What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-03-04 compared with 2021-03-02 · 156 added, 342 removed, 881 unchanged (36% of the section changed)

13 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory — Refer to Notes 2 and 5 to the financial statements

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The inventory, net balance at December 31, 2021 was $241.7 million and the amount of inventory reserve was $62.9 million.

Given the significant judgments and assumptions made by management in applying the methodology used to determine net realizable value, future sales forecasts, and the reports utilized to determine inventory levels and historical sales experiences, performing audit procedures required a high degree of auditor judgment and increased extent of effort.

historical sales experiences, performing audit procedures required a high degree of auditor judgment and increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

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historical usage, contracts, communications with customers, product development plans, and macroeconomic conditions) with the Company’s forecasted demand.

• We evaluated management’s forecasted demand by comparing actual results to historical forecasts.

• We evaluated management’s overall forecasted demand by comparing actual results to historical forecasts.

• We considered the existence of contradictory evidence based on reading of internal communications to management and the board of directors, Company press releases, and analysts' reports, as well as our observations and inquiries as to changes within the business.

Long-lived assets —Refer to Notes 2, 6, 7 and 8 to the financial statements

Critical Audit Matter Description

The Company reviews long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.

If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the assets may be impaired.

The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset.

In performing the review for impairment, management makes significant estimates and assumptions related to forecasts of future cash flows including forecasts of future revenue and useful lives of the assets.

The net balances of property and equipment, definite lived intangibles, and right of use asset balances were $113.7 million, $240.4 million and $31.5 million, respectively, as of December 31, 2020.

Given the significant estimates and assumptions made by management to estimate future sales forecasts and useful lives of the assets, performing audit procedures required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future sales and useful lives included the following, among others:

• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical and current year results, (2) internal communications to management and the Board of Directors (3) forecasted information included in industry reports of the Company and certain of its peer companies, and (4) third-party and independently researched market data.

• We compared the remaining useful life of the primary assets to the Company’s underlying asset registers

/s/ Deloitte & Touche LLP

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Selling, general and administrative expenses 168,886 197,677

Impairments of goodwill, intangible assets, property and equipment 20,394 532,336

Transaction expenses 3,128 1,159

Contingent consideration benefit — ( 4,629 )

Impairments of intangible assets, property and equipment — 20,394

Loss (gain) on disposal of assets and other ( 1,052 ) 2,531

Total operating expenses 167,834 220,602

Loss from equity investments — ( 318 )

Operating loss ( 44,493 ) ( 231,623 )

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Interest expense 32,009 30,268

Gain on extinguishment of debt ( 72,478 ) —

Loss (gain) on extinguishment of debt 5,290 ( 72,478 )

Deferred loan costs written off — 2,262

Foreign exchange losses and other, net 217 6,470

Gain realized on previously held equity investment — ( 1,567 )

Gain on disposition of business — ( 88,375 )

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Loss before income taxes ( 82,009 ) ( 109,770 )

Income tax benefit ( 12,881 ) ( 1,814 )

Income tax expense (benefit) 642 ( 12,881 )

Net loss ( 82,651 ) ( 96,889 )

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Diluted $ ( 14.65 ) $ ( 17.37 )

Other comprehensive income (loss), net of tax:

Other comprehensive income (loss), net of tax of $ 0 :

Net loss ( 82,651 ) ( 96,889 )

Change in foreign currency translation, net of tax of $ 0

Loss on pension liability ( 700 ) ( 1,666 )

Change in foreign currency translation ( 1,479 ) 9,249

Gain (loss) on pension liability 840 ( 700 )

Comprehensive loss $ ( 83,290 ) $ ( 88,340 )

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( 135,562 ) ( 134,499 )

Retained earnings (accumulated deficit) ( 601,656 ) ( 503,369 )

Retained deficit ( 684,307 ) ( 601,656 )

Accumulated other comprehensive loss ( 101,028 ) ( 100,389 )

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Adjustments to reconcile net loss to net cash provided by (used in) investing activities:

Impairments of goodwill, intangible assets, property and equipment 20,394 532,336

Impairments of intangible assets, property and equipment — 20,394

Impairments of operating lease assets — 15,370

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Deferred income taxes 2,791 ( 149 )

Contingent consideration benefit — ( 4,629 )

Gain on disposition of business — ( 88,375 )

Gain on extinguishment of debt ( 72,478 ) —

Loss (gain) on extinguishment of debt 5,290 ( 72,478 )

Deferred loan costs written off — 2,262

Gain realized on previously held equity investment — ( 1,567 )

Loss from equity investments, net of distributions — 318

Other 5,210 3,703

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Billings in excess of costs and estimated profits earned 7,986 ( 3,900 )

Net cash provided by operating activities $ 3,883 $ 104,144

Net cash provided by (used in) operating activities $ ( 15,775 ) $ 3,883

Cash flows from investing activities

Capital expenditures for property and equipment ( 2,399 ) ( 2,246 )

Proceeds from the sale of equity investment and business 105,204 42,754

Proceeds from the sale of property and equipment 7,007 5,292

Proceeds from settlement of note receivable 10,784 —

Acquisition of businesses, net of cash acquired ( 3,411 ) —

Proceeds from the sale of business ( 1,283 ) 105,204

Net cash provided by investing activities $ 10,698 $ 108,250

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Repayments on revolving Credit Facility ( 13,126 ) ( 169,196 )

Cash paid to repurchase 2021 Notes ( 40,270 ) —

Cash paid to repurchase 2025 Notes and 2021 Notes ( 58,596 ) ( 40,270 )

