What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 87 added, 66 removed, 329 unchanged (32% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

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

(in thousands, except per share information) 2023 2022 2023 2022

6 unchanged sentences

Total operating expenses 44,899 42,589 90,150 86,916

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

Operating income 6,407 5,984 13,258 276

Other expense (income)

1 unchanged sentence

Foreign exchange and other losses (gains), net 6,436 ( 12,838 ) 9,408 ( 18,824 )

Total other expense 7,521 1,638

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

Total other expense (income), net 11,125 ( 4,996 ) 18,646 ( 3,358 )

Income (loss) before income taxes ( 4,718 ) 10,980 ( 5,388 ) 3,634

Income tax expense 1,861 1,716 4,677 3,569

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

Net income (loss) $ ( 6,579 ) $ 9,264 $ ( 10,065 ) $ 65

Weighted average shares outstanding

1 unchanged sentence

Diluted 10,210 10,481 10,195 5,910

Loss per share

Earnings (loss) per share

Basic $ ( 0.64 ) $ 1.61 $ ( 0.99 ) $ 0.01

1 unchanged sentence

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

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

Net income (loss) $ ( 6,579 ) $ 9,264 $ ( 10,065 ) $ 65

Change in foreign currency translation 7,749 ( 16,518 ) 11,907 ( 23,510 )

5 unchanged sentences

Condensed Consolidated Balance Sheets

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

(in thousands, except share information) June 30, 2023 December 31, 2022

Current assets

40 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2023 2022

Cash flows from operating activities

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

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

Net income (loss) $ ( 10,065 ) $ 65

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

Depreciation expense 5,027 6,742

15 unchanged sentences

Proceeds from sale of property and equipment 1,106 2,608

Payments related to business acquisitions and dispositions — ( 485 )

Net cash used in investing activities ( 1,703 ) ( 1,447 )

4 unchanged sentences

Repurchases of stock ( 5,370 ) ( 361 )

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

Net cash provided by financing activities 4,123 32,642

Effect of exchange rate changes on cash 798 ( 590 )

10 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

11 unchanged sentences

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

Stock-based compensation expense — 1,257 — — — 1,257

Currency translation adjustment — — — — 7,749 7,749

Change in pension liability — — — — 6 6

Net loss — — — ( 6,579 ) — ( 6,579 )

Balance at June 30, 2023 $ 109 $ 1,367,441 $ ( 142,057 ) $ ( 690,660 ) $ ( 115,557 ) $ 419,276

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, 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.

10 unchanged sentences

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.

Operating results for the three and six months ended June 30, 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.

13 unchanged sentences

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.

Effective April 2023, the Company transitioned its Credit Facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

The adoption of this standard did not 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, 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.

Similarly, the Company records 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 three months ended March 31, 2023 (in thousands):

March 31, 2023 December 31, 2022 Decrease

The following table reflects the changes in our contract assets and contract liabilities balances for the six months ended June 30, 2023 (in thousands):

June 30, 2023 December 31, 2022 Decrease

Accrued revenue $ 820 $ 665

6 unchanged sentences

Contract liabilities $ 14,461 $ 14,706 $ ( 245 ) ( 2 ) %

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.

During the six months ended June 30, 2023, our contract assets decreased by $ 2.9 million and our contract liabilities decreased by $ 0.2 million primarily due to the timing of milestone billings for projects in our Subsea Technologies product line.

During the six months ended June 30, 2023, we recognized $ 11.4 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

The Company's significant components of inventory at June 30, 2023 and December 31, 2022 were as follows (in thousands):

June 30, 2023 December 31, 2022

Raw materials and parts $ 98,177 $ 94,182

8 unchanged sentences

Intangible Assets

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

March 31, 2023

Intangible assets consisted of the following as of June 30, 2023 and December 31, 2022, respectively (in thousands):

June 30, 2023

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

13 unchanged sentences

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

Notes payable and lines of credit as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, 2023 December 31, 2022

2025 Notes $ 134,208 $ 256,970

9 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.

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.

During the six months ended June 30, 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.

2 unchanged sentences

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.

Our senior secured revolving credit facility ( “ Credit Facility”), which has a maturity date of September 2026, provides revolving credit commitments of $ 179.0 million (with a sublimit of up to $ 70.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S.

Line”), of which up to $ 20.0 million is available to certain of our Canadian subsidiaries for loans in U.S.

4 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, 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 %.

As of June 30, 2023, our total borrowing base was $ 178.3 million, of which $ 10.0 million was drawn and $ 22.8 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 145.5 million.

Borrowings under the U.S.

Line are subject to an interest rate equal to, at the Company's option, either (a) the SOFR, 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 SOFR 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 weighted average interest rate under the Credit Facility was approximately 8.00 % for the six months ended June 30, 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.

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.

The Company had $ 22.8 million and $ 21.8 million in total outstanding letters of credit as of June 30, 2023 and December 31, 2022, respectively.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

Letters of Credit and Guarantees

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

For the three and six months ended June 30, 2023, the Company recorded a tax expense of $ 1.9 million and a tax expense of $ 4.7 million, respectively.

For the three and six months ended June 30, 2022, the Company recorded a tax expense of $ 1.7 million and $ 3.6 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.

4 unchanged sentences

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

As of March 31, 2023, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions:

As of June 30, 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 March 31, 2023.

As a result, we have certain valuation allowances against our deferred tax assets as of June 30, 2023.

Fair Value Measurements

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

The Company had $ 10.0 million of borrowings outstanding under the Credit Facility as of June 30, 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 March 31, 2023, the fair value and the carrying value of our 2025 Notes approximated $ 130.3 million and $ 125.3 million, respectively.

At June 30, 2023, the fair value and the carrying value of our 2025 Notes approximated $ 132.3 million and $ 126.1 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 March 31, 2023 and December 31, 2022 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, 2023.

There were no other significant outstanding financial instruments as of June 30, 2023 and December 31, 2022 that required measuring the amounts at fair value on a recurring basis.

Forum Energy Technologies, Inc.

6 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,

2023 2022 2023 2022

Drilling & Downhole $ 80,677 $ 76,493 $ 157,471 $ 147,753

3 unchanged sentences

Total revenue $ 185,449 $ 172,246 $ 374,406 $ 327,420

Segment operating income (loss)

Segment operating income

Drilling & Downhole $ 8,290 $ 8,528 $ 16,728 $ 14,514

4 unchanged sentences

Loss (gain) on disposal of assets and other 542 ( 908 ) 282 ( 886 )

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

Operating income $ 6,407 $ 5,984 $ 13,258 $ 276

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Drilling & Downhole $ 353,678 $ 340,819

4 unchanged sentences

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

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

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,

2023 2022 2023 2022

Drilling Technologies $ 45,265 $ 33,540 $ 86,042 $ 62,775

7 unchanged sentences

Total revenue $ 185,449 $ 172,246 $ 374,406 $ 327,420

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 March 31,

Three Months Ended

June 30, Six Months Ended June 30,

2023 2022 2023 2022

United States $ 119,544 $ 114,626 $ 248,730 $ 211,858

8 unchanged sentences

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.

The reserves accrued at June 30, 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.

6 unchanged sentences

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

Tenaris has appealed the final judgment and Global Tubing has filed a cross-appeal.

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.

4 unchanged sentences

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

Three Months Ended

June 30, Six Months Ended June 30,

2023 2022 2023 2022

Net income (loss) - basic $ ( 6,579 ) $ 9,264 $ ( 10,065 ) $ 65

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

Net income (loss) - diluted $ ( 6,579 ) $ 12,026 $ ( 10,065 ) $ 65

Weighted average shares outstanding - basic 10,210 5,747 10,195 5,715

2 unchanged sentences

Weighted average shares outstanding - diluted 10,210 10,481 10,195 5,910

Loss per share

Earnings (loss) per share

Basic $ ( 0.64 ) $ 1.61 $ ( 0.99 ) $ 0.01

Diluted $ ( 0.64 ) $ 1.15 $ ( 0.99 ) $ 0.01

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.

For the three months and six months ended June 30, 2023, 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.

For the three months and six months ended June 30, 2022, the diluted earnings per share calculation excludes approximately 59 thousand and 116 thousand shares, respectively.

Stockholders' Equity

Stock-based compensation

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.

During the six months ended June 30, 2023, the Company granted 86,912 time-based restricted stock units to employees that vest ratably over three years .

In addition, during the six months ended June 30, 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.

4 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