FORUM ENERGY TECHNOLOGIES, INC. 10-Q

Item 1. Financial Statements Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended March 31, (in thousands, except per share information) 2021 2020 Revenue $ 114,517 $ 182,632 Cost of sales 88,332 160,542 Gross profit 26,185 22,090 Operating expenses Selling, general and administrative expenses 41,474 60,161 Impairments of intangible assets, property and equipment — 17,320 Loss (gain) on disposal of assets and other ( 909 ) 16 Total operating expenses 40,565 77,497 Operating loss ( 14,380 ) ( 55,407 ) Other expense (income) Interest expense 9,162 6,724 Foreign exchange and other losses (gains), net 3,470 ( 5,007 ) Loss (gain) on extinguishment of debt 933 ( 7,459 ) Deferred loan costs written off — 1,829 Total other expense (income), net 13,565 ( 3,913 ) Loss before income taxes ( 27,945 ) ( 51,494 ) Income tax expense (benefit) 1,718 ( 14,350 ) Net loss ( 29,663 ) ( 37,144 ) Weighted average shares outstanding Basic 5,613 5,559 Diluted 5,613 5,559 Loss per share Basic $ ( 5.28 ) $ ( 6.68 ) Diluted ( 5.28 ) ( 6.68 ) Other comprehensive income (loss), net of tax: Net loss ( 29,663 ) ( 37,144 ) Change in foreign currency translation, net of tax of $ 0 3,152 ( 8,846 ) Gain on pension liability 77 21 Comprehensive loss $ ( 26,434 ) $ ( 45,969 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share information) March 31, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents $ 100,810 $ 128,617 Accounts receivable—trade, net of allowances of $ 9,921 and $ 9,217 88,624 80,606 Inventories, net 236,427 251,747 Prepaid expenses and other current assets 19,225 19,018 Accrued revenue 1,132 1,687 Costs and estimated profits in excess of billings 9,373 8,516 Total current assets 455,591 490,191 Property and equipment, net of accumulated depreciation 108,740 113,668 Operating lease assets 29,630 31,520 Deferred financing costs, net 125 249 Intangible assets, net 233,711 240,444 Deferred income taxes, net 97 102 Other long-term assets 16,065 13,752 Total assets $ 843,959 $ 889,926 Liabilities and equity Current liabilities Current portion of long-term debt $ 1,054 $ 1,322 Accounts payable—trade 53,561 46,351 Accrued liabilities 68,195 67,581 Deferred revenue 8,240 7,863 Billings in excess of costs and profits recognized 2,621 1,817 Total current liabilities 133,671 124,934 Long-term debt, net of current portion 267,330 293,373 Deferred income taxes, net 1,913 1,952 Operating lease liabilities 41,603 44,536 Other long-term liabilities 17,883 18,895 Total liabilities 462,400 483,690 Commitments and contingencies Equity Common stock, $ 0.01 par value, 14,800,000 shares authorized, 6,038,225 and 5,992,400 shares issued 60 60 Additional paid-in capital 1,244,477 1,242,720 Treasury stock at cost, 410,877 shares ( 134,499 ) ( 134,499 ) Retained deficit ( 631,319 ) ( 601,656 ) Accumulated other comprehensive loss ( 97,160 ) ( 100,389 ) Total equity 381,559 406,236 Total liabilities and equity $ 843,959 $ 889,926 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (in thousands) 2021 2020 Cash flows from operating activities Net loss $ ( 29,663 ) $ ( 37,144 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation expense 4,953 7,355 Amortization of intangible assets 6,357 6,838 Impairments of intangible assets, property and equipment — 17,320 Impairments of operating lease assets — 9,483 Inventory write down 1,410 11,567 Stock-based compensation expense 1,896 3,223 Loss (gain) on extinguishment of debt 933 ( 7,459 ) Deferred loan costs written off — 1,829 Deferred income taxes 265 1,152 Noncash losses (gains) and other, net 2,065 ( 734 ) Changes in operating assets and liabilities Accounts receivable—trade ( 8,999 ) 6,773 Inventories 13,726 6,704 Prepaid expenses and other assets ( 2,458 ) ( 11,002 ) Cost and estimated profit in excess of billings ( 281 ) 1,374 Accounts payable, deferred revenue and other accrued liabilities 7,692 ( 14,955 ) Billings in excess of costs and estimated profits earned 766 ( 757 ) Net cash provided by (used in) operating activities $ ( 1,338 ) $ 1,567 Cash flows from investing activities Capital expenditures for property and equipment ( 389 ) ( 958 ) Proceeds from sale of property and equipment 1,499 37 Net cash provided by (used in) investing activities $ 1,110 $ ( 921 ) Cash flows from financing activities Borrowings on revolving Credit Facility — 55,000 Repayments on revolving Credit Facility ( 13,126 ) — Cash paid to repurchase 2025 Notes and 2021 Notes ( 13,711 ) ( 3,362 ) Payment of capital lease obligations ( 482 ) ( 101 ) Repurchases of stock ( 139 ) ( 179 ) Deferred financing costs — ( 254 ) Net cash provided by (used in) financing activities $ ( 27,458 ) $ 51,104 Effect of exchange rate changes on cash ( 121 ) ( 712 