What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 92 added, 73 removed, 397 unchanged (29% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except per share information) 2021 2020 2021 2020

5 unchanged sentences

Impairments of intangible assets, property and equipment — 112 — 17,432

Loss (gain) on disposal of assets and other ( 909 ) 16

Gain on disposal of assets and other ( 360 ) ( 550 ) ( 1,269 ) ( 534 )

Total operating expenses 41,824 47,924 82,389 125,421

19 unchanged sentences

66 1,900 3,218 ( 6,946 )

Gain on pension liability 77 21

Gain (loss) on pension liability ( 21 ) ( 22 ) 56 ( 1 )

Comprehensive loss $ ( 21,761 ) $ ( 3,616 ) $ ( 48,195 ) $ ( 49,585 )

3 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share information) March 31, 2021 December 31, 2020

(in thousands, except share information) June 30,

2021 December 31, 2020

Current assets

40 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2021 2020

11 unchanged sentences

Deferred income taxes ( 320 ) 385

Noncash losses (gains) and other, net 2,065 ( 734 )

Noncash losses and other, net 3,909 686

Changes in operating assets and liabilities

9 unchanged sentences

Proceeds from sale of property and equipment 2,106 1,336

Net working capital settlement from sale of business ( 1,283 ) —

Net cash provided by (used in) investing activities $ 119 $ ( 202 )

18 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

(in thousands) Common stock Additional paid-in capital Treasury stock Retained

9 unchanged sentences

Balance at March 31, 2021 $ 60 $ 1,244,477 $ ( 134,499 ) $ ( 631,319 ) $ ( 97,160 ) $ 381,559

Stock-based compensation expense — 1,914 — — — 1,914

Restricted stock issuance, net of forfeitures — ( 2 ) — — — ( 2 )

Currency translation adjustment — — — — 66 66

Change in pension liability — — — — ( 21 ) ( 21 )

Net loss — — — ( 21,806 ) — ( 21,806 )

Balance at June 30, 2021 $ 60 $ 1,246,389 $ ( 134,499 ) $ ( 653,125 ) $ ( 97,115 ) $ 361,710

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

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

(in thousands) Common stock Additional paid-in capital Treasury stock Retained

13 unchanged sentences

Balance at March 31, 2020 $ 1,196 $ 1,235,039 $ ( 134,499 ) $ ( 541,911 ) $ ( 117,763 ) $ 442,062

Stock-based compensation expense — 2,537 — — — 2,537

Restricted stock issuance, net of forfeitures — ( 2 ) — — — ( 2 )

Currency translation adjustment — — — — 1,900 1,900

Change in pension liability — — — — ( 22 ) ( 22 )

Net loss — — — ( 5,494 ) — ( 5,494 )

Balance at June 30, 2020 $ 1,196 $ 1,237,574 $ ( 134,499 ) $ ( 547,405 ) $ ( 115,885 ) $ 440,981

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

4 unchanged sentences

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.

(the “Company,” "FET," “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil, natural gas, industrial and renewable energy industries.

FET provides value added solutions that increase the safety and efficiency of energy exploration and production.

We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world.

Basis of Presentation

3 unchanged sentences

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.

Operating results for the six months ended June 30, 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.

1 unchanged sentence

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.

The outbreak of COVID-19 in 2020 caused significant disruptions in the U.S.

and world economies which led to significant reductions in demand for crude oil.

As a result, many companies in the energy industry 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.

During the first half of 2021, distribution of vaccines resulted in reopening of certain economies and increasing demand for oil and natural gas.

However, ongoing COVID-19 outbreaks and new variants of the virus continue to cause disruptions in global supply chains which have led to inflationary pressures for certain goods and services.

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.

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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)

Convertible instruments that continue to be subject to separation models are (1) 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-

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

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.

share guidance.

This guidance may be adopted through either a modified retrospective or fully retrospective method of transition.

This guidance will be effective for us in the first quarter of 2022.

We are currently evaluating the impact of this new guidance.

9 unchanged sentences

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

The following table reflects the changes in our contract assets and contract liabilities balances for the six months ended June 30, 2021 (in thousands):

June 30, 2021 December 31, 2020 Increase / (Decrease)

Accrued revenue $ 1,205 $ 1,687

4 unchanged sentences

Contract liabilities $ 12,052 $ 9,680 $ 2,372 25 %

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.

During the six months ended June 30, 2021, our contract assets decreased by $ 0.1 million and our contract liabilities increased by $ 2.4 million due to the timing of billings for significant projects within our Subsea product line.

During the six months ended June 30, 2021, we recognized $ 7.4 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.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

2020 Disposition of ABZ and Quadrant Valves

1 unchanged sentence

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.

We recognized a gain on disposition of $ 88.4 million based on the difference in cash received less $ 14.9 million of net book value of assets sold and $ 1.3 million of cash paid in the second quarter 2021 for the net working capital settlement related to this disposition.

Pro forma results of operations for this disposition have not been presented because the effects were not material to the consolidated financial statements.

Our significant components of inventory at March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021 December 31, 2020

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Our significant components of inventory at June 30, 2021 and December 31, 2020 were as follows (in thousands):

June 30, 2021 December 31, 2020

Raw materials and parts $ 83,910 $ 151,531

5 unchanged sentences

Intangible Assets

Intangible assets consisted of the following as of March 31, 2021 and December 31, 2020, respectively (in thousands):

March 31, 2021

Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020, respectively (in thousands):

June 30, 2021

Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years)

17 unchanged sentences

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.

Long-lived assets with definite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

During the six months ended June 30, 2021, there were no impairments of long-lived assets.

During the six months ended June 30, 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.

As a result, during the six months ended June 30, 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

Following is a summary of impairment charges recognized in our segments during the six months ended June 30, 2020 (in thousands):

Impairments of:

8 unchanged sentences

(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.

(2) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss and primarily include customer relationships, technology and distributor relationships.

(3) $ 8.6 million of these charges are included in Cost of sales and $ 0.7 million are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss.

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

Notes payable and lines of credit as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021 December 31, 2020

2025 Notes 258,837 316,863

6 unchanged sentences

Long-term debt $ 231,696 $ 293,373

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

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date.

This transaction was 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.

6 unchanged sentences

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.

During the six months ended June 30, 2021, we repurchased an aggregate $ 58.0 million of principal amount of our 2025 Notes for $ 56.7 million.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 51.6 million, resulting in a $ 5.1 million loss on extinguishment of debt.

8 unchanged sentences

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.

As of June 30, 2021, our total borrowing base was $ 140.6 million, of which no amounts were drawn and $ 14.8 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 125.8 million.

Borrowings under the U.S.

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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.

We had $ 14.8 million and $ 15.6 million in total outstanding letters of credit as of June 30, 2021 and December 31, 2020, respectively.

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.

For the three and six months ended June 30, 2021, we recorded a tax expense of $ 1.2 million and $ 2.9 million, respectively, compared to a tax benefit of $ 0.4 million and $ 14.8 million for the three and six months ended June 30, 2020, respectively.

The estimated annual effective tax rates for the six months ended June 30, 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.

The tax benefit for the six months ended June 30, 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.

6 unchanged sentences

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:

As of June 30, 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.

As a result, we have certain valuation allowances against our deferred tax assets as of June 30, 2021.

Forum Energy Technologies, Inc.

2 unchanged sentences

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 Company had zero and $ 13.1 million of borrowings outstanding under the Credit Facility as of June 30, 2021 and December 31, 2020, respectively.

The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value.

1 unchanged sentence

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 June 30, 2021, the fair value and the carrying value of our 2025 Notes approximated $ 257.0 million and $ 231.0 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.

There were no other outstanding financial assets as of June 30, 2021 and December 31, 2020 that required measuring the amounts at fair value.

Business Segments

3 unchanged sentences

Summary financial data by segment follows (in thousands):

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended June 30,

2021 2020 2021 2020

Drilling & Downhole $ 61,570 $ 47,183 110,226 123,826

10 unchanged sentences

Impairments of intangible assets, property and equipment — 112 — 17,432

Loss (gain) on disposal of assets and other ( 909 ) 16

Gain on disposal of assets and other ( 360 ) ( 550 ) ( 1,269 ) ( 534 )

Operating loss $ ( 9,620 ) $ ( 35,022 ) $ ( 24,000 ) $ ( 90,429 )

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

A summary of consolidated assets by reportable segment is as follows (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Drilling & Downhole $ 316,630 $ 314,375

3 unchanged sentences

Total assets $ 804,161 $ 889,926

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Corporate assets primarily include cash and certain prepaid assets.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended June 30,

2021 2020 2021 2020

Drilling Technologies $ 27,624 $ 19,971 $ 46,144 $ 56,609

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

2021 2020 2021 2020

United States $ 77,400 $ 70,296 $ 145,714 $ 194,186

8 unchanged sentences

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.

The reserves accrued at June 30, 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.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

There have been no material changes related to these matters during the six months ended June 30, 2021.

Loss Per Share

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net loss $ ( 21,806 ) $ ( 5,494 ) ( 51,469 ) ( 42,638 )

9 unchanged sentences

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 .

During the six months ended June 30, 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 .

During the six months ended June 30, 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.

4 unchanged sentences

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.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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 .

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements