have the right to be repaid by Grantee the amount of any dividend equivalents previously paid to Grantee under Section 8(b) of this Agreement with respect to any RSUs that remain forfeitable as of the date Grantee ceases to serve as a director.

9. No Right to Future Awards or Board Membership . The grant of the RSUs under this Agreement to the Grantee is a voluntary, discretionary award being made on a one-time

basis, and it does not constitute a commitment to make any future awards. Nothing contained in this Agreement shall confer upon the Grantee any right to continued service as a member of the Board.

10. Taxes . The Grantee will be solely responsible for the payment of all taxes that arise with respect to the granting and payment of the RSUs, including the payment of any Common Stock.

11. Adjustments . The number of shares of Common Stock issuable for each RSU and the other terms and conditions of the grant evidenced by this Agreement are subject to adjustment as provided in Section 11 of the Plan.

13. Amendments . Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided , however , that (a) no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee’s written consent, and (b) the Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the Securities Exchange Commission or any national securities exchange or national securities association on which the Common Stock may be traded, including as a result of the implementation of any recoupment policy the Company adopts to comply with the requirements set forth in Section 10D of the Exchange Act.

14. Severability . In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

15. Relation to Plan . This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this Agreement.

16. Successors and Assigns . Without limiting Section 3 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

17. Governing Law . This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

18. Notices . All notices, demands and other communications required or permitted hereunder or designated to be given with respect to the rights or interests covered by this Agreement shall be deemed to have been properly given or delivered when delivered personally or sent by certified or registered mail, return receipt requested, U.S. mail or reputable overnight carrier, with full postage prepaid and addressed to the parties as follows:

If to the Company, at:	777 Main Street, Suite 2900
	Fort Worth, TX 76102
	Attention: General Counsel

If to Grantee, at:	Grantee’s last known address reflected on the
	records of the Company

The Company may change the above designated address by notice to the Grantee. The Grantee will maintain a current address with the payroll records of the Company.

19. Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the RSUs and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

20. Compliance With Section 409A of the Code . To the extent applicable, it is intended that any amounts payable under this Agreement and the Plan, and the Company’s and the Grantee’s exercise of authority or discretion hereunder, be exempt from or comply with the provisions of Section 409A of the Code so as to not subject the Grantee to the payment of the additional tax, interest and any tax penalty which may be imposed under Section 409A of the Code. In furtherance of this intent, to the extent that any provision hereof would result in the Grantee being subject to payment of the additional tax, interest and tax penalty under Section 409A of the Code, the parties agree to amend this Agreement in order to bring this Agreement into compliance with Section 409A of the Code; and thereafter interpret its provisions in a manner that complies with Section 409A of the Code. Each payment under this Agreement shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code. Notwithstanding the foregoing, no particular tax result for the Grantee with respect to any income recognized by the Grantee in connection with this Agreement is guaranteed, and the Grantee shall be responsible for any taxes, penalties and interest imposed on the Grantee under or as a result of Section 409A of the Code in connection with this Agreement.

21. Interpretation . Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to Section 409A of the Code by the U.S. Department of the Treasury or the Internal Revenue Service.

22. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

[SIGNATURES ON FOLLOWING PAGE]


	FTS INTERNATIONAL, INC.

	By:
	Name:
	Title:


	GRANTEE’S SIGNATURE

	Print Name:

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Doss, certify that:

1. I have reviewed this quarterly report on Form 10-Q of FTS International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 1, 2018	By:	/s/ Michael J. Doss
		Michael J. Doss
		Chief Executive Officer and Director (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lance D. Turner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of FTS International, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 1, 2018	By:	/s/ Lance D. Turner
		Lance D. Turner
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of FTS International, Inc. (the “Company”) for the quarter ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Michael Doss, Chief Executive Officer of the Company, and Lance Turner, Chief Financial Officer and Treasurer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods indicated.


Date: May 1, 2018	By:	/s/ Michael J. Doss
		Michael J. Doss
		Chief Executive Officer and Director (Principal Executive Officer)

Date: May 1, 2018	By:	/s/ Lance D. Turner
		Lance D. Turner
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)