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 27,807 ) 51,038 Cash, cash equivalents and restricted cash at beginning of period 128,617 57,911 Cash, cash equivalents and restricted cash at end of period $ 100,810 $ 108,949 Noncash activities Operating lease right of use assets obtained in exchange for lease obligations 284 688 Finance lease right of use assets obtained in exchange for lease obligations 47 931 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2021 (in thousands) Common stock Additional paid-in capital Treasury stock Retained deficit Accumulated other comprehensive income / (loss) Total equity Balance at December 31, 2020 $ 60 $ 1,242,720 $ ( 134,499 ) $ ( 601,656 ) $ ( 100,389 ) $ 406,236 Stock-based compensation expense — 1,896 — — — 1,896 Restricted stock issuance, net of forfeitures — ( 139 ) — — — ( 139 ) Currency translation adjustment — — — — 3,152 3,152 Change in pension liability — — — — 77 77 Net loss — — — ( 29,663 ) — ( 29,663 ) Balance at March 31, 2021 $ 60 $ 1,244,477 $ ( 134,499 ) $ ( 631,319 ) $ ( 97,160 ) $ 381,559 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Forum Energy Technologies, Inc. and subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2020 (in thousands) Common stock Additional paid-in capital Treasury stock Retained deficit Accumulated other comprehensive income / (loss) Total equity Balance at December 31, 2019 $ 1,189 $ 1,231,650 $ ( 134,493 ) $ ( 503,369 ) $ ( 108,938 ) $ 486,039 Stock-based compensation expense — 3,223 — — — 3,223 Restricted stock issuance, net of forfeitures 5 ( 178 ) — — — ( 173 ) Shares issued in employee stock purchase plan 2 344 — — — 346 Adjustment for adoption of ASU 2016-13 — — — ( 1,398 ) — ( 1,398 ) Treasury stock — — ( 6 ) — — ( 6 ) Currency translation adjustment — — — — ( 8,846 ) ( 8,846 ) Change in pension liability — — — — 21 21 Net loss — — — ( 37,144 ) — ( 37,144 ) Balance at March 31, 2020 $ 1,196 $ 1,235,039 $ ( 134,499 ) $ ( 541,911 ) $ ( 117,763 ) $ 442,062 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 1. Organization and Basis of Presentation Forum Energy Technologies, Inc. (the “Company,” "Forum," “we,” “our,” or “us”), a Delaware corporation, is a global products company, serving the oil, natural gas, industrial and renewable energy industries. The Company designs, manufactures and distributes value added solutions that increase the safety and efficiency of energy exploration and production. We also engage in aftermarket parts supply and services that complement our product offering. Forum is headquartered in Houston, Texas with manufacturing and distribution facilities strategically located around the globe. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other interim period. These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on March 2, 2021. COVID-19 Impacts The outbreak of COVID-19 in 2020 has continued to cause significant disruptions in the U.S. and world economies. In response, federal, state and local governments have continued, to varying degrees, the imposition of restrictions on business and social activities, including quarantine and “stay-at-home” orders. As a result of these government orders, there has been an adverse impact on the level of oil and natural gas demand and many companies in these industries have sought protection under Chapter 11 of the U.S. Bankruptcy Code. The timing and extent to which economic and operating conditions recover from the impacts of the COVID-19 outbreak will ultimately depend on the number of vaccinations administered worldwide and actions taken by governmental authorities, customers, suppliers and other third parties, and the level of demand created by a return to a historically normal way of life and business operations. We anticipate that our liquidity, financial condition and future results of operations will continue to be impacted by ongoing developments from the COVID-19 pandemic. 2. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption. Accounting Standards Adopted in 2021 Income Tax. In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740) - Disclosure Framework - Simplifying the Accounting for Income Taxes, which simplified the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and clarifying and amending existing guidance. We adopted this new standard as of January 1, 2021. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements. Accounting Standards Issued But Not Yet Adopted Convertible Debt. In August 2020, the FASB issued ASU No. 2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) 8 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-share guidance. This guidance may be adopted through either a modified retrospective or fully retrospective method of transition and will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and must be adopted as of the beginning of the Company's fiscal year. We are currently evaluating the impact of this new guidance. However, we currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements. 