What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-09 · 131 added, 179 removed, 264 unchanged (54% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended September 30, Nine Months Ended September 30,

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

(in thousands, except per share information) 2023 2022

4 unchanged sentences

Selling, general and administrative expenses 45,511 44,305

Gain on disposal of assets and other ( 52 ) ( 93 ) ( 938 ) ( 1,362 )

Loss (gain) on disposal of assets and other ( 260 ) 22

Total operating expenses 45,251 44,327

2 unchanged sentences

Interest expense 4,549 7,624

Foreign exchange and other gains, net ( 18,288 ) ( 3,962 ) ( 37,112 ) ( 1,431 )

Loss on extinguishment of debt — 196 — 5,290

Total other expense (income), net ( 10,145 ) 3,362 ( 13,503 ) 27,924

Income (loss) before income taxes 17,847 ( 10,738 ) 21,481 ( 59,300 )

Foreign exchange and other losses (gains), net 2,972 ( 5,986 )

Total other expense 7,521 1,638

Loss before income taxes ( 670 ) ( 7,346 )

Income tax expense 2,816 1,853

Net income (loss) $ 16,477 $ ( 11,587 ) $ 16,542 $ ( 63,056 )

Net loss $ ( 3,486 ) $ ( 9,199 )

Weighted average shares outstanding

1 unchanged sentence

Diluted 10,179 5,683

Earnings (loss) per share

Loss per share

Basic $ ( 0.34 ) $ ( 1.62 )

Diluted $ ( 0.34 ) $ ( 1.62 )

Other comprehensive income (loss), net of tax:

Net income (loss) $ 16,477 $ ( 11,587 ) $ 16,542 $ ( 63,056 )

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

( 22,690 ) ( 5,822 ) ( 46,199 ) ( 2,604 )

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

Net loss $ ( 3,486 ) $ ( 9,199 )

Change in foreign currency translation 4,158 ( 6,992 )

Gain on pension liability 15 30

Comprehensive loss $ ( 6,147 ) $ ( 17,364 ) $ ( 29,504 ) $ ( 65,559 )

Comprehensive income (loss) $ 687 $ ( 16,161 )

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

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

(in thousands, except share information) March 31, 2023 December 31, 2022

Current assets

30 unchanged sentences

Additional paid-in capital 1,366,184 1,253,613

Treasury stock at cost, 467,153 shares

Treasury stock at cost, 708,885 and 570,247 shares

( 142,057 ) ( 138,560 )

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

Cash flows from operating activities

Net income (loss) $ 16,542 $ ( 63,056 )

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

Net loss $ ( 3,486 ) $ ( 9,199 )

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

Depreciation expense 2,570 3,423

2 unchanged sentences

Stock-based compensation expense 841 2,151

Loss on extinguishment of debt — 5,290

Deferred income taxes 421 ( 266 )

11 unchanged sentences

Proceeds from sale of property and equipment 264 118

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

Net cash provided by (used in) investing activities $ ( 2,592 ) $ 4,544

Net cash used in investing activities $ ( 819 ) $ ( 742 )

Cash flows from financing activities

1 unchanged sentence

Repayments on Credit Facility ( 94,426 ) ( 95,883 )

Cash paid to repurchase 2025 Notes — ( 58,596 )

Payment of capital lease obligations ( 273 ) ( 239 )

Repurchases of stock ( 5,370 ) ( 360 )

Deferred financing costs — ( 1,464 )

Net cash provided by (used in) financing activities $ 19,357 $ ( 599 )

6 unchanged sentences

Finance lease right of use assets obtained in exchange for lease obligations 926 100

Conversion of debt to common stock 113,650 —

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

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

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

5 unchanged sentences

Restricted stock issuance, net of forfeitures 1 ( 1,874 ) — — — ( 1,873 )

Conversion of debt to common stock 46 113,604 — — — 113,650

Treasury stock — — ( 3,497 ) — — ( 3,497 )

Currency translation adjustment — — — — 4,158 4,158

2 unchanged sentences

Balance at March 31, 2023 $ 109 $ 1,366,184 $ ( 142,057 ) $ ( 684,081 ) $ ( 123,312 ) $ 416,843

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

Stock-based compensation expense — 765 — — — 765

Restricted stock issuance, net of forfeitures — ( 467 ) — — — ( 467 )

Treasury stock — — — — — —

Currency translation adjustment — — — — ( 22,690 ) ( 22,690 )

Change in pension liability — — — — 66 66

Net income — — — 16,477 — 16,477

Balance at September 30, 2022 $ 62 $ 1,252,945 $ ( 135,562 ) $ ( 667,765 ) $ ( 147,075 ) $ 302,605

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

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2021

Three Months Ended March 31, 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 — 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

Stock-based compensation expense — 1,881 — — — 1,881

Restricted stock issuance, net of forfeitures 1 ( 209 ) — — — ( 208 )

Currency translation adjustment — — — — ( 5,822 ) ( 5,822 )

Change in pension liability — — — — 45 45

Net loss — — — ( 11,587 ) — ( 11,587 )

Balance at September 30, 2021 $ 61 $ 1,248,061 $ ( 134,500 ) $ ( 664,712 ) $ ( 102,892 ) $ 346,018

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

5 unchanged sentences

(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.