Bond exchange early participation payment — ( 3,500 )

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Effect of exchange rate changes on cash ( 439 ) 338

Net increase in cash, cash equivalents and restricted cash 70,706 10,670

Net increase (decrease) in cash, cash equivalents and restricted cash ( 81,759 ) 70,706

Cash, cash equivalents and restricted cash at beginning of period 128,617 57,911

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Finance lease right of use assets obtained in exchange for lease obligations 463 1,401

Note receivable related to equity method investment transaction — 4,725

Accrued purchases of property and equipment — —

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(in thousands) Common stock Additional

capital Treasury stock Retained

earnings (accumulated deficit) Accumulated

capital Treasury stock Retained deficit Accumulated

comprehensive

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Shares issued in employee stock purchase plan 2 344 — — — 346

Contingent shares issued for acquisition of Cooper 1 374 — — — 375

Adjustment for adoption of ASU 2016-13 — — — ( 1,398 ) — ( 1,398 )

Treasury stock — — ( 6 ) — — ( 6 )

1 unchanged sentence

Currency translation adjustment — — — — 9,249 9,249

1-for-20 reverse stock split ( 1,138 ) 1,138 — — — —

Net Loss — — — ( 96,889 ) — ( 96,889 )

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Stock-based compensation expense — 7,594 — — — 7,594

Shares issued in employee stock purchase plan 2 344 — — — 346

Adjustment for adoption of ASU 2016-13

— — — ( 1,398 ) — ( 1,398 )

Treasury stock — — ( 1,063 ) — — ( 1,063 )

1 unchanged sentence

Currency translation adjustment — — — — ( 1,479 ) ( 1,479 )

1-for-20 reverse stock split ( 1,138 ) 1,138 — — — —

Net Loss — — — ( 82,651 ) — ( 82,651 )

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Forum Energy Technologies, Inc.

(the “Company”), a Delaware corporation, is a global products company, serving the drilling, downhole, subsea, completions and production sectors of the energy industry.

The Company designs, manufactures and distributes products, and engages in aftermarket parts supply and services that complement the Company’s product offering.

(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.

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

COVID-19 Impacts

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

and world economies.

In response to the continued spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities, including quarantine and “stay-at-home” orders.

As a result of the imposition of these government orders, there was an adverse impact on the level of oil and natural gas demand and many companies have sought protection under Chapter 11 of the U.S.

Bankruptcy Code.

The full impacts of the COVID-19 outbreak are continuing to evolve and will ultimately depend on future developments, including the rate of distribution for approved vaccines, actions taken by governmental authorities, customers, suppliers and other third parties to prevent further spread of the virus, workforce availability, and the timing and extent to which economic and operating conditions resume.

We have experienced resulting disruptions to our business operations, as restrictions have significantly impacted many sectors of the economy, with businesses curtailing or ceasing normal operations.

While we cannot estimate with any degree of certainty the full impact of the COVID-19 outbreak on our liquidity, financial condition and future results of operations, we expect the adverse impacts on our financial results from COVID-19 will continue in future quarters.

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries after elimination of intercompany balances and transactions.

We previously held an investment in Ashtead, an operating entity where we had the ability to exert significant influence, but did not control operating and financial policies.

This investment was accounted for using the equity method of accounting with our share of the net income reported in “Loss from equity investments” in the consolidated statements of comprehensive loss and the investment reported in “Investment in unconsolidated subsidiary” in the consolidated balance sheets.

On September 3, 2019, we sold our aggregate 40 % interest in Ashtead to the majority owners of Ashtead.

As of December 31, 2020, we have no investments in unconsolidated subsidiaries.

Refer to Note 4 Dispositions for further discussion.

COVID-19 Impacts

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.

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

However, ongoing COVID-19 outbreaks and related work restrictions continue to contribute to 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.

Use of estimates

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The amounts of revenues and income recognized are subject to revisions as the contract progresses to completion and changes in estimates are reflected in the period in which the facts that give rise to the revisions become known.

Additional information that enhances and refines the estimating process that is obtained after the

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

balance sheet date, but before issuance of the consolidated financial statements, is reflected in the consolidated financial statements.

Additional information that enhances and refines the estimating process that is obtained after the balance sheet date, but before issuance of the consolidated financial statements, is reflected in the consolidated financial statements.

Cash and cash equivalents

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Cash equivalents are based on quoted market prices, a Level 1 fair value measure.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Accounts receivable-trade

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Property and equipment are stated at cost less accumulated depreciation.

Capital leases of property and equipment are stated at the present value of future minimum lease payments.

Finance leases of property and equipment are stated at the present value of future minimum lease payments.

Expenditures for property and equipment and for items which substantially increase the useful lives of existing assets are capitalized at cost and depreciated over their estimated useful life utilizing the straight-line method.

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Depreciation is computed using the straight-line method based on the estimated useful lives of assets, generally 2 to 30 years.

Property and equipment held under capital leases are amortized straight-line over the shorter of the lease term or estimated useful life of the asset.

Property and equipment held under finance leases are amortized straight-line over the shorter of the lease term or estimated useful life of the asset.

Gains or losses resulting from the disposition of assets are recognized in income with the related asset cost and accumulated depreciation removed from the balance sheet.

Assets acquired in connection with business combinations are recorded at fair value.

Rental equipment consists of equipment rented to customers under short-term rental agreements.

Rental equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of three to ten years.

We review long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.

In performing the review for impairment, future cash

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

flows expected to result from the use of the asset and its eventual disposal are estimated.