3. Revenue Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. For a detailed discussion of our revenue recognition policies, refer to the Company’s 2020 Annual Report on Form 10-K. Disaggregated Revenue Refer to Note 11 Business Segments for disaggregated revenue by product line and geography. Contract Balances Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, we record a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract. Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales. The following table reflects the changes in our contract assets and contract liabilities balances for the three months ended March 31, 2021 (in thousands): March 31, 2021 December 31, 2020 Increase $ % Accrued revenue $ 1,132 $ 1,687 Costs and estimated profits in excess of billings 9,373 8,516 Contract assets $ 10,505 $ 10,203 $ 302 3 % Deferred revenue $ 8,240 $ 7,863 Billings in excess of costs and profits recognized 2,621 1,817 Contract liabilities $ 10,861 $ 9,680 $ 1,181 12 % During the three months ended March 31, 2021, our contract assets increased by $ 0.3 million and our contract liabilities increased by $ 1.2 million due to the timing of billings for significant projects within our Subsea and Production Equipment product lines. During the three months ended March 31, 2021, we recognized $ 3.9 million of revenue that was included in the contract liability balance at the beginning of the period. As substantially all of our contracts are less than one year in duration, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. 9 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 4. Dispositions 2020 Disposition of ABZ and Quadrant Valves On December 31, 2020, we sold certain assets of our ABZ and Quadrant valve brands for cash consideration of $ 104.6 million. This transaction was accounted for as a disposition of a business. We recognized a gain on disposition of $ 88.4 million based on the difference in cash received less $ 15.0 million of net book value of assets sold and a $ 1.2 million accrued liability for an estimated working capital settlement. Pro forma results of operations for this disposition have not been presented because the effects were not material to the consolidated financial statements. 5. Inventories Our significant components of inventory at March 31, 2021 and December 31, 2020 were as follows (in thousands): March 31, 2021 December 31, 2020 Raw materials and parts $ 124,343 $ 151,531 Work in process 18,959 15,946 Finished goods 202,589 229,212 Gross inventories 345,891 396,689 Inventory reserve ( 109,464 ) ( 144,942 ) Inventories $ 236,427 $ 251,747 6. Intangible Assets Intangible assets consisted of the following as of March 31, 2021 and December 31, 2020, respectively (in thousands): March 31, 2021 Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years) Customer relationships $ 268,465 $ ( 121,645 ) $ 146,820 10 - 15 Patents and technology 89,145 ( 25,570 ) 63,575 5 - 19 Non-compete agreements 190 ( 146 ) 44 2 - 6 Trade names 42,915 ( 23,545 ) 19,370 7 - 19 Trademarks 5,089 ( 1,187 ) 3,902 15 Intangible Assets Total $ 405,804 $ ( 172,093 ) $ 233,711 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years) Customer relationships $ 272,470 $ ( 121,294 ) $ 151,176 10 - 15 Patents and technology 89,626 ( 24,440 ) 65,186 5 - 19 Non-compete agreements 190 ( 137 ) 53 2 - 6 Trade names 42,984 ( 22,941 ) 20,043 7 - 19 Trademarks 5,089 ( 1,103 ) 3,986 15 Intangible Assets Total $ 410,359 $ ( 169,915 ) $ 240,444 10 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 7. Impairments of Long-Lived Assets During the three months ended March 31, 2021, there were no impairments of long-lived assets. During the three months ended March 31, 2020, the COVID-19 pandemic and associated preventative actions taken around the world to mitigate its spread caused oil demand to deteriorate and economic activity to decrease. As a result, oil prices declined significantly during the period and created an extremely challenging market for all sub-sectors of the oil and natural gas industry. In addition, responses to the spread of COVID-19, including significant government restrictions on movement, resulted in sharp declines in global economic activity. As a result, during the three months ended March 31, 2020, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. The fair value was determined either through analysis of discounted future cash flows or, for certain real estate, based on a third party's sales price estimate (classified within level 3 of the fair value hierarchy). Following is a summary of impairment charges recognized in our segments during the three months ended March 31, 2020 (in thousands): Three Months Ended March 31, 2020 Impairments of: Drilling & Downhole Completions Production Total Impairments Property and equipment (1) 1,076 9,608 1,378 12,062 Intangible assets (2) 5,258 — — 5,258 Operating lease right of use assets (3) 1,429 6,139 1,915 9,483 Total impairments $ 7,763 $ 15,747 $ 3,293 $ 26,803 (1) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss. (2) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss and include primarily customer relationships, technology and distributor relationships. (3) $ 8.6 million of these charges are included in Cost of sales and $ 0.9 million are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss. 8. Debt Notes payable and lines of credit as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands): March 31, 2021 December 31, 2020 2025 Notes 300,341 316,863 Unamortized debt discount ( 27,132 ) ( 30,248 ) Debt issuance cost ( 6,660 ) ( 7,318 ) Credit Facility — 13,126 Other debt 1,835 2,272 Total debt 268,384 294,695 Less: current maturities ( 1,054 ) ( 1,322 ) Long-term debt $ 267,330 $ 293,373 2025 Notes In August 2020, we exchanged $ 315.5 million principal amount of our previous 6.25 % unsecured notes due 2021 (“2021 Notes”) for new 9.00 % convertible secured notes due August 2025 (the “2025 Notes”). This transaction was 11 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date. We estimated the fair value of the 2025 Notes to be $ 282.6 million at the issuance date, resulting in a $ 32.9 million discount (“Debt Discount”) at issuance. As a result, we recognized a $ 28.7 million gain on extinguishment of debt that reflects the difference in the $ 314.8 million net carrying value of the 2021 Notes exchanged, including debt issuance costs and unamortized debt premium, less the $ 282.6 million estimated fair value of 2025 Notes and a $ 3.5 million early participation fee paid to bondholders that participated in the exchange. The Debt Discount is being amortized as non-cash interest expense over the term of the 2025 Notes using the effective interest method. The 2025 Notes pay interest at the rate of 9.00 %, of which 6.25 % is payable in cash and 2.75 % is payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis. A portion of the 2025 Notes, initially equal to $ 150.0 million total principal amount, is mandatorily convertible into shares of our common stock at a conversion rate of 37.0370 shares per $ 1,000 principal amount of 2025 Notes converted, equivalent to a conversion price of $ 27.00 per share, subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20 -trading day period is at least $ 30.00 per share. Holders of the 2025 Notes also have optional conversion rights in the event that the Company elects to redeem the 2025 Notes in cash and at the final maturity of the new notes. Any interest that the Company elects to pay in additional notes are also subject to the mandatory and optional conversion rights. During the three months ended March 31, 2021, we repurchased an aggregate $ 16.5 million of principal amount of our 2025 Notes for $ 15.6 million. The repurchase amount of $ 15.6 million includes $ 13.7 million paid in cash and $ 1.9 million payable for bonds repurchased but not yet settled as of March 31, 2021. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 14.7 million, resulting in a $ 0.9 million loss on extinguishment of debt. Credit Facility In connection with the issuance of the 2025 Notes, we amended our senior secured revolving credit facility ("Credit Facility"). Following such amendment, our Credit Facility provides revolving credit commitments of $ 250.0 million (with a sublimit of up to $ 45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $ 25.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a sublimit of up to $ 3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”). Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's other assets. The amount of eligible inventory included in the borrowing base is restricted to the lesser of $ 130.0 million (subject to a quarterly reduction of $ 0.5 million that started on October 1, 2020) and 80.0 % of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of March 31, 2021, our total borrowing base was $ 156.8 million, of which no amounts were drawn and $ 15.3 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 141.5 million. Borrowings under the U.S. line bear interest at a rate equal to, at our option, either (a) the LIBOR rate, subject to a floor of 0.75 %, plus a margin of 2.50 % or (b) a base rate plus a margin of 1.50 %. The U.S. line base rate is determined by reference to the greatest of (i) the federal funds rate plus 0.50 % per annum, (ii) the one-month adjusted LIBOR plus 1.00 % per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.75 %. Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the CDOR rate, subject to a floor of 0.75 %, plus a margin of 2.50 % or (b) a base rate plus a margin of 1.50 %. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR rate plus 1.00 % and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.75 %. 12 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) The Credit Facility also provides for a commitment fee in the amount of (a) 0.375 % on the unused portion of commitments if average usage of the Credit Facility is greater than 50 % and (b) 0.500 % on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50 %. The Credit Facility is currently scheduled to mature on October 30, 2022. If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 31.3 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes. Deferred Loan Costs We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility. In the first quarter of 2020, we wrote-off $ 1.8 million of deferred loan costs for the termination of previous discussions related to a potential exchange offer for our 2021 Notes. Other Debt Other debt consists primarily of various finance leases of equipment. Letters of Credit and Guarantees We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts. We had $ 15.3 million and $ 15.6 million in total outstanding letters of credit as of March 31, 2021 and December 31, 2020, respectively. 9. Income Taxes For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods. We recorded a tax expense of $ 1.7 million for the three months ended March 31, 2021, compared to a tax benefit of $ 14.4 million for the three months ended March 31, 2020. The estimated annual effective tax rates for the three months ended March 31, 2021 and 2020 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction. The tax benefit for the three months ended March 31, 2020 includes a $ 16.6 million benefit related to a carryback claim for U.S. federal tax losses based on provisions in the U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. The CARES Act provided relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, increased the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerated refunds for minimum tax credit carryforwards, among other provisions. The tax effects of changes in tax laws are recognized in the period in which the law is enacted. We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S. and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of March 31, 2021, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S., the U.K., Germany, Singapore, China and Saudi Arabia. As a result, we have certain valuation allowances against our deferred tax assets as of March 31, 2021. 13 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 10. Fair Value Measurements The Company had zero and $ 13.1 million of borrowings outstanding under the Credit Facility as of March 31, 2021 and December 31, 2020, respectively. The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities. The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At March 31, 2021, the fair value and the carrying value of our 2025 Notes approximated $ 282.4 million and $ 266.5 million, respectively. At December 31, 2020, the fair value and the carrying value of our 2025 Notes approximated $ 200.3 million and $ 279.3 million, respectively. There were no other outstanding financial assets as of March 31, 2021 and December 31, 2020 that required measuring the amounts at fair value. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the three months ended March 31, 2021. 11. Business Segments The Company reports results of operations in the following three reporting segments: Drilling & Downhole, Completions and Production. The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands): Three Months Ended March 31, 2021 2020 Revenue: Drilling & Downhole 48,656 76,643 Completions 37,843 50,823 Production 28,031 55,605 Eliminations ( 13 ) ( 439 ) Total revenue $ 114,517 $ 182,632 Operating loss Drilling & Downhole $ ( 4,506 ) $ ( 4,145 ) Completions 68 ( 17,318 ) Production ( 3,841 ) ( 8,179 ) Corporate ( 7,010 ) ( 8,429 ) Segment operating loss ( 15,289 ) ( 38,071 ) Impairments of intangible assets, property and equipment — 17,320 Loss (gain) on disposal of assets and other ( 909 ) 16 Operating loss $ ( 14,380 ) $ ( 55,407 ) A summary of consolidated assets by reportable segment is as follows (in thousands): March 31, 2021 December 31, 2020 Drilling & Downhole $ 305,409 $ 314,375 Completions 356,303 356,645 Production 89,661 92,949 Corporate 92,586 125,957 Total assets $ 