With headquarters located in Houston, Texas, FET provides value added solutions that increase the safety and efficiency of energy exploration and production.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries.

The Company's accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

All intercompany transactions have been eliminated in consolidation.

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 and nine months ended September 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.

Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC on March 4, 2022.

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 contributed to materials delays and 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 measures taken in response to COVID-19 outbreaks.

In management's opinion, 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, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 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 (“SEC”) regarding interim financial reporting.

Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of the specified effective date.

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption.

Accounting Standards Adopted in 2022

Convertible Debt.

In August 2020, the FASB issued ASU No.

2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP.

In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-share guidance.

We adopted this new standard as of January 1, 2022.

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

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which the Company adopts as of the specified effective date.

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

Accounting Standard Adopted in 2023

Inflation Reduction Act of 2022.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA, among other provisions, imposes a 15% corporate alternative minimum tax on the adjusted financial statement income of certain large corporations effective for tax years beginning after December 31, 2022 and a 1% excise tax on stock repurchases made by publicly traded U.S.

corporations after December 31, 2022.

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

Reference Rate Reform (Topic 848) .

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04 , which provides temporary, optional practical expedients and exceptions to enable a smoother transition to the new reference rates which will replace the London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, which expanded the scope to include derivative instruments impacted by the discounting transition.

In December 2022, the FASB issued ASU 2022-06, which extended the temporary accounting rules from December 31, 2022 to December 31, 2024.

Effective April 2023, the Company transitioned its Credit Facility from LIBOR to the Secured Overnight Financing Rate.

The Company plans to adopt the guidance prospectively in second quarter 2023 and does not expect it to have a material impact on the Company's consolidated financial statements.

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

8 unchanged sentences

Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time.

Similarly, we record a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract.

Similarly, the Company records a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract.

Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales.

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

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

The following table reflects the changes in our contract assets and contract liabilities balances for the three months ended March 31, 2023 (in thousands):

March 31, 2023 December 31, 2022 Decrease

Accrued revenue $ 671 $ 665

Costs and estimated profits in excess of billings 14,538 15,139

Contract assets - current 15,209 15,804

Contract assets - noncurrent 2,413 2,638

Contract assets $ 17,622 $ 18,442 $ ( 820 ) ( 4 ) %

2 unchanged sentences

Contract liabilities $ 13,841 $ 14,706 $ ( 865 ) ( 6 ) %

During the nine months ended September 30, 2022, our contract assets increased by $ 7.0 million and our contract liabilities decreased by $ 6.2 million primarily due to the timing of milestone billings for projects in our Subsea product line.

During the nine months ended September 30, 2022, we recognized $ 12.9 million of revenue that was included in the contract liability balance at the beginning of the period.

As the majority 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 subsequent five years , including $ 0.5 million paid in the first nine months of 2022.

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.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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

September 30, 2022 December 31, 2021

During the three months ended March 31, 2023, our contract assets decreased by $ 0.8 million and our contract liabilities decreased by $ 0.9 million primarily due to the timing of milestone billings for projects in our Subsea Technologies product line.

During the three months ended March 31, 2023, we recognized $ 7.3 million of revenue that was included in the contract liability balance at the beginning of the period.

Substantially all of our contracts are less than one year in duration.

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.

The Company's significant components of inventory at March 31, 2023 and December 31, 2022 were as follows (in thousands):

March 31, 2023 December 31, 2022

Raw materials and parts $ 95,435 $ 94,182

1 unchanged sentence

Finished goods 197,566 187,448

Gross inventories 312,373 304,625

Total inventories 327,241 309,119

inventory reserve ( 39,627 ) ( 39,291 )

Inventories $ 270,626 $ 241,740

Inventories, net $ 287,614 $ 269,828

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Intangible Assets

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

September 30, 2022

Intangible assets consisted of the following as of March 31, 2023 and December 31, 2022, respectively (in thousands):

March 31, 2023

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

4 unchanged sentences

Trademarks 5,089 ( 1,866 ) 3,223 15

Intangible Assets Total $ 399,868 $ ( 203,287 ) $ 196,581

Total intangible assets $ 403,967 $ ( 218,338 ) $ 185,629

December 31, 2022

5 unchanged sentences

Trademarks 5,089 ( 1,781 ) 3,308 15

Intangible Assets Total $ 407,443 $ ( 190,038 ) $ 217,405

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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

September 30, 2022 December 31, 2021

Total intangible assets $ 403,315 $ ( 211,834 ) $ 191,481

Notes payable and lines of credit as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

March 31, 2023 December 31, 2022

2025 Notes $ 134,208 $ 256,970

4 unchanged sentences

Total debt 152,987 239,910

current maturities ( 502 ) ( 860 )

Long-term debt $ 247,511 $ 232,370

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.

We estimated the fair value of the 2025 Notes to be $ 282.6 million at the issuance date, resulting in a $ 32.9 million discount (“Debt Discount”) at issuance.

As a result, we recognized a $ 28.7 million gain on extinguishment of debt that reflects the difference in the $ 314.8 million net carrying value of the 2021 Notes exchanged, including debt issuance costs and unamortized debt premium, less the $ 282.6 million estimated fair value of 2025 Notes and a $ 3.5 million early participation fee paid to bondholders that participated in the exchange.

The Debt Discount is being amortized as non-cash interest expense over the term of the 2025 Notes using the effective interest method.

current portion ( 988 ) ( 782 )

Long-term debt, net of current portion $ 151,999 $ 239,128

In August 2020, we exchanged $ 315.5 million principal amount of our previous 6.25 % unsecured notes due 2021 for new 9.00 % convertible secured notes due August 2025 (the “2025 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.

As of September 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 per share daily volume weighted average price 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 nine months ended September 30, 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.

During the quarter ended March 31, 2023, $ 122.8 million or 48 % of the principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Credit Facility

4 unchanged sentences

Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S.

Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Facility, which is also secured on a second lien basis by substantially all of the Company's other assets.

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 $ 125.0 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 September 30, 2022, our total borrowing base was $ 160.0 million, of which $ 10.7 million was drawn and $ 22.1 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 127.2 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 0.00 %, 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 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 5.02 % for the nine months ended September 30, 2022.

As of March 31, 2023, our total borrowing base was $ 178.3 million, of which $ 25.0 million was drawn and $ 24.0 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 129.3 million.

Prior to the amendment discussed below, borrowings under the U.S.

Line were subject to an interest rate equal to, at the Company's option, either (a) the LIBOR, 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, with the U.S.

Line base rate 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 were subject to an interest rate during the reporting period equal to, our subsidiary's option, either (a) the Canadian Dollar Offered Rate (“CDOR”), 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 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 7.96 % for the three months ended March 31, 2023.

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 %.

1 unchanged sentence

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.

In April 2023, the Credit Facility was amended to, among other things, (a) replace the interest rate benchmark for borrowings denominated in U.S.

dollars from LIBOR to the Secured Overnight Financing Rate;

(b) reset existing capacity under the general "Permitted Dispositions" basket;

and (c) increase the domestic letter of credit sublimit from $ 45.0 million to $ 70.0 million.

Deferred Loan Costs

2 unchanged sentences

Other debt consists primarily of various finance leases of equipment.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Letters of Credit and Guarantees

We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts.

We had $ 22.1 million and $ 19.1 million in total outstanding letters of credit as of September 30, 2022 and December 31, 2021, respectively.

We had $ 24.0 million and $ 21.8 million in total outstanding letters of credit as of March 31, 2023 and December 31, 2022, 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 and nine months ended September 30, 2022, we recorded a tax expense of $ 1.4 million and $ 4.9 million, respectively.

For the three and nine months ended September 30, 2021, we recorded a tax expense of $ 0.8 million and $ 3.8 million, respectively.

For the three months ended March 31, 2023 and 2022, the Company recorded a tax expense of $ 2.8 million and $ 1.9 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.

3 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

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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

As of September 30, 2022, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions:

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, 2023, 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 September 30, 2022.

As a result, we have certain valuation allowances against our deferred tax assets as of March 31, 2023.

Fair Value Measurements

The Company had $ 10.7 million of borrowings outstanding under the Credit Facility as of September 30, 2022.

The Company had $ 25.0 million of borrowings outstanding under the Credit Facility as of March 31, 2023.

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 September 30, 2022, the fair value and the carrying value of our 2025 Notes approximated $ 248.2 million and $ 236.4 million, respectively.

At March 31, 2023, the fair value and the carrying value of our 2025 Notes approximated $ 130.3 million and $ 125.3 million, respectively.

At December 31, 2022, the fair value and the carrying value of our 2025 Notes approximated $ 272.8 million and $ 237.9 million, respectively.

There were no other significant outstanding financial instruments as of September 30, 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 nine months ended September 30, 2022.

