FORUM ENERGY TECHNOLOGIES, INC. 10-Q

Item 2. Management’s discussion and analysis of financial condition and results of operations CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2021, and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Overview We are a global products company, serving the oil, natural gas, and renewable energy industries. We design, manufacture and distribute 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. Our products include highly engineered capital equipment as well as products that are consumed in the drilling, well construction, production and transportation of oil and natural gas. These consumable products are used in drilling, well construction and completions activities, within the supporting infrastructure, and at processing centers and refineries. Our engineered capital products are directed at drilling rig equipment for new rigs, upgrades and refurbishment projects, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects. Our products are aimed at improving the efficiency, safety and environmental and social impact of our customers' operations. For the three months ended March 31, 2021, approximately 80% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services. We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among others, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and service companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies. 17 A summary of the products and services offered by each segment is as follows: • Drilling & Downhole . This segment designs, manufactures and supplies products and provides related services to the drilling, well construction, artificial lift and subsea energy construction and services markets as well as other sectors such as renewable energy, defense and communications. The products and related services consist primarily of: (i) capital equipment and a broad line of expendable products consumed in the drilling process; (ii) well construction casing and cementing equipment and protection products for artificial lift equipment and cables; and (iii) subsea remotely operated vehicles and trenchers, submarine rescue vehicles, specialty components and tooling, and complementary subsea technical services. • Completions. This segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold to the pressure pumping, hydraulic fracturing and flowback services markets, including hydraulic fracturing pumps, cooling systems and flow iron as well as wireline cable and pressure control equipment used in the well completion and intervention service markets; and (ii) coiled tubing strings and coiled line pipe and related services. • Production . This segment designs, manufactures and supplies products and provides related equipment and services for production and infrastructure markets. The products and related services consist primarily of: (i) engineered process systems, production equipment, as well as specialty separation equipment; and (ii) a wide range of industrial valves focused on serving upstream, midstream, and downstream oil and natural gas customers as well as power generation and other industries. Market Conditions The level of demand for our products is directly related to the activity levels, and the capital and operating budgets of our customers, which in turn are heavily influenced by energy prices and expectations as to future price trends. In addition, the availability of existing capital equipment adequate to serve exploration and production requirements, or lack thereof, drives demand for our capital equipment products. In 2020, the COVID-19 pandemic and associated actions taken around the world to mitigate the spread of COVID-19 caused unprecedented declines in economic activity, energy demand and oil and natural gas prices. In response, OPEC+ agreed to a significant reduction in oil production and North American exploration and production companies aggressively reduced drilling and completion activities. The extreme volatility and lower price environment in 2020 created a very challenging market for all sub-sectors of the oil and natural gas industry, including those in which the Company competes. More recently, oil demand and prices have partially rebounded as oil supply and demand have rebalanced at a lower level. The U.S. drilling rig count bottomed at 244 rigs in August 2020 and has since increased to over 400 rigs as of the end of the first quarter of 2021. In addition, the level of active hydraulic fracturing fleets for well completions also increased in the first quarter of 2021 in order to meet increasing oil demand. However, overall activity levels and the North America rig count remain far below pre-pandemic levels. Due to the challenging market conditions, exploration and production companies in North America are under pressure to generate positive cash flows and constrain capital and maintenance expenditures. In addition, bankruptcies and consolidation of exploration and production and service companies continued through 2020. This trend has led to a reduction in the demand for our products compared to periods prior to the pandemic. While activity levels in international regions, as well as global offshore and subsea activity, have also been impacted by COVID-19 related activity disruptions, international revenue for our drilling and subsea capital equipment offerings have recently increased due to an improved outlook for our international drilling customers and the diversification of our subsea product line revenue outside of the oil and natural gas industry. 