In performing the review for impairment, future cash flows expected to result from the use of the asset and its eventual disposal are estimated.

If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired.

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The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows based on expected utilization.

For the years ended December 31, 2020 and 2019, we recognized property and equipment impairment charges totaling $ 15.1 million and $ 7.9 million, respectively, which are included in “Impairments of goodwill, intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

We record the fair value of asset retirement obligations as a liability in the period in which the associated legal obligation is incurred.

The fair value of the obligation is recorded as a liability and capitalized as part of the related asset.

Over time, the liability is accreted to its future value and the capitalized cost is depreciated over the estimated useful life of the related asset.

The current portion of the liability is included in other accrued liabilities and the non-current portion is included in other long-term liabilities in the consolidated balance sheets.

For the year ended December 31, 2021, we did no t recognize any property and equipment impairment charges.

For the year ended December 31, 2020, we recognized property and equipment impairment charges totaling $ 15.1 million which are included in “Impairments of intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Lease Obligations

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The fair value is determined by means of an analysis of discounted future cash flows based on expected utilization.

For the years ended December 31, 2020 and 2019, we recognized impairments of operating lease assets totaling $ 15.4 million and $ 2.4 million, respectively, which are included in “Cost of Sales” and “Selling, general and administrative expenses” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Goodwill and intangible assets

For goodwill and intangible assets with indefinite lives, an assessment for impairment is performed annually or when there is an indication an impairment may have occurred.

We use an assessment date of October 1 for our annual impairment test for goodwill and other indefinite-lived intangible assets.

Goodwill is reviewed for impairment by comparing the carrying value of each of our seven reporting units’ net assets, including allocated goodwill, to the estimated fair value of the reporting unit.

We determine the fair value of our reporting units using a discounted cash flow approach.

We selected this valuation approach because we believe it, combined with our best judgment regarding underlying assumptions and estimates, provides the best estimate of fair value for each of our reporting units.

Determining the fair value of a reporting unit requires the use of estimates and assumptions.

Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average cost of capital, a terminal growth value, and future market conditions, among others.

We believe that the estimates and assumptions used in our impairment assessments are reasonable.

If the reporting unit’s carrying value is greater than its calculated fair value, we recognize a goodwill impairment charge for the amount by which the carrying value of goodwill exceeds its fair value.

For the year ended December 31, 2019, we recognized goodwill impairment charges totaling $ 471.0 million which is included in “Impairments of goodwill, intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

Following the goodwill impairment charges recognized in the third quarter of 2019, there is no remaining goodwill balance for any of our reporting units.

For the year ended December 31, 2021, we did no t recognize any impairments of operating lease assets.

For the year ended December 31, 2020, we recognized impairments of operating lease assets totaling $ 15.4 million which are included in “Cost of Sales” and “Selling, general and administrative expenses” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

Intangible assets

Intangible assets with definite lives are comprised of customer and distributor relationships, patents and technology, trade names, trademarks and non-compete agreements which are amortized on a straight-line basis over the life of the intangible asset, generally two to twenty-two years .

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The impairment loss recognized represents the excess of an assets’ carrying value as compared to its estimated fair value.

For the years ended December 31, 2020 and 2019, we recognized intangible asset impairment charges totaling $ 5.3 million and $ 53.5 million, respectively, which are included in “Impairments of goodwill, intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

For the year ended December 31, 2021, we did no t recognize any impairments of intangible assets.

For the year ended December 31, 2020, we recognized intangible asset impairment charges totaling $ 5.3 million which are included in “Impairments of intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

Recognition of provisions for contingencies

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Legal costs are expensed as incurred.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

An assessment is made of the areas where potential claims may arise under contract warranty clauses.

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The liability for product warranty is included in other accrued liabilities in the consolidated balance sheets.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Revenue recognition and deferred revenue

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Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of profit to be established.

In such cases, no profit is recognized during the period.

Accounting estimates during the course of projects may change, primarily related to our remotely operated vehicles (“ROVs”) which may take longer to manufacture.

The effect of such a change, which can be upward as well as

We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless the stage of

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

downward, is accounted for in the period of change, and the cumulative income recognized to date is adjusted to reflect the latest estimates.

completion is insufficient to enable a reasonably certain forecast of profit to be established.

In such cases, no profit is recognized during the period.

Accounting estimates during the course of projects may change, primarily related to our remotely operated vehicles (“ROVs”) which may take longer to manufacture.

The effect of such a change, which can be upward as well as downward, is accounted for in the period of change, and the cumulative income recognized to date is adjusted to reflect the latest estimates.

These revisions to estimates are accounted for on a prospective basis.

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See Note 11 Income Taxes for more information on valuation allowances recognized.

Accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

If a tax position meets the “more likely than not” recognition criteria, accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of being realized upon ultimate settlement.

Forum Energy Technologies, Inc.

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Notes to consolidated financial statements (continued)

local currency translation

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The book values of other financial instruments, such as our debt related to the Credit Facility, approximates fair value because interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with a market index.

For the financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

For financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The established fair value hierarchy divides fair value measurement into three broad levels:

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Accounting Standards Adopted in 2021

Financial Instruments—Credit Losses.

In June 2016, the FASB issued ASU No.

2016-13 Financial Instruments—Credit Losses (Topic 326), which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis.

It requires an entity to estimate credit losses expected over the life of an exposure based on historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments.

The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

We adopted this new standard as of January 1, 2020.

The adoption of this standard resulted in a noncash cumulative effect adjustment to increase our allowance for doubtful accounts and increase our retained deficit by $ 1.4 million.

