What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 95 added, 65 removed, 334 unchanged (32% 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) 2022 2021 2022 2021

4 unchanged sentences

Selling, general and administrative expenses 43,497 42,184 87,802 83,658

Loss (gain) on disposal of assets and other 22 ( 909 )

Gain on disposal of assets and other ( 908 ) ( 360 ) ( 886 ) ( 1,269 )

Total operating expenses 42,589 41,824 86,916 82,389

Operating loss ( 5,708 ) ( 14,380 )

Operating income (loss) 5,984 ( 9,620 ) 276 ( 24,000 )

Other expense (income)

2 unchanged sentences

Loss on extinguishment of debt — 4,161 — 5,094

Total other expense 1,638 13,565

Loss before income taxes ( 7,346 ) ( 27,945 )

Total other expense (income), net ( 4,996 ) 10,997 ( 3,358 ) 24,562

Income (loss) before income taxes 10,980 ( 20,617 ) 3,634 ( 48,562 )

Income tax expense 1,716 1,189 3,569 2,907

Net loss ( 9,199 ) ( 29,663 )

Net income (loss) 9,264 ( 21,806 ) 65 ( 51,469 )

Weighted average shares outstanding

1 unchanged sentence

Diluted 10,481 5,638 5,910 5,625

Loss per share

Earnings (loss) per share

Basic $ 1.61 $ ( 3.87 ) $ 0.01 $ ( 9.15 )

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Net loss ( 9,199 ) ( 29,663 )

Net income (loss) 9,264 ( 21,806 ) 65 ( 51,469 )

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

( 16,518 ) 66 ( 23,510 ) 3,218

Gain on pension liability 30 77

Gain (loss) on pension liability 57 ( 21 ) 87 56

Comprehensive loss $ ( 7,197 ) $ ( 21,761 ) $ ( 23,358 ) $ ( 48,195 )

3 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share information) March 31, 2022 December 31, 2021

(in thousands, except share information) June 30, 2022 December 31, 2021

Current assets

40 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

Cash flows from operating activities

Net loss $ ( 9,199 ) $ ( 29,663 )

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss) $ 65 $ ( 51,469 )

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

Depreciation expense 6,742 9,222

12 unchanged sentences

Billings in excess of costs and estimated profits earned ( 8,024 ) 3,679

Net cash used in operating activities $ ( 24,875 ) $ ( 1,338 )

Net cash provided by (used in) operating activities $ ( 50,559 ) $ 2,356

Cash flows from investing activities

1 unchanged sentence

Proceeds from sale of property and equipment 2,608 2,106

Payments related to business acquisitions and dispositions $ ( 485 ) $ ( 1,283 )

Net cash provided by (used in) investing activities $ ( 1,447 ) $ 119

5 unchanged sentences

Repurchases of stock ( 361 ) ( 141 )

Net cash used in financing activities $ ( 599 ) $ ( 27,458 )

Net cash provided by (used in) financing activities $ 32,642 $ ( 70,781 )

Effect of exchange rate changes on cash ( 590 ) 50

9 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

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

9 unchanged sentences

Balance at March 31, 2022 $ 62 $ 1,251,752 $ ( 135,562 ) $ ( 693,506 ) $ ( 107,990 ) $ 314,756

Stock-based compensation expense — 621 — — — 621

Restricted stock issuance, net of forfeitures — ( 1 ) — — — ( 1 )

Liability awards converted to share settled — 275 — — — 275

Currency translation adjustment — — — — ( 16,518 ) ( 16,518 )

Change in pension liability — — — — 57 57

Net Income — — — 9,264 — 9,264

Balance at June 30, 2022 $ 62 $ 1,252,647 $ ( 135,562 ) $ ( 684,242 ) $ ( 124,451 ) $ 308,454

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, 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.

11 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other interim period.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 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.

4 unchanged sentences

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.

However, ongoing COVID-19 outbreaks and related work restrictions continue to contribute to disruptions in global supply chains which have contributed 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.