18 Demand for products in our Valve Solutions product line is driven by capital projects and maintenance spending in the upstream, midstream and downstream markets. As such, revenue for our Valve Solutions product line has also been negatively affected by lower energy prices and the impacts of COVID-19 on the global economy. On December 31, 2020, we sold assets pertaining to our ABZ and Quadrant valve brands for total consideration of $104.6 million and recognized a gain on disposition of $88.4 million. The disposition of these brands resulted in a sequential decrease in our Valve Solutions product line’s revenue. Although we have experienced some operational inefficiencies, our manufacturing facilities and business operations have not experienced work stoppages due to COVID-19 or associated government regulations. However, in response to the decline in demand for our products and decreases in revenue, we implemented significant cost reduction actions, including exiting facilities, lowering headcount, reducing salaries, suspending the Company’s matching contribution to the U.S. and Canada defined contribution retirement plans, and furloughing select employee groups. Certain facility closures and headcount reduction efforts continued in the first quarter of 2021 and are expected to be completed during the first half of 2021. The table below shows average crude oil and natural gas prices for West Texas Intermediate crude oil (“WTI”), United Kingdom Brent crude oil (“Brent”), and Henry Hub natural gas: Three Months Ended March 31, December 31, March 31, 2021 2020 2020 Average global oil, $/bbl West Texas Intermediate $ 58.09 $ 42.52 $ 45.34 United Kingdom Brent $ 61.04 $ 44.32 $ 50.27 Average North American Natural Gas, $/Mcf Henry Hub $ 3.50 $ 2.52 $ 1.90 The price of oil varied dramatically in 2020 with the spot prices for WTI and Brent falling from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020. Since that time, oil prices have increased substantially to average $58.09 and $61.04 for WTI and Brent, respectively, in the first quarter 2021, a 37% increase from the fourth quarter 2020. In addition, natural gas prices continued to increase in the first quarter 2021 with average price levels approximately 39% higher compared to the fourth quarter 2020 and 84% higher compared to the first quarter 2020. 19 The table below shows the average number of active drilling rigs, based on the weekly Baker Hughes Incorporated rig count, operating by geographic area and drilling for different purposes. Three Months Ended March 31, December 31, March 31, 2021 2020 2020 Active Rigs by Location United States 393 311 785 Canada 145 88 205 International 698 663 1,074 Global Active Rigs 1,236 1,062 2,064 Land vs. Offshore Rigs Land 1,052 891 1,796 Offshore 184 171 268 Global Active Rigs 1,236 1,062 2,064 U.S. Commodity Target Oil/Gas 302 233 671 Gas 90 76 112 Unclassified 1 2 2 Total U.S. Active Rigs 393 311 785 U.S. Well Path Horizontal 353 272 704 Vertical 22 18 34 Directional 18 21 47 Total U.S. Active Rigs 393 311 785 A substantial portion of our revenue is impacted by the level of rig activity and the number of wells completed. The average U.S. rig count for the first quarter 2021 was 26% higher compared to the fourth quarter of 2020, but 50% lower compared to the first quarter of 2020. The U.S. rig count started 2020 at 805 working rigs and fell 70% to a low of 244 rigs in August 2020. Since that time, the number of active rigs has partially recovered, ending the first quarter 2021 at 417. The table below shows the amount of total inbound orders by segment: (in millions of dollars) Three Months Ended March 31, December 31, March 31, 2021 2020 2020 Drilling & Downhole $ 57.9 $ 57.5 $ 70.0 Completions 47.2 30.3 49.9 Production 32.9 36.3 50.7 Total Orders $ 138.0 $ 124.1 $ 170.6 20 Results of operations Three months ended March 31, 2021 compared with three months ended March 31, 2020 Three Months Ended March 31, Change (in thousands of dollars, except per share information) 2021 2020 $ % Revenue: Drilling & Downhole $ 48,656 $ 76,643 $ (27,987) (36.5) % Completions 37,843 50,823 (12,980) (25.5) % Production 28,031 55,605 (27,574) (49.6) % Eliminations (13) (439) 426 * Total revenue 114,517 182,632 (68,115) (37.3) % Operating income (loss): Drilling & Downhole $ (4,506) $ (4,145) $ (361) (8.7) % Operating margin % (9.3) % (5.4) % Completions 68 (17,318) 17,386 100.4 % Operating margin % 0.2 % (34.1) % Production (3,841) (8,179) 4,338 53.0 % Operating margin % (13.7) % (14.7) % Corporate (7,010) (8,429) 1,419 16.8 % Total segment operating loss (15,289) (38,071) 22,782 59.8 % Operating margin % (13.4) % (20.8) % Impairments of intangible assets, property and equipment — 17,320 (17,320) * Loss (gain) on disposal of assets and other (909) 16 (925) * Operating loss (14,380) (55,407) 41,027 74.0 % Interest expense 9,162 6,724 2,438 36.3 % Foreign exchange losses (gains) and other, net 3,470 (5,007) 8,477 * Loss (gain) on extinguishment of debt 933 (7,459) 8,392 * Deferred loan costs written off — 1,829 (1,829) * Total other (income) expense, net 13,565 (3,913) 17,478 446.7 % Loss before income taxes (27,945) (51,494) 23,549 45.7 % Income tax expense (benefit) 1,718 (14,350) 16,068 112.0 % Net loss $ (29,663) $ (37,144) $ 7,481 20.1 % 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) * not meaningful We sold certain assets of our ABZ and Quadrant valve brands on December 31, 2020. Therefore, our results of operations for the first quarter of 2021 may not be comparable to the results of operations for the first quarter of 2020. Refer to Note 4 Dispositions for additional information. 