There were no other significant outstanding financial instruments as of March 31, 2023 and December 31, 2022 that required measuring the amounts at fair value on a recurring basis.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Business Segments

3 unchanged sentences

Summary financial data by segment follows (in thousands):

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Drilling & Downhole $ 76,794 $ 71,260

3 unchanged sentences

Total revenue $ 188,957 $ 155,174

Operating income (loss):

Segment operating income (loss)

Drilling & Downhole $ 8,438 $ 5,986

2 unchanged sentences

Corporate ( 7,032 ) ( 9,205 )

Segment operating income (loss) 7,650 ( 7,469 ) 7,040 ( 32,738 )

Gain on disposal of assets and other ( 52 ) ( 93 ) ( 938 ) ( 1,362 )

Total segment operating income (loss) 6,591 ( 5,686 )

Loss (gain) on disposal of assets and other ( 260 ) 22

Operating income (loss) $ 6,851 $ ( 5,708 )

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Drilling & Downhole $ 348,581 $ 340,819

3 unchanged sentences

Total assets $ 849,956 $ 834,757

Corporate assets primarily include cash and certain prepaid assets.

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

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

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Drilling Technologies $ 40,777 $ 29,235

7 unchanged sentences

Total revenue $ 188,957 $ 155,174

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

United States $ 129,186 $ 97,232

Middle East 17,982 11,153

Canada 13,668 11,389

Europe & Africa 11,672 15,377

Middle East 12,751 10,916 38,700 33,196

Asia-Pacific 9,537 7,302 26,963 31,097

Latin America 8,768 10,964

Asia-Pacific 7,681 9,059

Total revenue $ 188,957 $ 155,174

1 unchanged sentence

In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, some of which may or may not be covered by insurance.

Management reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated.

The reserves accrued at September 30, 2022 and December 31, 2021, respectively, are immaterial.

Management has 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, 2023 and December 31, 2022, 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.

In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris, S.A.

(together “Tenaris”) in the United States District Court for the Southern District of Texas seeking a declaration that its DURACOIL TM products do not infringe certain Tenaris patents related to coiled tubing.

Tenaris filed counterclaims against Global Tubing alleging DURACOIL TM products infringe three patents.

Tenaris sought unspecified damages and a permanent injunction.

In response, Global Tubing alleged that its products do not infringe and the Tenaris patents are invalid and unenforceable.

On March 20, 2023, the court agreed with Global Tubing, finding all patents unenforceable and dismissing all Tenaris infringement claims.

Global Tubing intends to seek an award of its attorneys’ fees and costs incurred as a result of the litigation.

For further disclosure regarding certain litigation matters, refer to Note 12 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

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 nine months ended September 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

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net income (loss) - basic $ 16,477 $ ( 11,587 ) 16,542 ( 63,056 )

Interest on dilutive convertible notes due 2025 2,762 — 8,286 —

Net income (loss) - diluted $ 19,239 $ ( 11,587 ) 24,828 ( 63,056 )

Three Months Ended March 31,

Net loss $ ( 3,486 ) $ ( 9,199 )

Weighted average shares outstanding - basic 10,179 5,683

2 unchanged sentences

Weighted average shares outstanding - diluted 10,179 5,683

Earnings (loss) per share

Loss per share

Basic $ ( 0.34 ) $ ( 1.62 )

Diluted $ ( 0.34 ) $ ( 1.62 )

The diluted earnings per share calculation excludes approximately 54 thousand shares for the three months ended September 30, 2022, and 95 thousand shares for the nine months ended September 30, 2022, because they were anti-dilutive.

For the three months and nine months ended September 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.

For the three months ended March 31, 2023 and 2022, we excluded all potentially dilutive restricted shares and stock options 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 nine months ended September 30, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years .

In addition, during the nine months ended September 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 an additional 325,000 shares to be added to the employee equity incentive plan and the fair value of the awards was remeasured as of May 10, 2022.

In connection with their remeasurement, the Company determined that the awards would be settled in shares instead of cash and they were classified as equity.

During the three months ended March 31, 2023, the Company granted 86,912 time-based restricted stock units to employees that vest ratably over three years .

In addition, during the three months ended March 31, 2023, the Company granted 86,912 performance restricted stock units to employees (assuming target performance) that vest based upon the total shareholder return of the Company's common stock as compared to a group of peer companies over three different performance periods.

The performance periods run from January 1, 2023 through December 31, 2023, January 1, 2023 through December 31, 2024 and January 1, 2023 through December 31, 2025, and 1/3 of each award is allocated to each performance period.

The performance restricted stock units may settle for between 0 % and 200 % of the target units granted in shares of the Company’s common stock.

Related Party Transactions

The Company has sold and purchased inventory, services and fixed assets to and from certain affiliates of certain directors.

The Company has sold and purchased inventory, services and fixed assets to and from affiliates of a former director.

The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.

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