The new standard did not materially affect our consolidated statements of comprehensive loss for the year ended December 31, 2020.

Accounting for Implementation Costs Related to a Cloud Computing Arrangement .

In August 2018, the FASB issued ASU No.

2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.

This new guidance aligns the requirements for capitalizing implementation costs incurred by an entity related to a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Accordingly, this guidance requires an entity to capitalize certain implementation costs incurred and then amortize them over the term of the cloud hosting

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Furthermore, this guidance also requires an entity to present the expense, cash flows, and capitalized implementation costs in the same financial statement line items as the associated hosting service.

We adopted this new standard as of January 1, 2020.

The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurement Disclosure .

In August 2018, the FASB issued ASU No.

2018-13 Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement.

This new guidance eliminated, modified and added certain disclosure requirements related to fair value measurements.

We adopted this new standard as of January 1, 2020.

This new standard did not have a material impact on our condensed consolidated financial statements.

Subsidiary Guarantees.

In March 2020, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X.

The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements.

We adopted these amendments in 2020.

Accordingly, combined summarized financial information has been presented only for the issuers and guarantors of our registered securities.

In addition, the previous disclosures have been removed from the Notes to Condensed Consolidated Financial Statements and the new required disclosures are included in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Accounting Standards Issued But Not Yet Adopted

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.

This guidance will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

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.

We adopted this new standard as of January 1, 2021.

The adoption of this new standard did not have a material impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Convertible Debt.

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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) 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.

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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.

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 currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements.

Disaggregated Revenue

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The following table reflects the changes in our contract assets and contract liabilities balances for the year ended December 31, 2021:

December 31, 2020 December 31, 2019 Increase / (Decrease)

December 31, 2021 December 31, 2020 Increase

Accrued revenue $ 2,245 $ 1,687

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Contract liabilities $ 16,981 $ 9,680 $ 7,301 75 %

During the year ended December 31, 2020, our contract assets increased by $ 4.8 million and our contract liabilities decreased by $ 1.1 million primarily due to the timing of billings on large projects in our Subsea Technologies product line.

During the year ended December 31, 2021, our contract assets increased by $ 0.3 million and our contract liabilities increased by $ 7.3 million primarily due to the timing of billings on large projects in our Subsea Technologies product line.

During the year ended December 31, 2021, we recognized revenue of $ 8.2 million that was included in the contract liability balance at the beginning of the period.

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As such, 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.

Acquisitions & Dispositions

2021 Acquisition of Hawker Equipment Solutions

On December 20, 2021, we acquired certain assets of Hawker Equipment Solutions, LLC (“Hawker”) for total cash consideration of $ 5.1 million, of which, $ 3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the next five years .

Hawker is a manufacturer of hydraulic pickup and laydown units.

This acquisition is included in the Drilling product line within the Drilling and Downhole segment.

The fair values of the assets acquired and liabilities assumed, as well as the pro forma results of operations for this acquisition, have not been presented because they are not material to the consolidated financial statements.

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.

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

2019 Disposition of Cooper Alloy ®

On December 4, 2019, we sold certain assets of our Cooper Alloy ® brand of valve products for total consideration of $ 4.0 million and recognized a gain on disposition totaling $ 2.3 million.

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 working capital settlement liability which was paid in 2021.

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

2019 Disposition of Equity Interest in Ashtead Technology

On September 3, 2019, we sold our aggregate 40 % interest in Ashtead to the majority owners of Ashtead.

Total consideration for Forum’s 40 % interest and the settlement of a £ 3.0 million British Pounds note receivable from Ashtead was $ 47.7 million.

Forum received $ 39.3 million in cash proceeds and a new £ 6.9 million British Pounds note receivable with a three year maturity.

In the third quarter of 2019, we recognized a gain of $ 1.6 million as a result of this transaction, which is classified as Gain realized on previously held equity investment in the consolidated statements of comprehensive loss.

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

Forum Energy Technologies, Inc.

27 unchanged sentences

Right of use assets - finance leases 2 - 6

Rental equipment 3 - 10

Construction in progress 1,960 968

1 unchanged sentence

accumulated depreciation ( 183,921 ) ( 199,810 )

Property and equipment, net 113,355 154,411

Rental equipment 3 - 10

accumulated depreciation ( 3,517 ) ( 3,354 )

Rental equipment, net 313 425

Total property and equipment, net $ 94,005 $ 113,668

Depreciation expense was $ 17.1 million and $ 24.5 million for the years ended December 31, 2021 and 2020, respectively.

For the year ended December 31, 2021, we did no t recognize any property and equipment impairment charges.

For the year ended December 31, 2020, we recognized property and equipment impairment charges totaling $ 15.1 million, which are included in “Impairments of intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

Intangible Assets

20 unchanged sentences

Trade names 42,984 ( 22,941 ) 20,043 7 - 19

Distributor relationships 22,160 ( 18,866 ) 3,294 15 - 22

Trademark 5,089 ( 1,103 ) 3,986 15

1 unchanged sentence

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

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

For the year ended December 31, 2021, we did no t recognize any intangible asset impairment charges.

For the year ended December 31, 2020, we recognized intangible asset impairment charges totaling $ 5.3 million, which are included in “Impairments of intangible assets, property and equipment” in the consolidated statements of comprehensive loss.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

Amortization expense was $ 25.1 million and $ 26.5 million for the years ended December 31, 2021 and 2020, respectively.

2 unchanged sentences

2022 $ 25,161

Impairments of Goodwill and Long Lived Assets

During the third quarter of 2019, there was a significant decline in the quoted market prices of our common stock and a continued decline in U.S.

onshore drilling and completions activity, which led us to evaluate all of our reporting units for a triggering event as of September 30, 2019.

Upon evaluation, we considered these developments to be a triggering event that required us to update our goodwill impairment evaluation and review long-lived assets for all reporting units as of September 30, 2019.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

As a result, and in connection with the preparation of our financial statements, 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.

In addition, we determined that the remaining carrying value of our goodwill was fully impaired in the third quarter of 2019.

The fair values used in each goodwill impairment analysis were determined using the net present value of the expected future cash flows for each reporting unit (classified within level 3 of the fair value hierarchy).

We determined the fair value of each reporting unit using a combination of discounted cash flow and guideline public company methodologies, which required significant assumptions and estimates about the future operations of each reporting unit.

The assumptions about future cash flows and growth rates were based on our strategic plans and management’s estimates for future activity levels.

Forecasted cash flows in future periods were estimated using a terminal value calculation, which considered long-term earnings growth rates.

Impairments of Long-Lived Assets

During the year ended December 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, have driven sharp declines in global economic activity.

In addition, responses to the spread of COVID-19, including significant government restrictions on movement, led to sharp declines in global economic activity.

As a result, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values.

1 unchanged sentence

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 thousands) in our Drilling & Downhole (“D&D”), Completions (“C”), Production (“P”), and Corporate (“Corp”) segments:

Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Following is a summary of impairment charges recognized in our segments during the year ended December 31, 2020 (in thousands):

Impairments of:

D&D C P Corp Total D&D C P Total

Drilling & Downhole Completions Production Corporate Total Impairments

Property and equipment (1)

1,069 9,608 4,460 — 15,137

1 unchanged sentence

5,257 — — — 5,257

Property and equipment (1)

1,069 9,608 4,460 — 15,137 5,200 2,655 — 7,855

Operating lease right of use assets (2)

1 unchanged sentence

Total impairments $ 11,692 $ 15,748 $ 6,826 $ 1,498 $ 35,764

(1) These charges are included in Impairments of goodwill, intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss.

(2) For the years ended December 31, 2020 and 2019, $ 10.8 million and $ 1.3 million, respectively, of these charges are included in Cost of sales, while $ 4.5 million and $ 1.1 million, respectively, are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

(1) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss.

(2) $ 10.8 million of these charges are included in Cost of sales, while $ 4.5 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 December 31, 2021 and 2020 consisted of the following (in thousands):

1 unchanged sentence

2025 Notes 256,970 316,863

2025 Notes 316,863 —

Unamortized debt premium (discount) ( 30,248 ) 770

Unamortized debt discount ( 20,035 ) ( 30,248 )

Debt issuance cost ( 4,918 ) ( 7,318 )

Senior secured revolving credit facility 13,126 —

Credit Facility — 13,126

Other debt 1,213 2,272

2 unchanged sentences

Long-term debt $ 232,370 $ 293,373

As of December 31, 2020, no 2021 Notes remained outstanding.

In October 2013, we issued $ 300.0 million of 6.25 % unsecured notes due 2021 at par, and in November 2013, we issued an additional $ 100.0 million aggregate principal amount of the notes at a price of 103.25 % of par (the “2021 Notes”).

The 2021 Notes bear interest at a rate of 6.25 % per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021.

The 2021 Notes are unsecured obligations, and are guaranteed on an unsecured basis by our U.S.

subsidiaries that guarantee our senior secured revolving credit facility ("Credit Facility") .

During the first half of 2020, we repurchased an aggregate $ 71.9 million principal amount of our 2021 Notes for $ 27.7 million and recognized a net gain of $ 43.8 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 the third quarter of 2020, we exchanged $ 315.5 million principal amount of the remaining 2021 Notes for new 2025 Notes as discussed further below.

In the fourth quarter of 2020, we redeemed the remaining $ 12.6 million principal amount of 2021 Notes at par.

In August 2020, we exchanged $ 315.5 million principal amount of the 2021 Notes for new 9.00 % convertible secured notes due August 2025 (the “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 accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date.

2 unchanged sentences

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 % will be payable in cash and 2.75 % will be payable in cash or additional notes, at the Company’s option.

In the fourth quarter 2020, we elected to pay $ 1.4 million of accrued interest as additional notes.

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.

As of December 31, 2021, approximately $ 116.0 million principal amount of the 2025 Notes 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.

Any interest that the Company elects to pay in additional notes is also subject to the mandatory and optional conversion rights.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

During the year ended December 31, 2021, we repurchased an aggregate $ 59.9 million of principal amount of our 2025 Notes for $ 58.6 million.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 53.3 million, resulting in a $ 5.3 million loss on extinguishment of debt.

Credit Facility

In connection with the issuance of the 2025 Notes, we amended our Credit Facility.

In September 2021, we amended our senior secured revolving credit facility ("Credit Facility") to, among other things, extend the maturity date to September 2026, reduce the aggregate amount of the commitment under the Credit Facility, and change the interest rate applicable to outstanding loans.

Following such amendment, our Credit Facility provides revolving credit commitments of $ 179.0 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.

3 unchanged sentences

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 80.00 % of the total borrowing base.

The amount of eligible inventory included in the borrowing base is restricted to the lesser of $ 127.5 million (subject to a quarterly reduction of $ 0.5 million ) 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 December 31, 2020, our total borrowing base was $ 139.2 million, of which $ 13.1 million was drawn and $ 15.6 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 110.5 million.

As of December 31, 2021, our total borrowing base was $ 146.1 million , of which no amounts were drawn and $ 18.7 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 127.4 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 %.

line bear interest at a rate equal to, at our option, either (a) the LIBOR rate, subject to a floor of 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly total net leverage ratio.

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 0.00 %.

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 %.

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 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly net leverage ratio.

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 0.00 %.

The weighted average interest rate under the Credit Facility was approximately 2.65 % for the year ended December 31, 2020.

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 $ 22.4 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.

Other debt consists primarily of various finance leases of equipment.

Other debt consists of various finance leases of equipment.

Deferred loan costs

The Company has incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility.

During the year ended December 31, 2020, we capitalized a total of $ 9.7 million of deferred loan costs related to the exchange of the 2021 Notes.

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 $ 2.0 million of deferred loan costs for the termination of previous discussions related to a potential exchange offer for our 2021 Notes.

In the third quarter of 2020, we wrote off $ 0.3 million of deferred loan costs related to amending our Credit Facility to, among other things, reduce the size of the commitments from $ 300.0 million to $ 250.0 million.

Approximately $ 1.8 million and $ 1.9 million of deferred loan costs were amortized to interest expense for the years ended December 31, 2020 and 2019, respectively.

In connection with the September 2021 Credit Facility amendment, we deferred approximately $ 1.6 million of loan costs that will be amortized over the facility's remaining life.

Forum Energy Technologies, Inc.

3 unchanged sentences

Total future payment $ 258,249

Unamortized debt premium ( 30,248 )

Unamortized debt discount ( 20,035 )

Debt issuance cost ( 4,918 )

43 unchanged sentences

Financing leases 6.58 % 6.58 %

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The following table summarizes the supplemental cash flow information related to leases as of December 31, 2021:

4 unchanged sentences

Financing cash flows from finance leases $ 1,517 $ 1,179

Noncash activities from adoption of ASC 842 as of January 1, 2019

Prepaid expenses and other current assets n/a $ ( 884 )

Operating lease assets n/a 54,069

Operating lease liabilities n/a 64,506

Accrued liabilities n/a ( 11,321 )

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The components of loss before income taxes for the years ended December 31, 2021 and 2020 are as follows (in thousands):

2 unchanged sentences

Loss before income taxes $ ( 82,009 ) $ ( 109,770 )

The components of income tax benefit for the years ended December 31, 2020 and 2019 are as follows (in thousands):

The components of income tax expense (benefit) for the years ended December 31, 2021 and 2020 are as follows (in thousands):

federal and state $ 1,235 $ ( 17,219 )

( 3,384 ) 4,487

Total current ( 2,149 ) ( 12,732 )

2 unchanged sentences

Total deferred 2,791 ( 149 )

Income tax benefit $ ( 12,881 ) $ ( 1,814 )

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Income tax expense (benefit) $ 642 $ ( 12,881 )

The reconciliation between the actual provision for income taxes and that computed by applying the U.S.

7 unchanged sentences

Nondeductible expenses 1,624 2.0 % 2,053 1.9 %

Goodwill impairment — — % 27,244 4.8 %

CAREs Act 113 0.1 % ( 15,981 ) ( 14.6 ) %

8 unchanged sentences

The tax effects of changes in tax laws are recognized in the period in which the law is enacted.

The tax benefit for the year ended December 31, 2020 includes an increase in our valuation allowance of $ 25.3 million consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and Saudi Arabia as further described below under the primary components of deferred taxes.

The tax benefit for the year ended December 31, 2021 and 2020 includes an increase in our valuation allowance of $ 31.1 million and $ 25.3 million, respectively, consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and Saudi Arabia as further described below under the primary components of deferred taxes.

Forum Energy Technologies, Inc.

10 unchanged sentences

Fair value discount on 2025 Notes 22,250 30,564

Property and equipment 6,424 —

Other 1,912 931

24 unchanged sentences

and foreign deferred tax assets by $ 15.6 million and $ 15.5 million, respectively.

In making such a determination for each of these jurisdictions, we considered all available positive and negative evidence, including our recent history of pretax losses over the prior three year period, the goodwill and intangible asset impairments for various reporting units, the future reversals of existing taxable temporary differences, the projected future taxable income or loss, including the effect of U.S.

tax reform, and tax-planning.

Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiaries, referred to as outside basis differences, have not been provided for U.S.

25 unchanged sentences

Fair Value Measurements

At December 31, 2020 the Company had $ 13.1 million outstanding under the Credit Facility, and at December 31, 2019, the Company had no balance outstanding under the Credit Facility.

The Company had zero and $ 13.1 million outstanding under the Credit Facility at December 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.

21 unchanged sentences

Our subsidiary acquired the trademark for the product line in question in 1985.

To date, the claims against our subsidiary alleging illnesses due to asbestos have generally been based on products manufactured by the previous owner prior to 1985 that are alleged to have contained asbestos.

To date, most of the claims against our subsidiary alleging illnesses due to asbestos have generally been based on products manufactured by the previous owner prior to 1985 that are alleged to have contained asbestos.

Many claimants alleging illnesses due to asbestos sue on the basis of exposure prior to 1985, as by that date the hazards of asbestos exposure were well known and asbestos had begun to fall into disuse.

2 unchanged sentences

The law in other states on so called “successor liability” may be different or ambiguous in this regard, and could also expose our subsidiary to liability.

Our subsidiary could also be found liable should a trier of fact reject our subsidiary’s position that it is not responsible for the alleged asbestos injuries.