21 Revenue Our revenue for the three months ended March 31, 2021 was $114.5 million, a decrease of $68.1 million, or 37.3%, compared to the three months ended March 31, 2020. For the three months ended March 31, 2021, our Drilling & Downhole, Completions, and Production segments comprised 42.5%, 33.0%, and 24.5% of our total revenue, respectively, which compared to 42.0%, 27.6%, and 30.4% of our total revenue, respectively, for the three months ended March 31, 2020. The overall decline in revenue is primarily related to lower sales volumes due to the significant decrease in drilling and completions activity levels. The changes in revenue by operating segment consisted of the following: Drilling & Downhole segment — Revenue was $48.7 million for the three months ended March 31, 2021, a decrease of $28.0 million, or 36.5%, compared to the three months ended March 31, 2020. This decrease was driven by an $18.1 million, or 49.5%, decline in revenue for our Drilling Technologies product line due to lower sales volumes of consumable products and capital equipment as a result of the 50% year-over-year decline in U.S. rig activity. Revenue for our Downhole Technologies product line decreased by $9.9 million, primarily due to lower sales volumes of artificial lift products due to the significant decline in the number of well completions in the first quarter 2021 compared to 2020. Revenue for our Subsea Technologies product line was flat compared to the previous year with continued diversification of sales to customers outside the oil and natural gas industry. Completions segment — Revenue was $37.8 million for the three months ended March 31, 2021, a decrease of $13.0 million, or 25.5%, compared to the three months ended March 31, 2020. This decline was driven by a $7.2 million decrease in sales volumes for our Coiled Tubing product line and a $5.8 million decrease in revenue for our Stimulation and Intervention product line due to the significant reduction in U.S. hydraulic fracturing and well intervention service activity levels, and the cannibalization of existing excess equipment. Production segment — Revenue was $28.0 million for the three months ended March 31, 2021, a decrease of $27.6 million, or 49.6%, compared to the three months ended March 31, 2020. This decrease includes a $12.9 million decline from the divestiture of our ABZ and Quadrant valve brands in the fourth quarter 2020. The remaining decline was driven by a $10.3 million decline in sales volumes of our other valve brands, primarily due to lower sales into the North America upstream and midstream oil and natural gas market, and a $4.4 million decrease in revenue for our Production Equipment product line from lower sales volumes of our surface production equipment due to lower well completions activity in 2021. Segment operating income (loss) and segment operating margin percentage Segment operating loss for the three months ended March 31, 2021 was $15.3 million, a decline of $22.8 million compared to a loss of $38.1 million for the three months ended March 31, 2020. For the three months ended March 31, 2021, segment operating margin percentage was (13.4)% compared to (20.8)% for the three months ended March 31, 2020. Segment operating margin percentage is calculated by dividing segment operating loss by revenue for the period. The change in operating income (loss) for each segment is explained as follows: Drilling & Downhole segment — Segment operating loss was $4.5 million, or (9.3)%, for the three months ended March 31, 2021 compared to a loss of $4.1 million, or (5.4)%, for the three months ended March 31, 2020. The $0.4 million decline in segment operating results is primarily attributable to lower gross profit from the 36.5% decline in segment revenues, partially offset by lower employee and facility related costs due to headcount, salary and other cost reductions implemented in 2020. Completions segment — Segment operating income was $0.1 million, or 0.2%, for the three months ended March 31, 2021 compared to a segment operating loss of $17.3 million, or (34.1)%, for the three months ended March 31, 2020. Segment operating results were negatively impacted by the reduction in gross profit from the 25.5% decline in revenues discussed above. However, segment operating results improved by $17.4 million due to a $7.5 million reduction in inventory write-downs, a $6.1 million decline from lease impairments recognized in the first quarter 2020, a $1.9 million reduction in severance and restructuring related costs and lower employee and facility related costs due to headcount, salary and other cost reductions implemented in 2020. Production segment — Segment operating loss was $3.8 million, or (13.7)%, for the three months ended March 31, 2021 compared to a loss of $8.2 million, or (14.7)%, for the three months ended March 31, 2020. Segment operating results were negatively impacted by the reduction in gross profit from the 49.6% decline in revenue discussed above, including the disposition of our ABZ and Quadrant valve brands in the fourth quarter 2020. However, segment operating results improved by $4.3 million due to a $2.6 million reduction in inventory write-downs, a $1.9 million decline from lease impairments recognized in the first quarter 2020 and lower employee and facility related costs due to headcount, salary and other cost reductions implemented in 2020. 22 Corporate — Selling, general and administrative expenses for Corporate were $7.0 million for the three months ended March 31, 2021, a $1.4 million decrease compared to the three months ended March 31, 2020. This decrease was primarily related to lower employee related costs and reductions in professional fees in connection with headcount, salary and other cost reductions implemented in 2020. Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. Other items not included in segment operating loss Several items are not included in segment operating loss, but are included in total operating loss. These items include transaction expenses, impairments of intangible assets, property and equipment, and gain on the disposal of assets and other. Transaction expenses relate to legal and other advisory costs incurred in acquiring or disposing of businesses and are not considered to be part of segment operating income (loss). For further information related to impairments of intangible assets, property and equipment, refer to Note 7 Impairments of Long-Lived Assets. Other income and expense Other income and expense includes interest expense, foreign exchange losses (gains) and other, loss (gain) on extinguishment of debt, and deferred loan costs written off. We incurred $9.2 million of interest expense during the three months ended March 31, 2021, an increase of $2.4 million compared to the three months ended March 31, 2020 primarily due to higher non-cash amortization of debt discount and debt issuance costs associated with our 9.0% convertible secured notes due August 2025 (the “2025 Notes”) and a higher interest rate on our new 2025 Notes compared to our previous notes outstanding. The foreign exchange losses (gains) are primarily the result of movements in the British pound and Euro relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar. 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 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. During the three months ended March 31, 2020, we repurchased an aggregate $10.9 million of principal amount of our 2021 Notes for $3.4 million and recognized a net gain of $7.5 million reflecting the difference in the amount paid and the net carrying value of the extinguished debt, including debt issuance costs and unamortized debt premium. In addition, we wrote off $1.8 million of deferred loan costs due to the termination of discussions related to a potential exchange offer for our 2021 Notes. Taxes 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. 23 Liquidity and capital resources Sources and uses of liquidity Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, our Credit Facility and the 2025 Notes. Our primary uses of capital have been for inventories, sales on credit to our customers and maintenance and growth capital expenditures. We continually monitor potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital. As of December 31, 2020, we had $316.9 million principal amount of 2025 Notes outstanding and $13.1 million outstanding on our revolving Credit Facility. During the first quarter of 2021, we repurchased an aggregate $16.5 million 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. In addition, we repaid the $13.1 million outstanding on our revolving Credit Facility. Following these transactions, we had $300.3 million principal amount of 2025 Notes and no borrowings outstanding under our Credit Facility as of March 31, 2021. The Credit Facility is scheduled to mature on October 30, 2022 and the 2025 notes are scheduled to mature in August 2025. See Note 8 Debt for further details related to the terms for our 2025 Notes and Credit Facility. As of March 31, 2021, we had cash and cash equivalents of $100.8 million and $141.5 million of availability under our Credit Facility. We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues. Furthermore, availability under our Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits. In addition, we expect total 2021 capital expenditures to be less than $10.0 million, consisting of, among other items, replacing end of life machinery and equipment. We expect our available cash on-hand, cash generated by operations, and estimated availability under our Credit Facility to be adequate to fund current operations during the next 12 months. In addition, based on existing market conditions and our expected liquidity needs, among other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce the principal amount of our 2025 Notes or other debt outstanding. In 2020, we completed one disposition for total consideration of $104.6 million. For additional information, see Note 4 Dispositions . We may pursue acquisitions in the future, which may be funded with cash and/or equity. Our ability to make significant acquisitions for cash may require us to pursue additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all. To the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, our customers and other counterparties may become unable to make payments to us, on a timely basis or at all, which could adversely affect our business, cash flows, liquidity, financial condition and results of operations. Our cash flows for the three months ended March 31, 2021 and 2020 are presented below (in millions): Three Months Ended March 31, 2021 2020 Net cash provided by (used in) operating activities $ (1.3) $ 1.6 Net cash provided by (used in) investing activities 1.1 (0.9) Net cash provided by (used in) financing activities (27.5) 51.1 Effect of exchange rate changes on cash (0.1) (0.8) Net increase (decrease) in cash, cash equivalents and restricted cash $ (27.8) $ 51.0 Net cash provided by (used in) operating activities Net cash used in operating activities was $1.3 million for the three months ended March 31, 2021 compared to $1.6 million of cash provided by operating activities for the three months ended March 31, 2020. This decline is primarily attributable to the decline in operating results. Net income adjusted for non-cash items used $11.8 million of cash for the three months ended March 31, 2021 compared to providing $13.4 million of cash for the three months ended March 31, 2020. This decline was partially offset by changes in working capital which provided cash of $10.4 million 24 for the three months ended March 31, 2021 compared to using $11.9 million of cash for the three months ended March 31, 2020. Net cash provided by (used in) investing activities Net cash provided by investing activities was $1.1 million for the three months ended March 31, 2021 including $1.5 million of proceeds from the sale of property and equipment, partially offset by $0.4 million of capital expenditures. Net cash provided by investing activities was $0.9 million for the three months ended March 31, 2020, primarily related to $1.0 million of capital expenditures for property and equipment. Net cash provided by (used in) financing activities Net cash used in financing activities was $27.5 million for the three months ended March 31, 2021 compared to $51.1 million provided by financing activities for the three months ended March 31, 2020. Net cash used in financing activities for the three months ended March 31, 2021 includes $13.7 million of cash used to repurchase 2025 Notes and $13.1 million of repayments on the revolving Credit Facility. Net cash provided by financing activities for the three months ended March 31, 2020 primarily includes $55.0 million of borrowings on the revolving Credit Facility, partially offset by $3.4 million of repurchases of our previous 2021 Notes. Supplemental Guarantor Financial Information The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several. The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor, including all obligations under our Credit Facility; (ii) secured by certain collateral of such guarantor, subject to permitted liens under the indenture governing the 2025 Notes; (iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral); and (v) senior in right of payment to any future subordinated indebtedness of that guarantor. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries of the 2025 Notes, the non-guarantor subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company or to any guarantors. The 2025 Notes guarantees shall each be released upon (i) any sale or other disposition of all or substantially all of the assets of such guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes; (ii) any sale, exchange or transfer (by merger, consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes; (iii) legal or covenant defeasance or satisfaction and discharge of the indenture governing such notes; or (iv) dissolution of such guarantor, provided no default or event of default has occurred that is continuing. The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such guarantor (including, without limitation, any guarantees under the Credit Facility) and any collections from or payments made by or on behalf of any other guarantor in respect of the obligations of such other guarantor under its guarantee or pursuant to its contribution obligations under the applicable indenture, result in the obligations of such guarantor under its guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under applicable law. Nonetheless, in the event of the bankruptcy, insolvency or financial difficulty of a guarantor, such guarantor’s obligations under its guarantee may be subject to review and avoidance under applicable fraudulent conveyance, fraudulent preference, fraudulent transfer and insolvency laws. We are presenting the following summarized financial information for the Company and the subsidiary guarantors (collectively referred to as the "Obligated Group") pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the subsidiary guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded. Amounts due to the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information below. 25 Summarized financial information for the year-to-date interim period and the most recent annual period was as follows (in thousands): Three Months Ended March 31, Summarized Statements of Operations 2021 2020 Revenue $ 82,197 $ 147,384 Cost of sales 66,041 133,195 Operating loss (18,734) (51,072) Net loss (29,663) (37,144) March 31, 2021 December 31, 2020 Summarized Balance Sheet Current assets $ 347,796 $ 385,364 Noncurrent assets 323,907 332,486 Current liabilities $ 109,541 $ 105,393 Payables to non-guarantor subsidiaries 103,533 102,885 Noncurrent liabilities 297,234 324,954 Off-balance sheet arrangements As of March 31, 2021, we had no off-balance sheet instruments or financial arrangements, other than letters of credit entered into in the ordinary course of business. Critical accounting policies and estimates There have been no material changes in our critical accounting policies and procedures during the three months ended March 31, 2021. For a detailed discussion of our critical accounting policies and estimates, refer to our 2020 Annual Report on Form 10-K. For recent accounting pronouncements, refer to Note 2 Recent Accounting Pronouncements . Item 3. Quantitative and qualitative disclosures about market risk Not required under Regulation S-K for “smaller reporting companies.”