843,959 $ 889,926 14 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) Corporate assets primarily include cash and certain prepaid assets. The following table presents our revenues disaggregated by product line (in thousands): Three Months Ended March 31, 2021 2020 Drilling Technologies $ 18,520 $ 36,638 Downhole Technologies 15,093 24,951 Subsea Technologies 15,043 15,054 Stimulation and Intervention 18,702 24,476 Coiled Tubing 19,141 26,347 Production Equipment 14,394 18,749 Valve Solutions 13,637 36,856 Eliminations ( 13 ) ( 439 ) Total revenue $ 114,517 $ 182,632 The following table presents our revenues disaggregated by geography (in thousands): Three Months Ended March 31, 2021 2020 United States $ 68,314 $ 123,890 Canada 8,961 7,952 Europe & Africa 12,664 11,146 Middle East 10,341 13,140 Asia-Pacific 8,880 18,793 Latin America 5,357 7,711 Total Revenue $ 114,517 $ 182,632 12. Commitments and Contingencies In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, some of which may or may not be covered by insurance. Management reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reserves accrued at March 31, 2021 and December 31, 2020, respectively, are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. For further disclosure regarding certain litigation matters, refer to Note 13 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2020 Annual Report on Form 10-K filed with the SEC on March 2, 2021. There have been no material changes related to these matters during the three months ended March 31, 2021. 15 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 13. Loss Per Share The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts): Three Months Ended March 31, 2021 2020 Net loss $ ( 29,663 ) $ ( 37,144 ) Basic - weighted average shares outstanding 5,613 5,559 Dilutive effect of stock options and restricted stock — — Dilutive effect of convertible notes due 2025 — — Diluted - weighted average shares outstanding 5,613 5,559 Loss per share Basic $ ( 5.28 ) $ ( 6.68 ) Diluted $ ( 5.28 ) $ ( 6.68 ) For all periods presented, we excluded all potentially dilutive restricted shares, stock options and the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods. 14. Stockholders' Equity Stock-based compensation During the three months ended March 31, 2021, the Company granted 73,839 restricted stock units that vest ratably over three years . The Company also granted 66,524 contingent restricted stock units that vest ratably over three years dependent upon achieving a minimum stock price of $ 23.49 for 20 trading days during each performance period. Liability-classified awards During the three months ended March 31, 2021, the Company granted 66,524 cash-settled phantom stock units that vest ratably over three years . These awards have a maximum payout that is calculated based on five times the stock price on the date of grant. The Company also granted 73,839 cash-settled contingent phantom stock units that vest ratably over three years dependent upon achieving a minimum stock price of $ 23.49 for 20 trading days during each performance period. These awards also have a maximum payout that is calculated based on five times the stock price on the date of grant. Reverse stock split In order to bring the Company into compliance with the listing requirements of the New York Stock Exchange, our Board of Directors approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $ 0.01 per share, accompanied by a corresponding decrease in the Company’s authorized shares of common stock. The Company's stockholders previously approved the Reverse Stock Split at the annual meeting of stockholders on May 12, 2020. The effective time of the Reverse Stock Split was after market close on November 9, 2020, with the common stock trading on a post-split basis under the Company’s existing trading symbol, “FET,” at the market open on November 10, 2020. No fractional shares of common stock were issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to a fractional share received a cash payment in lieu of such fractional shares. 16 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) Following the completion of the Reverse Stock Split, the number of authorized shares of common stock was reduced from 296,000,000 to 14,800,000 . Unless otherwise indicated, the number of shares of common stock outstanding and per-share amounts in these consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the effect of the Reverse Stock Split. The par value of our common stock remains at $ 0.01 per share. 15. Related Party Transactions The Company has sold and purchased inventory, services and fixed assets to and from certain affiliates of certain directors. The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.