22 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, 2022 (in thousands):

March 31, 2022 December 31, 2021 Increase / (Decrease)

The following table reflects the changes in our contract assets and contract liabilities balances for the six months ended June 30, 2022 (in thousands):

June 30, 2022 December 31, 2021 Increase / (Decrease)

Accrued revenue $ 893 $ 2,245

4 unchanged sentences

Contract liabilities $ 9,172 $ 16,981 $ ( 7,809 ) ( 46 ) %

During the three months ended March 31, 2022, our contract assets increased by $ 5.7 million due to increasing project activity for process oil treatment equipment in our Production Equipment product line and our contract liabilities decreased by $ 3.2 million primarily due to lower customer advance payments for projects in our Subsea product line.

During the three months ended March 31, 2022, we recognized $ 10.8 million of revenue that was included in the contract liability balance at the beginning of the period.

During the six months ended June 30, 2022, our contract assets increased by $ 5.6 million and our contract liabilities decreased by $ 7.8 million primarily due to the timing of milestone billings for projects in our subsea product line.

During the six months ended June 30, 2022, we recognized $ 12.0 million of revenue that was included in the contract liability balance at the beginning of the period.

As 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.

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.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Our significant components of inventory at March 31, 2022 and December 31, 2021 were as follows (in thousands):

March 31, 2022 December 31, 2021

Our significant components of inventory at June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022 December 31, 2021

Raw materials and parts $ 106,251 $ 97,053

5 unchanged sentences

Intangible Assets

Intangible assets consisted of the following as of March 31, 2022 and December 31, 2021, respectively (in thousands):

March 31, 2022

Intangible assets consisted of the following as of June 30, 2022 and December 31, 2021, respectively (in thousands):

June 30, 2022

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

16 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Notes payable and lines of credit as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

March 31, 2022 December 31, 2021

Notes payable and lines of credit as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

June 30, 2022 December 31, 2021

2025 Notes 256,970 256,970

13 unchanged sentences

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.

As of March 31, 2022, 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.

As of June 30, 2022, approximately $ 123 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 is 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.

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.

12 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, 2022, our total borrowing base was $ 158.8 million, of which no amounts were drawn and $ 17.6 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 141.2 million.

As of June 30, 2022, our total borrowing base was $ 162.4 million, of which $ 33.6 million was drawn and $ 14.5 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 114.3 million.

Borrowings under the U.S.

1 unchanged sentence

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 0.00 %, 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.

Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the Canadian Dollar Offered Rate ("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 4.43 % for the six months ended June 30, 2022.

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 %.

7 unchanged sentences

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 $ 17.6 million and $ 18.7 million in total outstanding letters of credit as of March 31, 2022 and December 31, 2021, respectively.

We had $ 14.8 million and $ 19.1 million in total outstanding letters of credit as of June 30, 2022 and December 31, 2021, 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.

For the three months ended March 31, 2022 and March 31, 2021, we recorded tax expense of $ 1.9 million and $ 1.7 million, respectively.

The estimated annual effective tax rates for the three months ended March 31, 2022 and 2021 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, 2022, we recorded a tax expense of $ 1.7 million and $ 3.6 million, respectively.

For the three and six months ended June 30, 2021, we recorded a tax expense of $ 1.2 million and $ 2.9 million, respectively.

The estimated annual effective tax rates for all periods 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.

2 unchanged sentences

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results.

As of March 31, 2022, 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

In making such a determination, we consider all available positive and negative

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

Saudi Arabia.

As a result, we have certain valuation allowances against our deferred tax assets as of March 31, 2022.

evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results.

As of June 30, 2022, 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 June 30, 2022.

Fair Value Measurements

The Company had no borrowings outstanding under the Credit Facility as of March 31, 2022 and December 31, 2021.

The Company had $ 33.6 million of borrowings outstanding under the Credit Facility as of June 30, 2022.

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, 2022, the fair value and the carrying value of our 2025 Notes approximated $ 250.5 million and $ 233.4 million, respectively.

At June 30, 2022, the fair value and the carrying value of our 2025 Notes approximated $ 249.8 million and $ 234.9 million, respectively.

At December 31, 2021, the fair value and the carrying value of our 2025 Notes approximated $ 225.0 million and $ 232.0 million, respectively.

There were no other significant outstanding financial instruments as of March 31, 2022 and December 31, 2021 that required measuring the amounts at fair value on a recurring basis.

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, 2022.

There were no other significant outstanding financial instruments as of June 30, 2022 and December 31, 2021 that required measuring the amounts at fair value on a recurring basis.

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,

2022 2021 2022 2021

Drilling & Downhole $ 76,493 $ 61,570 147,753 110,226

8 unchanged sentences

Corporate ( 6,885 ) ( 8,270 ) ( 16,090 ) ( 15,280 )

Segment operating loss ( 5,686 ) ( 15,289 )

Loss (gain) on disposal of assets and other 22 ( 909 )

Operating loss $ ( 5,708 ) $ ( 14,380 )

Segment operating income (loss) 5,076 ( 9,980 ) ( 610 ) ( 25,269 )

Gain on disposal of assets and other ( 908 ) ( 360 ) ( 886 ) ( 1,269 )

Operating income (loss) $ 5,984 $ ( 9,620 ) $ 276 $ ( 24,000 )

Forum Energy Technologies, Inc.

2 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Drilling & Downhole $ 321,757 $ 313,493

5 unchanged sentences

The following table presents our revenues disaggregated by product line (in thousands):

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

Drilling Technologies $ 33,540 $ 27,624 $ 62,775 $ 46,144

8 unchanged sentences

The following table presents our revenues disaggregated by geography (in thousands):

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

United States $ 114,626 $ 77,400 $ 211,858 $ 145,714

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, 2022 and December 31, 2021, respectively, are immaterial.

The reserves accrued at June 30, 2022 and December 31, 2021, 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.

3 unchanged sentences

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 2021 Annual Report on Form 10-K filed with the SEC on March 4, 2022.

There have been no material changes related to these matters during the three months ended March 31, 2022.

Loss Per Share

There have been no material changes related to these matters during the six months ended June 30, 2022.

Earnings (Loss) Per Share

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

Three Months Ended March 31,

Net loss ( 9,199 ) ( 29,663 )

Basic - weighted average shares outstanding 5,683 5,613

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income (loss) - basic $ 9,264 $ ( 21,806 ) 65 ( 51,469 )

Interest on dilutive convertible notes due 2025 2,762 — — —

Net income (loss) - diluted $ 12,026 $ ( 21,806 ) 65 ( 51,469 )

Weighted average shares outstanding - basic 5,747 5,638 5,715 5,625

Dilutive effect of stock options and restricted stock 187 — 195 —

Dilutive effect of convertible notes due 2025 4,547 — — —

Diluted - weighted average shares outstanding 5,683 5,613

Loss per share

Weighted average shares outstanding - diluted 10,481 5,638 5,910 5,625

Earnings (loss) per share

Basic $ 1.61 $ ( 3.87 ) $ 0.01 $ ( 9.15 )

Diluted $ 1.15 $ ( 3.87 ) $ 0.01 $ ( 9.15 )

For all periods presented, we excluded all potentially dilutive restricted shares, stock options and the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods.

The diluted earnings per share calculation excludes approximately 59 thousand shares for the three months ended June 30, 2022, and 116 thousand shares for the six months ended June 30, 2022, because they were anti-dilutive.

For the three months and six months ended June 30, 2021, we excluded all potentially dilutive restricted shares, stock options and the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods.

Stockholders' Equity

Stock-based compensation

During the three months ended March 31, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years .

Liability-classified awards

During the three months ended March 31, 2022, the Company granted 101,111 cash-settled contingent restricted stock units to employees that vest ratably over three years dependent upon achieving a minimum stock price of $ 23.68 for 20 trading days during each performance period.

During the six months ended June 30, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years .

During the six months ended June 30, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years contingent upon achieving a minimum stock price of $ 23.68 for 20 trading days during each performance period.

These awards may be settled in cash or shares, at the company's option.

These awards were originally classified as cash-settled liability settled awards.

On May 10, 2022, shareholders approved additional shares to be added to the employee equity incentive plan.

As a result, the fair value of the awards was remeasured as of May 10, 2022 and the classification of these awards was updated from cash-settled to share-settled resulting in equity classification.

Related Party Transactions

2 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