Our subsidiary could also be found liable should a trier of fact reject our subsidiary’s position that it is not responsible for the alleged asbestos injuries, such as in a case where a plaintiff alleges post-1985 exposure.

To date, asbestos claims have not had a material adverse effect on our business, financial condition, results of operations, or cash flow, as our annual out-of-pocket costs over the last five years has been less than $ 200,000 .

5 unchanged sentences

In January 2011, we entered into an agreement with seven of our primary insurers under which they have agreed to pay 80 % of the costs of handling and settling each asbestos claim against the affected subsidiary.

The insurers’ portion of the settlements is funded by our aggregate primary limits, which are eroded only by settlements and not legal fees.

The insurers’ portion of the settlements is funded by our primary insurance limits, which are eroded only by settlements and not legal fees.

Approximately $ 2.0 million in settlements has been paid by insurers and our subsidiary to date, with approximately $ 40,000 paid over the course of the last two years.

23 unchanged sentences

At December 31, 2021, the Company had $ 18.7 million in letters of credit outstanding.

Earnings Per Share

Loss Per Share

The reconciliation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):

19 unchanged sentences

In 2020, for certain plans, the Company temporarily suspended the matching of contributions.

Matching contributions were reinstated at the beginning of 2022.

Subsequent to the closing of all acquisitions, employees of those acquired entities will generally be eligible to participate in the Company’s 401(k) savings plan.

We also have the discretion to provide a profit sharing contribution to each participant depending on the Company’s performance for the applicable year.

The expense under the Company’s plan was $ 2.3 million and $ 5.8 million for the years ended December 31, 2020 and 2019, respectively.

We have an Employee Stock Purchase Plan, which allows eligible employees to purchase shares of the Company’s common stock at six -month intervals through periodic payroll deductions at a price per share equal to 85.0 % of the lower of the fair market value at the beginning and ending of the six -month intervals.

At the beginning of 2020, this plan was suspended.

The expense under the Company’s plan was zero and $ 2.3 million for the years ended December 31, 2021 and 2020, respectively.

Reverse stock split

7 unchanged sentences

The par value of our common stock remains at $ 0.01 per share.

Stock Based Compensation

Long-Term Incentive Compensation

FET stock based compensation plan

9 unchanged sentences

Approximately 105 thousand shares remained available under the 2016 Amended Plan for future grants as of December 31, 2021.

The total amount of stock based compensation expense recorded was approximately $ 9.8 million and $ 15.8 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, the Company expects to

The total amount of stock based compensation expense recorded was $ 7.6 million and $ 9.8 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company expects to record stock based compensation expense of approximately $ 11.4 million over a weighted average remaining term of approximately two years .

Future grants will result in additional compensation expense.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

record stock based compensation expense of approximately $ 8.9 million over a weighted average remaining term of approximately one year .

Future grants will result in additional compensation expense.

Stock options

17 unchanged sentences

Restricted stock

Restricted stock generally vests over a three or four year period from the date of grant.

Restricted stock generally vests over a period of one to four years from the date of grant.

The following table provides additional information related to our restricted stock:

1 unchanged sentence

Nonvested at beginning of year —

Vested ( 10 )

Nonvested at the end of year 10

No restricted stock was granted during 2020.

The weighted average grant date fair value of restricted stock granted during the year ended December 31, 2021 was $ 23.36 per share.

The total grant date fair value of shares vested was $ 1.5 million and $ 1.5 million during 2020 and 2019, respectively.

The total grant date fair value of shares vested was $ 1.5 million during 2020.

Restricted stock units

6 unchanged sentences

Nonvested at the end of year 356

Of the restricted stock units granted during 2020, 113 thousand shares vest ratably over three years, 163 thousand shares vest ratably over three years dependent upon achieving a minimum stock price of $ 14.20 for 20 trading days in each performance period, and 24 thousand shares cliff vest at the end of three years dependent upon achieving a minimum stock price of $ 30.00 for 20 consecutive trading days during the performance period.

Of the restricted stock units granted during 2021, 73,839 shares vest ratably over three years and 66,524 shares vest ratably over three years dependent upon achieving a minimum stock price of $ 23.49 for 20 trading days during each performance period.

The weighted average grant date fair value of the restricted stock units was $ 18.20 and $ 12.83 per share during the years ended December 31, 2021, and 2020, respectively.

The total grant date fair value of units vested was $ 5.3 million and $ 10.3 million during 2021 and 2020, respectively.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

The weighted average grant date fair value of the restricted stock units was $ 12.83 and $ 130.80 per share during the years ended December 31, 2020, and 2019, respectively.

The total grant date fair value of units vested was $ 10.3 million and $ 11.8 million during 2020 and 2019, respectively.

Performance share awards

During 2020, we granted performance awards with service-vesting and market-vesting conditions that are payable in either cash or shares of the Company’s common stock.

These awards may settle between zero and three times the award’s cash target amount.

The award amount issued pursuant to the performance award agreements will be determined based on the total shareholder return of the Company’s common stock as compared to a group of peer companies measured over a three year performance period.

As our intention is to settle the awards in cash, we will account for these as liability classified awards.

As such, compensation expense will be recognized over the requisite three -year service period with subsequent changes in the estimated fair value of the award recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs.

Liability-classified awards

During 2021, we granted 66,524 cash-settled phantom stock units to employees 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 to employees 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.

Stock appreciation rights

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The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments.

The Drilling & Downhole segment designs and manufactures products and provides related services to the drilling, well construction, artificial lift and subsea energy construction and services markets as well as other markets such as alternative energy, defense and communications.

The Completions segment designs, manufactures and supplies products and provides related services to the coiled tubing, stimulation and intervention markets.

The Drilling & Downhole segment designs and manufactures products and provides related services to the drilling, well construction, artificial lift and subsea energy construction and services markets, including applications in oil and natural gas, renewable energy, defense, and communications.

The Completions segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation and intervention markets.

The Production segment designs, manufactures and supplies products, and provides related equipment and services for production and infrastructure markets.

21 unchanged sentences

Total segment operating loss ( 45,545 ) ( 208,698 )

Impairments of goodwill, intangible assets, property and equipment 20,394 532,336

Transaction expenses 3,128 1,159

Contingent consideration benefit — ( 4,629 )

Impairments of intangible assets, property and equipment — 20,394

Loss (gain) on disposal of assets and other ( 1,052 ) 2,531

14 unchanged sentences

Total capital expenditures $ 2,399 $ 2,246

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

7 unchanged sentences

Corporate assets primarily include cash, certain prepaid expenses and deferred loan costs.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

A summary of long-lived assets by country is as follows (in thousands):

28 unchanged sentences

Total revenue $ 541,068 100.0 % $ 512,476 100.0 %

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Quarterly Results of Operations (Unaudited)

The following tables summarize the Company’s results by quarter for the years ended December 31, 2020 and 2019.

The quarterly results may not be comparable due to dispositions in 2020 and 2019.

Refer to Note 4 Dispositions for further information.

(in thousands, except per share information) Q1 Q2 Q3 Q4

Revenues $ 182,632 $ 113,275 $ 103,606 $ 112,963

Cost of sales (1) 160,542 100,373 90,496 172,086

Gross profit 22,090 12,902 13,110 ( 59,123 )

Total operating expenses (2) 77,497 47,924 50,157 45,024

Operating loss ( 55,407 ) ( 35,022 ) ( 37,047 ) ( 104,147 )

Total other income, net (3) ( 3,913 ) ( 29,104 ) ( 16,513 ) ( 72,323 )

Loss before income taxes ( 51,494 ) ( 5,918 ) ( 20,534 ) ( 31,824 )

Income tax expense (benefit) ( 14,350 ) ( 424 ) 1,017 876

Net loss ( 37,144 ) ( 5,494 ) ( 21,551 ) ( 32,700 )

Weighted average shares outstanding

Basic 5,559 5,580 5,580 5,588

Diluted 5,559 5,580 5,580 5,588

Loss per share

Basic $ ( 6.68 ) $ ( 0.98 ) $ ( 3.86 ) $ ( 5.85 )

Diluted $ ( 6.68 ) $ ( 0.98 ) $ ( 3.86 ) $ ( 5.85 )

(1) Q1 includes $ 11.6 million of inventory write-downs and $ 8.6 million of lease impairments.

Q4 includes $ 81.1 million of inventory write-downs.

(2) Q1 includes $ 17.3 million of impairments of property and equipment and intangible assets.

Q3 includes $ 3.0 million of impairments of property and equipment.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

(3) Q1 and Q2 include gains on extinguishment of debt of $ 7.5 million and $ 36.3 million, respectively, related to the repurchase of 2021 Notes at a discount.

Q3 includes a $ 28.7 million gain on extinguishment of debt related to the exchange of 2021 Notes for new 2025 Notes.

See Note 9 Debt for further information related to these gains.

Q4 includes an $ 88.4 million gain related to the sale of certain assets of our ABZ and Quadrant brands of valve products.

See Note 4 Dispositions for further information related to this gain.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

(in thousands, except per share information) Q1 Q2 Q3 Q4

Revenues $ 271,842 $ 245,648 $ 239,266 $ 199,777

Cost of sales 201,744 182,460 176,632 150,845

Gross profit 70,098 63,188 62,634 48,932

Total operating expenses (1) 64,952 63,022 595,954 56,752

Earnings (loss) from equity investment ( 849 ) 570 ( 39 ) —

Operating income (loss) 4,297 736 ( 533,359 ) ( 7,820 )

Total other expense, net (2) 10,458 6,077 2,999 13,191

Loss before income taxes ( 6,161 ) ( 5,341 ) ( 536,358 ) ( 21,011 )

Income tax expense (benefit) 1,727 8,393 ( 3,371 ) ( 8,563 )

Net loss ( 7,888 ) ( 13,734 ) ( 532,987 ) ( 12,448 )

Weighted average shares outstanding

Basic 5,482 5,499 5,515 5,523

Diluted 5,482 5,499 5,515 5,523

Loss per share

Basic $ ( 1.44 ) $ ( 2.50 ) $ ( 96.64 ) $ ( 2.25 )

Diluted $ ( 1.44 ) $ ( 2.50 ) $ ( 96.64 ) $ ( 2.25 )

(1) Q1 includes a $ 4.6 million contingent consideration benefit related to reducing the estimated fair value of the contingent cash liability associated with the fourth quarter 2018 acquisition of Global Heat Transfer LLC.

Q3 includes $ 471.0 million of goodwill impairments, $ 53.5 million of intangible asset impairments and $ 7.9 million of property and equipment impairments.

See Note 8 Impairments of Goodwill and Long Lived Assets for further information related to these charges.

(2) Q3 includes a $ 1.6 million gain realized on the sale of our previously held equity investment in Ashtead.

Q4 includes a $ 2.3 million gain on the sale of certain assets of our Cooper Alloy ® brand of valve products.

See Note 4 Dispositions for further information related to these gains.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk