What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-03-05 compared with 2023-02-28 · 174 added, 159 removed, 809 unchanged (29% of the section changed)

14 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 5, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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Houston, Texas

February 28, 2023

March 5, 2024

We have served as the Company’s auditor since 2019.

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(in thousands, except per share information) 2023 2022

Revenues $ 699,913 $ 541,068

Revenue $ 738,864 $ 699,913

Cost of sales 534,711 511,387

2 unchanged sentences

Selling, general and administrative expenses 180,389 179,471

Transaction expenses 2,892 —

Gain on sale-leaseback transactions — ( 7,000 )

Gain on disposal of assets and other ( 1,271 ) ( 1,052 )

Loss (gain) on disposal of assets and other 156 ( 1,271 )

Total operating expenses 183,437 171,200

Operating income (loss) 17,326 ( 44,493 )

Operating income 20,716 17,326

Other expense (income)

Interest expense 18,297 31,525

Loss on extinguishment of debt — 5,290

Foreign exchange losses (gains) and other, net 10,233 ( 24,548 )

12 unchanged sentences

Change in foreign currency translation 12,757 ( 28,713 )

Gain on pension liability 2,256 840

Gain (loss) on pension liability ( 508 ) 2,256

Comprehensive loss $ ( 6,627 ) $ ( 22,745 )

51 unchanged sentences

Net income (loss) $ ( 18,876 ) $ 3,712

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

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

Depreciation expense 10,799 12,441

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Deferred income taxes ( 204 ) ( 130 )

Loss on extinguishment of debt — 5,290

Gain on sale-leaseback transactions — ( 7,000 )

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Billings in excess of costs and profits recognized 3,851 ( 9,233 )

Net cash used in operating activities ( 17,054 ) ( 15,775 )

Net cash provided by (used in) operating activities 8,183 ( 17,054 )

Cash flows from investing activities

1 unchanged sentence

Proceeds from sale of property and equipment 1,371 3,007

Proceeds from settlement of note receivable — 10,784

Acquisition of businesses, net of cash acquired — ( 485 )

Proceeds from sale of business — ( 1,283 )

Proceeds from sale-leaseback transactions — 32,109

Net cash provided by investing activities 27,139 10,698

Net cash provided by (used in) investing activities ( 6,573 ) 27,139

Cash flows from financing activities

1 unchanged sentence

Repayments on revolving Credit Facility ( 451,738 ) ( 544,126 )

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

Repurchases of stock ( 5,996 ) ( 3,826 )

25 unchanged sentences

Stock-based compensation expense — 4,205 — — — 4,205

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

Treasury stock — — ( 2,998 ) — — ( 2,998 )

1 unchanged sentence

Currency translation adjustment — — — — ( 28,713 ) ( 28,713 )

Net loss — — — ( 82,651 ) — ( 82,651 )

Net income — — — 3,712 — 3,712

Balance at December 31, 2022 $ 62 $ 1,253,613 $ ( 138,560 ) $ ( 680,595 ) $ ( 127,485 ) $ 307,035

2 unchanged sentences

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

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

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

Change in pension liability — — — — ( 508 ) ( 508 )

Currency translation adjustment — — — — 12,757 12,757

Net income — — — 3,712 — 3,712

Net loss — — — ( 18,876 ) — ( 18,876 )

Balance at December 31, 2023 $ 109 $ 1,369,288 $ ( 142,057 ) $ ( 699,471 ) $ ( 115,236 ) $ 412,633

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Forum Energy Technologies, Inc.

(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.

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

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

Summary of Significant Accounting Policies

Basis of presentation

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

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

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

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

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.

In 2022, ongoing COVID-19 outbreaks and related work restrictions continued to disrupt global supply chains contributing to materials delays and inflationary pressures.

The Company anticipates that future outbreaks of COVID-19, should they occur, will continue to impact our liquidity, financial condition and future results of operations.

Use of estimates

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Accounts receivable-trade

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The changes in allowance for doubtful account during the years ended December 31, 2023 and 2022 were as follows (in thousands):

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Period ended Balance at beginning of period Charged to expense Deductions or other Balance at end of period

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Lease obligations

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Our leases have remaining terms of one to 11 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The operating lease assets also include any upfront lease payments made and exclude lease incentives and initial direct costs incurred.

The operating lease assets also include any upfront lease payments made

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

and exclude lease incentives and initial direct costs incurred.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Revenue recognition and deferred revenue

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Furthermore, since our customer payment terms are short-term in nature, we have also elected to apply the practical expedient which allows an entity to not adjust for the effects of a significant financing component if it expects that the customer’s payment period will be less than one year in duration.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Contract Value .

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

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

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

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

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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, 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, we record a contract liability.

Similarly, when we receive consideration, or such consideration is unconditionally

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, we record a contract liability.

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

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Trade accounts receivable consist of uncollateralized receivables from domestic and international customers.

For the years ended December 31, 2022 and 2021, no one customer accounted for 10% or more of the total revenue or 10% or more of the total accounts receivable balance at the end of the respective period.

For the years ended December 31, 2023 and 2022, no customer accounted for 10% or more of the total revenue or 10% or more of the total accounts receivable balance at the end of the respective period.

Stock-based compensation

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

local currency translation

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

• Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

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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.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), 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 Standards Adopted in 2023

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 consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Inflation Reduction Act of 2022.

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corporations after December 31, 2022.

The Company is in the process of evaluating the IRA and the impact it may have on our consolidated financial statements.

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 (“SOFR”).

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Segment Reporting (Topic 280) .

In November 2023, FASB issued ASU 2023-07, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

This update is effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods within fiscal years after December 15, 2024, early adoption is permitted.

The Company is in the process of evaluating the impact it may have on our consolidated financial statements.

Income Taxes (Topic 740).

In December 2023, FASB issued ASU 2023-09, which improves income tax disclosures.

This update is effective for fiscal years beginning after December 15, 2025, early adoption is permitted.

This update should be applied prospectively but retrospective application is permitted.

The Company is in the process of evaluating the impact it may have on our consolidated financial statements.

Disaggregated revenues

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Contract liabilities $ 14,772 $ 14,706 $ 66 — %

During the year ended December 31, 2022, our contract assets increased by $ 7.9 million and our contract liabilities decreased by $ 2.3 million primarily due to the timing of milestone billings in our Subsea Technologies product line.

During the year ended December 31, 2023, our contract assets decreased by $ 1.4 million and our contract liabilities increased by $ 0.1 million primarily due to the timing of milestone billings in our Subsea Technologies product line.

The noncurrent portion of contract assets is recorded on the consolidated balance sheets as other Iong-term assets.

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As such, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

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 and $ 1.0 million paid in 2022, with the balance expected to be paid over the next four years .

Hawker is a manufacturer of hydraulic pickup and laydown units.

This acquisition is included in the Drilling product line within the Drilling & 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.

On November 1, 2023, the Company and its wholly owned subsidiary entered into a purchase agreement with Variperm Holdings Ltd.

(“Variperm”) and its shareholders to acquire all of the issued and outstanding common shares of Variperm (the “Variperm Acquisition”).

The transaction closed on January 4, 2024.

Variperm, headquartered in Canada, is a manufacturer of downhole technology solutions, providing sand and flow control products for heavy oil applications.

Total consideration for the Variperm Acquisition includes approximately $ 150.0 million of cash and 2.0 million shares of the Company’s common stock, subject to customary purchase price adjustments set forth in the purchase agreement.

In connection with the closing, to fund the cash portion of the purchase price, the Company borrowed $ 90.0 million under its senior secured asset-based lending facility (“Credit Facility”) on January 2, 2024 and entered into a $ 60.0 million second lien seller term loan credit agreement (“Seller Term Loan”) on January 4, 2024.

Forum Energy Technologies, Inc.

2 unchanged sentences

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

2022 December 31,

Raw materials and parts $ 92,563 $ 94,182

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Notes payable and lines of credit consisted of the following as of (in thousands):

2022 December 31,

2025 Notes $ 134,208 $ 256,970

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Long-term debt, net of current portion $ 129,567 $ 239,128

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”).

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.

Our 9.00 % convertible secured notes due August 2025 (“2025 Notes”), of which $ 134.2 million principal amount was outstanding at December 31, 2023, 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 December 31, 2022, approximately $ 122.8 million principal amount of the 2025 Notes was 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 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.

These conditions were satisfied on December 27, 2022 and as a result, $ 122.8 million or 47.8 % of the principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock, which settled in January 2023.

During 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 January 2023, $ 122.8 million or 48 % of the then-outstanding principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock.

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.

In November 2023, the Credit Facility was modified to (i) permit the Variperm Acquisition, (ii) permit the incurrence of new secured notes in an amount not to exceed $ 200.0 million (which notes will, in part, refinance the 2025 Notes) and (iii) update the applicable base rate for loans denominated in Canadian dollars from CDOR to term Canadian Overnight Repo Rate Average (“CORRA”);

and effective upon consummation of the Variperm Acquisition, (a) extend the maturity date of the Credit Facility to September 8, 2028, (b) permit the incurrence of the Seller Term Loan in an amount not to exceed $ 60.0 million in connection with the consummation of the Variperm Acquisition, and (c) increase the aggregate revolving commitments from $ 179.0 million to $ 250.0 million .

Following such amendment, our Credit Facility provides revolving credit commitments of $ 250.0 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) (“U.S.

Line”), of which up to $ 50.0 million is available to certain of our Canadian subsidiaries for loans in U.S.

or Canadian dollars (with a sublimit of up to $ 10.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).

Lender commitments under the Credit Facility, subject to certain limitations, may be increased by an additional $ 100.0 million .

The Credit Facility matures in September 2028.

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 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 $ 125.5 million (subject to a quarterly reduction of $ 0.5 million ) and 80.0 % of the total borrowing base.

Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory.

As of December 31, 2022, our total borrowing base was $ 177.9 million, of which no amounts were drawn and $ 21.8 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 156.1 million.

As of December 31, 2023, our total borrowing base was $ 167.4 million, of which no amount was drawn and $ 20.3 million was used as security for outstanding letters of credit, resulting in remaining availability of $ 147.1 million.

Borrowings under the U.S.

line bear interest at a rate equal to, at our option, either (a) the London Interbank Offered Rate (“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

Line bear interest at a rate equal to, at our 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.

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 term SOFR plus 1.00 % per annum, and (iii) the “prime rate” of interest announced by Wells Fargo Bank, National Association, subject to a floor of 0.00 %.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

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”), 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 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 %.

If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 22.4 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days.

Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.

Borrowings under the Canadian Line bear interest at a rate equal to, at our Canadian borrowers’ option, either (a) CORRA, 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 Floor, (ii) the one-month CORRA and (iii) 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 8.36 % and 6.83 % for the years ended December 31, 2023 and 2022.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375 % on the unused portion of revolving commitments if average usage of the Credit Facility is greater than 50 % and (b) 0.500 % on the unused portion of revolving commitments if average usage of the Credit Facility is less than or equal to 50 %.

If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 31.25 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such threshold for 60 consecutive days.

Subject to customary exceptions, all obligations under the Credit Facility are guaranteed, jointly and severally, by our wholly-owned U.S.

subsidiaries and, in the case of the Canadian Line, our wholly-owned Canadian subsidiaries, and are secured by substantially all assets of each such entity and the Company, subject to customary exclusions.

The Credit Facility contains various covenants that, among other things, limit our ability (none of which are absolute) to incur additional indebtedness or issue certain preferred shares, grant certain liens, make certain loans and investments, pay dividends, make distributions or make other restricted payments, enter into mergers or acquisitions unless certain conditions are satisfied, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions or engage in certain asset dispositions.

If an event of default exists under the Credit Facility, the lenders will have the right to accelerate the maturity of the obligations outstanding under the Credit Facility and exercise other rights and remedies.

Obligations outstanding under the Credit Facility, however, will be automatically accelerated upon an event of default arising from a bankruptcy or insolvency event.

An event of default includes, among other things, nonpayment of principal, interest, fees or other amounts within certain grace periods;

representations and warranties proving to be untrue in any material respect;

failure to perform or otherwise comply with covenants in the Credit Facility or other loan documents, subject, in certain instances, to grace periods;

cross-defaults to certain other indebtedness if such default occurs at the final maturity of such indebtedness or if the effect of such default is to cause, or permit the holders of such indebtedness to cause, the acceleration of such indebtedness;

bankruptcy or insolvency events;

material monetary judgment defaults;

invalidity or unenforceability of the Credit Facility or any other loan document;

and the occurrence of a Change of Control (as defined in the Credit Facility).

Other debt consists of various finance leases of equipment.

Deferred loan costs

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

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

See Note 18 Subsequent Events for further information related to the Seller Term Loan entered into on January 4, 2024.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Future principal payments under long-term debt for each of the years ending December 31 are as follows (in thousands):

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Total debt $ 130,753

The above future payments include $ 122.8 million of the principal amount of the 2025 Notes mandatorily converted and settled in January 2023.

Our lease portfolio primarily consists of operating leases for certain manufacturing facilities, warehouses, service facilities, office spaces, equipment and vehicles.

The following table summarizes the supplemental consolidated balance sheet information related to leases as of December 31, 2023 and 2022 (in thousands):

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Classification December 31, 2022 December 31, 2021

Classification 2023 2022

Operating lease assets Operating lease assets $ 55,399 $ 57,270

6 unchanged sentences

Total lease liabilities $ 73,514 $ 75,415

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The following table summarizes the components of lease expenses (in thousands):

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Present value of lease liabilities $ 70,650 $ 2,864 $ 73,514

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The following table summarizes the weighted-average remaining term and weighted average discount rates related to leases as of December 31, 2023 and 2022:

December 31, 2022 December 31, 2021

Year ended December 31,

Weighted-average remaining lease term (years)

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Financing leases 6.89 % 6.43 %

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The following table summarizes the supplemental cash flow information related to leases for the years ended December 31, 2023 and 2022 (in thousands):

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Income (loss) before income taxes $ ( 7,814 ) $ 10,349

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The components of income tax expense (benefit) were as follows (in thousands):

1 unchanged sentence

federal and state $ 101 $ 196

6,571 ( 3,384 )

Total current 11,266 6,767

2 unchanged sentences

Total deferred ( 204 ) ( 130 )

Income tax expense (benefit) $ 6,637 $ 642

Income tax expense $ 11,062 $ 6,637

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

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Nondeductible expenses 806 ( 10.3 ) % 3,157 30.5 %

CARES Act — — % 113 0.1 %

Valuation allowance 8,313 ( 106.4 ) % 8,077 78.0 %

Other ( 12 ) 0.1 % 18 0.2 %

Income tax benefit $ 6,637 64.1 % $ 642 0.8 %

Income tax expense $ 11,062 ( 141.6 ) % $ 6,637 64.1 %

Our effective tax rate was 141.6 % and 64.1 % for the years ended December 31, 2023 and 2022, respectively.

The tax benefit for the years ended December 31, 2022 and 2021 includes an increase in our valuation allowance of $ 8.1 million and $ 31.1 million, respectively, consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and Saudi Arabia as further described below under the primary components of deferred taxes.

The tax expense for the years ended December 31, 2023 and 2022 includes an increase in our valuation allowance of $ 8.3 million and $ 8.1 million, respectively, consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and Saudi Arabia as further described below under the primary components of deferred taxes.

The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025.

We are currently evaluating the potential impact on our consolidated financial statements and related disclosures.

This may have an impact on our future effective tax rate.

Forum Energy Technologies, Inc.

2 unchanged sentences

The primary components of deferred taxes include (in thousands):

December 31, 2022 December 31, 2021

Deferred tax assets

36 unchanged sentences

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

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

income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S.

taxable income with

We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

regard to our investment in these foreign subsidiaries.

evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S.

taxable income with regard to our investment in these foreign subsidiaries.

Determining the amount of U.S.

10 unchanged sentences

Additional based on tax positions related to current year 1,477

Reduction based on tax positions related to prior years ( 822 )

Settlement with tax authorities —

Lapse of statute of limitations ( 1,587 )

26 unchanged sentences

The injuries alleged by plaintiffs in these cases range from mesothelioma and other cancers to asbestosis.

The earliest claims against our subsidiary were filed in New Jersey in 1998, and our subsidiary currently has active cases in Missouri, New Jersey, New York, and Illinois.

The earliest claims against our subsidiary were filed in New Jersey in 1998, and our subsidiary currently has active cases in New Jersey, New York, and Illinois.

These complaints do not typically include requests for a specific amount of damages.

6 unchanged sentences

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

To date, asbestos claims have not had a material adverse effect on our business, financial condition, results of operations, or cash flow, as our annual out-of-pocket costs over the last five years has been less than $ 300,000 .

There were approximately forty new cases filed against our subsidiary in each of last two years, and a significant number of existing cases were dismissed, settled or otherwise disposed of over the last year.

To date, asbestos claims had no material adverse effect on our business, financial condition, results of operations, or cash flow, as our annual out-of-pocket costs over the last five years have been less than $ 300,000 .

There were approximately 22 new cases filed against our subsidiary in each of last two years, and a significant number of existing cases were dismissed, settled or otherwise disposed of over the last year.

We currently have fewer than 110 lawsuits pending against this subsidiary.

6 unchanged sentences

Our subsidiary and the subscribing insurers have the right to withdraw from this agreement, but to date, no party has exercised this right or expressed an intent to do so.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Tenaris litigation

2 unchanged sentences

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

Tenaris seeks unspecified damages and a permanent injunction.

Global Tubing is vigorously defending itself and alleges the Tenaris patents are invalid and unenforceable.

While Global Tubing believes that it will prevail in showing that its products do not infringe on Tenaris’s patents, if Tenaris were to obtain a permanent injunction, Global Tubing may be barred from selling certain of its DURACOIL TM products.

Alternatively, if we are ordered to pay money damages and/or royalties for the life of the patents in question, Global Tubing’s and the Company’s financial performance may be materially adversely impacted.

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.

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Portland Harbor Superfund

One of the Company’s dormant subsidiaries is one of several named defendants in a suit filed by the Port of Portland, Oregon in May 2009 seeking reimbursement of costs related to an environmental study at the Port of Portland, and in March 2010, was identified as a potentially responsible party by the Environmental Protection Agency with respect to the Portland Harbor Superfund Site.

One of the Company’s dormant subsidiaries is one of several named defendants in a suit filed by the Port of Portland, Oregon in May 2009 seeking reimbursement of costs related to an environmental study at the Port of Portland, and in March 2010, was identified as a potentially responsible party by the EPA with respect to the Portland Harbor Superfund Site.

The subsidiary is indemnified for environmental contamination losses by a third party that has assumed responsibility and is providing a defense of the claims.

5 unchanged sentences

Letters of credit and guarantees

The Company executes letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee the Company fulfilling certain performance obligations relating to certain large contracts.

The Company executes letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee the Company fulfills certain performance obligations relating to certain large contracts.

At December 31, 2023, the Company had $ 20.3 million in letters of credit outstanding.

10 unchanged sentences

Diluted $ ( 1.85 ) $ 0.62

The diluted earnings per share calculation excludes approximately 84 thousand shares for 2022 because they were anti-dilutive.

For the year ended December 31, 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 the period.

For 2022, the diluted earnings per share calculation excludes approximately 84 thousand shares because they were anti-dilutive.

For the year ended December 31, 2022, we excluded the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive.

For the year ended December 31, 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 the period.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Diluted earnings per share was calculated using treasury stock method for the restricted shares and stock options;

and if-converted method for the convertible notes.

Employee Benefits

3 unchanged sentences

We contribute by matching a percentage of each employee’s contributions.

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

Matching contributions were reinstated at the beginning of 2022.

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

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

The expense under the Company’s retirement plan was $ 3.4 million and zero for the years ended December 31, 2022 and 2021, respectively.

The expense under the Company’s retirement plan was $ 4.4 million and $ 3.4 million for the years ended December 31, 2023 and 2022, respectively.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Long-Term Incentive Compensation

Stock-based compensation

In August 2010, we adopted the 2010 Stock Incentive Plan (the “2010 Plan”) to allow for employees, directors and consultants of the Company and its subsidiaries to share in stock ownership in the Company through the award of stock options, restricted stock, restricted stock units, performance shares or any combination thereof.

In August 2010, we adopted the 2010 Stock Incentive Plan (“2010 Plan”) to allow for employees, directors and consultants of the Company and its subsidiaries to share in stock ownership in the Company through the award of stock options, restricted stock, restricted stock units, performance shares or any combination thereof.

Under the terms of the 2010 Plan, a total of 925 thousand shares were authorized for issuance pursuant to awards.

26 unchanged sentences

No stock options were granted in 2023 or 2022.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Restricted stock

3 unchanged sentences

Nonvested at December 31, 2022 —

Vested ( 10 )

Nonvested at December 31, 2023 7

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Restricted stock units

7 unchanged sentences

Of the restricted stock units granted during 2023, 87 thousand shares vest ratably over three years .

The remaining 101 thousand shares granted during 2022 vest ratably over three years dependent upon achieving a minimum stock price of $ 23.68 for 20 trading days during each of three different 3-year , 2-year and 1-year performance periods.

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

In May 2022, the Company’s shareholders approved an additional 400 thousand shares to be added to the 2016 Plan and the fair value of the awards was remeasured.

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

The remaining 87 thousand shares are 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.

The weighted average grant date fair value of the restricted stock units was $ 31.70 and $ 18.94 per share during the years ended December 31, 2023, and 2022, respectively.

The total grant date fair value of units vested was $ 3.8 million and $ 4.3 million during 2023 and 2022, respectively.

Liability-classified awards

During 2022, 33 thousand cash-settled phantom stock units were issued to employees that vest ratably over two years .

These awards have a maximum payout that is calculated based on five times the stock price on the date of grant.

Forum Energy Technologies, Inc.

17 unchanged sentences

We consider the Chief Operating Decision Maker to be the Chief Executive Officer.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Summary financial data by reportable segment follows (in thousands):

4 unchanged sentences

Eliminations ( 2,204 ) ( 1,122 )

Total revenues $ 699,913 $ 541,068

Total revenue $ 738,864 $ 699,913

Segment operating income (loss)

3 unchanged sentences

Corporate ( 27,253 ) ( 34,268 )

Total segment operating income (loss) 9,055 ( 45,545 )

Total segment operating income 23,764 9,055

Transaction expenses 2,892 —

Gain on sale-leaseback transactions — ( 7,000 )

Gain on disposal of assets and other ( 1,271 ) ( 1,052 )

Operating income (loss) $ 17,326 $ ( 44,493 )

Loss (gain) on disposal of assets and other 156 ( 1,271 )

Operating income $ 20,716 $ 17,326

Depreciation and amortization

4 unchanged sentences

Total depreciation and amortization $ 34,728 $ 36,978

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

A summary of capital expenditures by reportable segment is as follows (in thousands):

6 unchanged sentences

Total capital expenditures $ 7,944 $ 7,492

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

8 unchanged sentences

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

Long-lived assets December 31,

2022 December 31,

Long-lived assets 2023 2022

United States $ 251,901 $ 279,390

7 unchanged sentences

Year ended December 31,

Revenues $ % $ %

Revenue $ % $ %

United States $ 455,871 61.7 % $ 470,765 67.3 %

Canada 48,279 6.9 % 41,822 7.7 %

Europe & Africa 57,533 8.2 % 59,207 10.9 %

Middle East 89,346 12.1 % 51,891 7.4 %

Europe & Africa 64,245 8.7 % 57,533 8.2 %

Canada 52,833 7.2 % 48,279 6.9 %

Asia-Pacific 38,624 5.2 % 36,832 5.3 %

Latin America 37,945 5.1 % 34,613 4.9 %

Total Revenues $ 699,913 100.0 % $ 541,068 100.0 %

Total Revenue $ 738,864 100.0 % $ 699,913 100.0 %

Forum Energy Technologies, Inc.

3 unchanged sentences

Year ended December 31,

Revenues $ % $ %

Revenue $ % $ %

Drilling Technologies $ 170,650 23.2 % $ 143,389 20.6 %

6 unchanged sentences

Eliminations ( 2,204 ) ( 0.3 ) % ( 1,122 ) ( 0.2 ) %

Total revenues $ 699,913 100.0 % $ 541,068 100.0 %

Total revenue $ 738,864 100.0 % $ 699,913 100.0 %

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Subsequent Events

On January 4, 2024, the Company entered into the Seller Term Loan in connection with the closing of the Variperm Acquisition, which has an initial principal amount of $ 60.0 million and matures in December 2026.

The Seller Term Loan bears interest at the rate of (i) 11.0 % per year for the period commencing on the Closing Date to (but excluding) the first anniversary of the Closing Date, (ii) 17.0 % per annum for the period commencing on the first anniversary of the Closing Date to (but excluding) the second anniversary of the Closing Date and (iii) 17.5 % per annum for the period commencing on the second anniversary of the Closing Date to (but excluding) the maturity date.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk