What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-03-03 compared with 2024-03-05 · 388 added, 218 removed, 765 unchanged (44% of the section changed)

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Report of independent registered public accounting firm - Deloitte & Touche LLP

Consolidated statements of comprehensive income (loss) for the years ended December 31, 2023 and 2022

Consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023

Consolidated balance sheets as of December 31, 2024 and 2023

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We have audited the accompanying consolidated balance sheets of Forum Energy Technologies, Inc.

and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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

Critical Audit Matter

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

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

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

Critical Audit Matters

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

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

Goodwill — Downhole Reporting Unit — Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

Inventory consists of finished goods and materials and supplies which are carried at the lower of cost or net realizable value.

The Company evaluates the net realizable values of inventories based on analysis of inventory levels including excess, obsolete and slow-moving items, historical sales experience and future sales forecasts.

The Company’s evaluation of net realizable value is performed at each location and is based on information and assumptions specific to that location.

Changes in these assumptions could have a significant impact on the recorded inventory amounts or the amount of inventory write-downs.

The inventory, net balance at December 31, 2023 was $299.6 million and the amount of inventory reserve was $38.2 million.

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

The Company completed its annual impairment test for goodwill as of October 1 using the combination of discounted cash flow model (“income approach”) and guideline public company method (“market approach”).

The Company performed a quantitative impairment evaluation of the $61.7 million in goodwill for the Downhole reporting unit by comparing the estimated fair value of the reporting unit to its carrying value.

The fair value exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified the Company’s goodwill impairment assessment for the Downhole reporting unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions utilized in the income approach related to forecasts of future revenues and profitability margins, long-term growth rate and discount rate, among others.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the net realizable value of inventory included the following, among others:

• We made inquiries of business unit managers as well as executives, sales, and operations personnel about the expected product lifecycles and product development plans and historical usage by product.

• We have tested the forecasted demand by comparing internal and external information (e.g.

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

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

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

Our audit procedures related to management’s forecasts and the selection of discount rates used by management to determine the fair value of the Downhole reporting unit and included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over management’s selection of the discount rate and forecasts of future revenue and operating margin.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate, including testing the source information underlying the determination of the discount rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management.

• We evaluated management’s ability to accurately forecast future revenue and operating margin by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s revenue and operating margin forecasts by comparing the forecasts to (1) historical results and (2) internal communications to management and the Board of Directors.

Business Combination — Variperm — Refer to Note 4 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Variperm on January 4, 2024 (the “Variperm Acquisition”).

The purchase price was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values.

The largest asset classes acquired included customer relationships, trade name, and backlog (“Intangible Assets”);

and property, plant and equipment (“PP&E”).

The fair value for trade name was estimated using the income approach, customer relationships and backlog were estimated using the multi-period excess earnings method and PP&E was valued using the cost approach.

We identified the valuation of Intangible Assets and PP&E arising out of the Variperm Acquisition as a critical audit matter because of the estimates made by management to determine the fair value of these assets.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists when performing audit procedures to determine the fair value of acquired assets.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of Intangible Assets and PP&E acquired as part of the Variperm Acquisition included the following, among others:

• We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the assumptions used in the income approach for Intangible Assets as well as in the cost approach for PP&E.

In addition, we evaluated the work of management’s third-party specialists.

• With the assistance of our fair value specialists, and in respect to the PP&E acquired, we evaluated the reasonableness of the valuation methodology, current market data, and the cost to replace or reproduce comparable assets and developed a range of independent estimates and compared to those used by management.

• With the assistance of our fair value specialists, and in respect to the Intangible Assets acquired, we evaluated the estimates used in the relief-from-royalty method for trade name and estimates used in the multi-period excess earnings method for customer relationship and backlog and developed a range of independent estimates and compared those to those selected by management.

• We considered any events or transactions occurring after the Variperm Acquisition closing date that may indicate a different valuation for the acquired Intangible Assets and PP&E.

Long-lived Assets — Impairment of Intangibles Assets — Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

Long-lived assets, which consists of property and equipment, intangible assets with finite useful lives (“intangible assets”), and right-of-use assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

During the fiscal year ended December 31, 2024, the company determined the carrying value of intangibles assets in the Coiled Tubing product line was impaired.

As a result, the Company recorded an impairment charge on intangible assets of $119.1 million in 2024.

We identified impairment for intangibles assets in the Coiled Tubing product line as a critical audit matter because of the estimates made by management to determine the fair value of these assets.

This required a high degree of auditor judgment and an increased extent of effort including the need to involve fair value specialists when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenues and profitability margins, long term growth rate and discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the evaluation of the Company’s impairment analysis for the coiled tubing product line included the following, among others:

• We tested the effectiveness of controls over the determination of fair value, including controls related to management’s development of forecasts of revenues and profitability margins, long-term growth rate and discount rate.

• Assessed the reasonableness of management’s estimates of future projections of revenues and cash flows within the undiscounted future net cash flows and discounted future net cash flows for the Coiled tubing asset group by:

– Compared historical results to the Company’s strategic plans.

– Made inquiries of management and corroborating inquiries with the Company’s strategic planning group.

– Read internal communications to management and the Board of Directors.

– With the assistance of our fair value specialists, we evaluated reasonableness of the discount rates and developed a range of independent estimates and compared those to the discount rates selected by management.

– Compared long-term growth rate by comparing them with projected nominal gross domestic product growth rates of the economies and the industry in which the entity operates.

• Evaluated the reasonableness of key assumptions used by management in determining the undiscounted and discounted future net cash flows.

/s/ Deloitte & Touche LLP

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and subsidiaries

Consolidated statements of comprehensive income (loss)

Consolidated statements of comprehensive loss

Year ended December 31,

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Transaction expenses 7,728 2,892

Impairment of intangible assets 119,123 —

Gain on sale-leaseback transactions ( 4,860 ) —

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

Loss on disposal of assets and other 484 156

Total operating expenses 341,800 183,437

Operating income 20,716 17,326

Operating income (loss) ( 86,767 ) 20,716

Other expense (income)

Interest expense 31,490 18,297

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

Loss on extinguishment of debt 2,854 —

Foreign exchange losses and other, net 7,315 10,233

Total other expense, net 41,659 28,530

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

Loss before income taxes ( 128,426 ) ( 7,814 )

Income tax expense 6,900 11,062

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

Net loss $ ( 135,326 ) $ ( 18,876 )

Weighted average shares outstanding

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Diluted 12,299 10,212

Earnings (loss) per share

Loss per share

Basic $ ( 11.00 ) $ ( 1.85 )

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

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

Net loss $ ( 135,326 ) $ ( 18,876 )

Change in foreign currency translation ( 8,168 ) 12,757

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Deferred financing costs, net 2,154 1,159

Goodwill 61,653 —

Intangible assets, net 109,230 167,970

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Cash flows from operating activities

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

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

Net loss $ ( 135,326 ) $ ( 18,876 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation expense 16,896 10,799

Amortization of intangible assets 36,821 23,929

Impairment of intangible assets 119,123 —

Stock-based compensation expense 7,137 4,571

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Deferred income taxes ( 17,574 ) ( 204 )

Loss on extinguishment of debt 2,854 —

Gain on sale-leaseback transactions ( 4,860 ) —

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Billings in excess of costs and profits recognized 438 3,851

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

Net cash provided by operating activities 92,191 8,183

Cash flows from investing activities

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Proceeds from sale-leaseback transactions 20,324 —

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

Net cash used in investing activities ( 137,526 ) ( 6,573 )

Cash flows from financing activities

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Repayments on revolving Credit Facility ( 624,250 ) ( 451,738 )

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

Proceeds from issuance of 2029 Bonds 100,000 —

Payments of 2025 Notes ( 134,208 ) —

Proceeds from issuance of Seller Term Loan 59,677 —

Payments of Seller Term Loan ( 59,677 ) —

Payment of capital lease obligations ( 1,319 ) ( 1,275 )

Repurchases of stock — ( 5,996 )

Payments of withheld taxes on stock-based compensation plans ( 1,090 ) —

Deferred financing costs ( 8,534 ) ( 311 )

Net cash used in financing activities ( 7,582 ) ( 5,076 )

Net cash provided by (used in) financing activities 45,242 ( 7,582 )

Effect of exchange rate changes on cash ( 1,411 ) 1,108

Net increase (decrease) in cash, cash equivalents and restricted cash ( 4,864 ) 4,171

Net decrease in cash, cash equivalents and restricted cash ( 1,504 ) ( 4,864 )

Cash, cash equivalents and restricted cash at beginning of period 46,165 51,029

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Cash paid for interest $ 26,764 $ 17,088

Cash paid (refunded) for income taxes 8,804 ( 383 )

Cash paid for income taxes 23,119 8,804

Noncash investing and financing activities

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Accrued purchases of property and equipment 1,345 6

Stock issued related to business acquisition 44,220 —

Liability awards converted to shares settled 337 —

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

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Stock-based compensation expense — 4,571 — — — 4,571

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

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

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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Stock-based compensation expense — 7,137 — — — 7,137

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

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

Stock issued related to business acquisition 20 44,200 — — — 44,220

Liability awards converted to shares settled — 337 — — — 337

Change in pension liability — — — — 157 157

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Basis of presentation

The Company’s 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 (“U.S.

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

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Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

In the preparation of these consolidated financial statements, estimates and assumptions have been made by management including, among others, an assessment of percentage of completion of projects based on costs to complete contracts, the selection of useful lives of tangible and intangible assets, expected future cash flows from long lived assets to support impairment tests, provisions necessary for trade receivables, amounts of deferred taxes and income tax contingencies.

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Any payments subsequently received on receivables previously written-off are credited to bad debt expense.

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.

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Notes to consolidated financial statements (continued)

The changes in allowance for doubtful account during the years ended December 31, 2024 and 2023 were as follows (in thousands):

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

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For the years ended December 31, 2024 and 2023, we recognized inventory write downs totaling $ 2.7 million and $ 2.8 million, respectively.

These charges are all included in cost of sales in the consolidated statements of comprehensive income (loss).

These charges are all included in cost of sales in the consolidated statements of comprehensive loss.

See Note 5 Inventories for further information related to these charges.

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

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

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

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

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As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

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

Our leases have

Forum Energy Technologies, Inc.

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Notes to consolidated financial statements (continued)

and exclude lease incentives and initial direct costs incurred.

remaining terms of one to 15 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.

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

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

Intangible assets

Intangible assets with definite lives are comprised of customer and distributor relationships, patents and technology, trade names, trademarks and non-compete agreements which are amortized on a straight-line basis over the life of the intangible asset, generally five to 35 years.

Goodwill and intangible assets

For goodwill, an assessment for impairment is performed annually or when there is an indication an impairment may have occurred.

The Company completes its annual impairment test for goodwill using an assessment date of October 1.

Goodwill is reviewed for impairment by comparing the carrying value of the reporting unit’s net assets (including allocated goodwill) to the fair value of the reporting unit.

The fair value of the reporting unit is determined using a combination of a discounted cash flows approach and a guideline public company method.

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

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

The Company believes that the estimates and assumptions used in impairment assessments are reasonable.

We determined our Downhole product line consists of a single reporting unit and, accordingly, goodwill acquired from the Variperm acquisition was allocated to that reporting unit.

The Company recognizes a goodwill impairment charge for the amount by which the carrying value of goodwill exceeds the reporting unit’s fair value.

Any impairment losses are reflected in operating income.

At October 1, 2024, we performed our annual impairment test and concluded that there had been no impairment because the estimated fair value exceeded its carrying value by approximately 20 %.

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

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

In 2024, an impairment loss of $ 119.1 million was recorded on intangible assets within the Coiled Tubing product line.

No impairments to intangible assets were recorded in 2023.

Refer to Note 7 Goodwill and Intangible Assets for further discussion.

Recognition of provisions for contingencies

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

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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

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.

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.

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

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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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operations have designated the local currency as the functional currency.

Realized and unrealized gains and losses resulting from re-measurements of monetary assets and liabilities denominated in a currency other than the local entity’s functional currency are included in the consolidated statements of comprehensive income (loss) as incurred.

Financial statements of our foreign operations where the functional currency is not the U.S.

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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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Accounting Standards Adopted in 2024

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 (“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.

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 adopted this accounting standard effective January 1, 2024, and the adoption resulted in additional segment disclosures in our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

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 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.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Disaggregation of Income Statement Expenses (Subtopic 220-40).

In November 2024, FASB issued ASU 2024-03 to improve financial reporting by requiring entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods.

This update is effective for fiscal years beginning after December 15, 2026.

Early adoption is permitted.

This update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this update or (2) retrospectively to any or all prior periods presented in the financial statements.

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

Disaggregated revenues

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The following table reflects the changes in our contract assets and contract liabilities balances for the years ended December 31, 2024 and 2023:

December 31, 2023 December 31, 2022 Increase / (Decrease)

December 31, 2024 December 31, 2023 Decrease

Accrued revenue $ 752 $ 1,801

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Contract liabilities $ 13,100 $ 14,772 $ ( 1,672 ) ( 11 ) %

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.

During the year ended December 31, 2024, our contract assets decreased by $ 4.6 million and our contract liabilities decreased by $ 1.7 million primarily due to the timing of milestone billings in our Subsea product line.

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

During the year ended December 31, 2023, we recognized revenue of $ 13.1 million that was included in the contract liability balance at the beginning of the period.

During the year ended December 31, 2024, we recognized revenue of $ 10.4 million that was included in the contract liabilities 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.

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.

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

On January 4, 2024, the Company and its wholly owned subsidiary acquired all of the issued and outstanding common shares of Variperm in the Variperm Acquisition.

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.

Total consideration for the Variperm Acquisition included approximately $ 150.0 million of cash and 2.0 million shares of the Company’s common stock, which was subject to customary purchase price adjustments.

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.

In March 2024, in connection with the finalization of working capital adjustments, the principal amount of the Seller Term Loan was reduced by $ 0.3 million.

In September 2024, the Company finalized the purchase price allocation resulting in an adjustment to goodwill of $ 2.8 million.

Adjustments primarily related to deferred income taxes.

Forum Energy Technologies, Inc.

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Notes to consolidated financial statements (continued)

During 2024, the Company recognized acquisition-related costs of $ 7.7 million, for consulting fees and other costs expensed as transaction expenses.

The acquisition of business on the statement of cash flow is presented net of the cash and cash equivalents acquired.

The following table summarizes the fair value of identified assets acquired and liabilities assumed at the date of acquisition.

The allocation of consideration transferred is based on management's estimates, judgments and assumptions.

Management estimated that consideration paid exceeded the fair value of the net assets acquired.

Therefore, goodwill of $ 66.8 million was recorded, most of which is not expected to be deductible for income tax purposes.

The Company has estimated the useful lives of customer relationships, backlog and trade names as approximately eight years , two years and eight years , respectively.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):

Cash and cash equivalents $ 4,388

Accounts receivable—trade 24,036

Inventories 13,422

Property and equipment 26,213

Intangible assets 104,600

Prepaid expenses and other assets 3,718

Total assets acquired 176,377

Current liabilities 11,760

Long-term liabilities 32,379

Total liabilities assumed 44,139

Total identifiable net assets acquired 132,238

Goodwill 66,778

Total purchase consideration $ 199,016

The excess of the total equity value of Variperm based on the purchase consideration over net assets acquired was recorded as goodwill.

The goodwill is primarily attributable to revenue synergies and assembled workforce expected to be realized from the acquisition.

Intangible assets acquired as a result of the Variperm Acquisition are amortized on a straight-line basis to reflect the pattern in which the economic benefits of the intangible assets are realized.

Acquired goodwill and intangibles relate to our Downhole reporting unit and Downhole asset group.

The fair value for trade names were estimated using the income approach, specifically the relief-from-royalty method which estimates the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or licenses fees on revenues earned through the use of the asset.

The fair value of customer relationships and backlog were estimated using the multi-period excess earnings method.

The excess earning method model estimates revenues and cash flows derived from the asset and then deducts portions of the cash flow that can be attributed to supporting assets.

The resulting cash flow, which is attributable solely to the asset acquired, is then discounted at a rate of return commensurate with the risk of the asset to calculate the present value.

Unaudited Pro Forma Financial Information

The contributed revenues and net income to the Company of the acquired Variperm business, for the period from January 4, 2024 to December 31, 2024 were $ 109.3 million and $ 19.0 million, respectively.

The following unaudited pro forma summary presents the results of operations of the Company as if the acquisition of Variperm occurred on January 1, 2023 (in thousands):

Year ended December 31,

Revenue $ 816,425 $ 868,015

Net income (loss) ( 135,326 ) ( 14,131 )

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The amounts have been calculated after applying the Company's accounting policies and adjusting the results of Variperm to reflect additional depreciation, amortization, and other purchase accounting adjustments assuming the fair value adjustments to the property, plant and equipment and intangibles assets and other purchase accounting adjustments have been applied on January 1, 2023.

The pro forma amounts do not include any potential cost savings or other expected benefits of the acquisition and are presented for illustrative purposes only.

Further, the pro forma amounts are not necessarily indicative of results that would have been achieved if the acquisition had occurred as of January 1, 2023 or of future operating performance.

The Company’s significant components of inventories at December 31, 2024 and 2023 were as follows (in thousands):

25 unchanged sentences

Depreciation expense was $ 16.9 million and $ 10.8 million for the years ended December 31, 2024 and 2023, respectively.

During 2022, the Company disposed land and buildings related to a sale-leaseback transaction with a net book value of approximately $ 25.1 million and received net proceeds of $ 32.1 million.

The Company recognized a gain of $ 7.0 million as a result, which is reported in operating expense in the consolidated statements of comprehensive income (loss).

In November 2024, the Company disposed land and buildings related to sale-leaseback transactions with a net book value of approximately $ 15.5 million and received net proceeds of $ 20.3 million.

The Company recognized a gain of $ 4.9 million as a result, which is reported in operating income in the consolidated statements of comprehensive loss.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill from December 31, 2023 to December 31, 2024, were as follows (in thousands):

Artificial Lift and Downhole

Goodwill, December 31, 2023 $ —

Acquisitions 66,778

Impact on non-U.S.

local currency translation ( 5,125 )

Goodwill, December 31, 2024 $ 61,653

We perform our annual test of goodwill as of October 1 or when events and circumstances indicate that the fair value may be below its carrying value.

There was no impairment of goodwill during the year ended December 31, 2024.

Intangible Assets

6 unchanged sentences

Patents and technology 29,166 ( 17,867 ) 11,299 10 - 19

Non-compete agreements 190 ( 190 ) — 5

Trade names 42,847 ( 28,974 ) 13,873 7 - 19

Trademark 5,089 ( 2,120 ) 2,969 15

Trade names and other $ 28,913 $ ( 22,567 ) $ 6,346 8 - 19

Total intangible assets $ 271,069 $ ( 161,839 ) $ 109,230

5 unchanged sentences

Patents and technology 89,151 ( 41,189 ) 47,962 5 - 19

Non-compete agreements 188 ( 188 ) — 5

Trade names 42,638 ( 27,071 ) 15,567 7 - 19

Trade names and other 43,037 ( 29,164 ) 13,873 7 - 19

Trademark 5,089 ( 2,120 ) 2,969 15

1 unchanged sentence

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

The Coiled Tubing product line has faced headwinds since 2019, including tariffs on raw materials, lower sales volumes in 2020 and 2021 due to the pandemic, and inflation-driven steel price increases since 2022.

During 2024, the Coiled Tubing product line faced further cost headwinds due to increased importation duties.

Given these factors, the Company performed an impairment test and determined that the carrying value of intangibles assets in the Coiled Tubing product line was impaired.

As a result, the Company recorded an impairment charge of $ 119.1 million in 2024.

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

The Company determine the fair value of the reporting unit using a discounted cash flow analysis, which requires significant assumptions and estimates about the future operations of the reporting unit.

The assumptions about future cash flows and growth rates are based on the Company’s current estimates, strategic plans and management’s estimates for future activity levels.

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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Amortization expense was $ 36.8 million and $ 23.9 million for the years ended December 31, 2024 and 2023, respectively.

2 unchanged sentences

2025 $ 19,516

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

Debt as of December 31, 2024 and December 31, 2023 consisted of the following (in thousands):

2029 Bonds $ 100,000 $ —

2025 Notes — 134,208

Unamortized debt discount ( 5,074 ) ( 15,314 )

Debt issuance cost ( 1,245 ) ( 3,759 )

Credit Facility 90,392 —

Other debt 3,373 2,864

Total debt 130,753 239,910

Long-term debt, principal amount 193,765 137,072

Unamortized debt discount — ( 5,074 )

Debt issuance cost ( 5,374 ) ( 1,245 )

Long-term debt, carrying value 188,391 130,753

current portion ( 1,866 ) ( 1,186 )

Long-term debt, net of current portion $ 186,525 $ 129,567

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.

Our 9.00 % Convertible Senior Secured Notes due 2025 (“2025 Notes”), of which no principal amount was outstanding at December 31, 2024, paid interest at the rate of 9.00 %, of which 6.25 % was payable in cash and 2.75 % was payable in cash or additional notes, at the Company’s option.

The 2025 Notes were secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secured the 2025 Notes on a second lien basis.

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.

In June 2024, we repurchased $ 13.0 million in aggregate principal amount of our 2025 Notes for $ 13.0 million.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 12.5 million, resulting in a $ 0.5 million loss on extinguishment of debt.

In August 2024, we redeemed $ 60.0 million in aggregate principal amount of our 2025 Notes for $ 60.0 million.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 58.2 million, resulting in a $ 1.8 million loss on extinguishment of debt.

In November 2024, we redeemed the remaining $ 61.2 million outstanding principal amount of our 2025 Notes at par, and we discharged our obligations under the indenture governing the 2025 Notes.

The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $ 59.9 million, resulting in a $ 1.3 million loss on extinguishment of debt.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Seller Term Loan

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

In March 2024, in connection with the finalization of purchase price adjustments, the principal amount of the Seller Term Loan was reduced by $ 0.3 million.

The Seller Term Loan bore interest at the rate of (i) 11.00 % per year for the period commencing on the Closing Date to (but excluding) the first anniversary of the Closing Date, (ii) 17.00 % 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) 17.50 % per annum for the period commencing on the second anniversary of the Closing Date to (but excluding) the maturity date.

The Company had an option to prepay the Seller Term Loan anytime without premium or penalty.

Subject to customary exceptions, all obligations under the Seller Term Loan were guaranteed, jointly and severally, by our wholly owned U.S.

and Canadian subsidiaries and were secured by substantially all assets of each such entity and the Company, subject to customary exclusions pursuant to certain intercreditor arrangements.

The Seller Term Loan also contained customary representations and warranties and affirmative and negative covenants, as well as customary events of default, with corresponding grace periods, including, without limitation, payment defaults, cross-defaults to other agreements evidencing indebtedness and bankruptcy-related defaults.

In November 2024, we repaid in full our Seller Term Loan for $ 58.4 million .

The net carrying value of the extinguished debt, including unamortized debt issuance costs, was $ 59.2 million , resulting in a $ 0.8 million gain on extinguishment of debt.

Credit Facility

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.

Our Credit Facility matures on the earliest of (a) September 8, 2028 and (b) the date that is 91 days prior to the maturity of 2029 Bonds (which will not apply if the 2029 Bonds are repaid prior to such 91st day).

Th e 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) (the “U.S.

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

1 unchanged sentence

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.

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, 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.

As of December 31, 2024, our total borrowing base was $ 169.4 million, of which $ 90.4 million amount was drawn and $ 17.8 million was used as security for outstanding letters of credit, resulting in remaining availability of $ 61.2 million.

Borrowings under the U.S.

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 bear interest at a rate equal to, at our option, either (a) the Secured Overnight Financing Rate (“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 %.

Borrowings under the Canadian Line bear interest at a rate equal to, at our Canadian borrowers’ option, either (a) Canadian Overnight Repo Rate Average (“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 one-month CORRA plus 1.00 % per annum 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 8.17 % and 8.36 % for the years ended December 31, 2024 and 2023, respectively.

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 %.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

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.

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.

12 unchanged sentences

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

Other debt consists of various finance leases of equipment.

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

As of December 31, 2024, the Company was in compliance with all of its Credit Facility financial covenants.

In October 2024, we entered into an amendment (the “Credit Agreement Amendment”) to our Credit Facility.

Pursuant to the Credit Agreement Amendment, the Credit Agreement was, in November 2024, modified to (i) permit the issuance of the 2029 Bonds (as defined below), (ii) permit, subject to specified conditions and up to specified amounts, redemption of the 2029 Bonds in certain circumstances and (iii) specify the extent to which collateral will be granted to secure Credit Agreement obligations by subsidiaries of Forum organized or domiciled under the laws of the United Kingdom, Germany or any territory or county thereof.

On November 8, 2024 (the “Closing Date”), we completed the offering of $ 100.0 million aggregate principal amount of 10.50 % senior secured bonds (the “2029 Bonds”).

The 2029 Bonds were privately placed, at an issue price of par.

The net proceeds of approximately $ 96.0 million from the offering, together with cash on hand of $ 10.2 million and borrowings from our Credit Facility of $ 15.0 million , were used to repay all borrowings outstanding under the Seller Term Loan issued in connection with the acquisition of Variperm and were used to redeem in full all outstanding 2025 Notes.

The 2029 Bonds were issued pursuant to the Bond Terms, dated as of November 5, 2024 (the “Bond Terms”), between the Company and Nordic Trustee AS, as bond trustee and security agent (the “Bond Trustee”).

An application will be made for the 2029 Bonds to be listed on the Nordic ABM or another specified exchange.

The 2029 Bonds are the Company’s senior secured obligations and are jointly and severally guaranteed on a senior secured basis by each of the Company’s present and future direct and indirect domestic subsidiaries that guarantees its Credit Facility and certain of the Company’s foreign subsidiaries.

The 2029 Bonds will mature on November 7, 2029.

Interest on the 2029 Bonds will accrue at a rate of 10.50 % per annum payable semi-annually in arrears on May 7 and November 7 of each year in cash, beginning May 7, 2025.

Prepayment of the 2029 Bonds prior to May 7, 2027 requires the payment of make-whole amounts, and prepayments on or after that date are subject to prepayment premiums that decline over time.

The 2029 Bonds contain the following financial covenants:

(i) a maximum leverage ratio of 4.0 x;

and (ii) a minimum liquidity test equal to $ 25.0 million , in each case, for the Company and its consolidated subsidiaries.

The Bond Terms also contain certain equity cure rights with respect to such financial covenants.

The 2029 Bonds are also subject to negative covenants as set forth in the Bond Terms.

As of December 31, 2024, the Company was in compliance with all of its 2029 Bonds financial covenants.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

Upon the occurrence of certain change of control events, as specified in the Bond Terms, each holder of the 2029 Bonds will have the right to require that the Company repurchase all or some of such holder’s 2029 Bonds in cash at a purchase price equal to 101 % of the aggregate principal amount thereof.

The Bond Terms contain certain customary events of default, including, among other things:

(i) default in the payment of any amount when due;

(ii) default in the performance or breach of any other covenant in the Finance Documents, as defined in the Bond Terms, which default continues uncured for a period of 20 business days after the earlier of (1) the Company’s actual knowledge of such event or (2) the Company’s receipt of notice from the Bond Trustee;

and (iii) certain voluntary or involuntary events of bankruptcy, insolvency or reorganization of the Company.

Other debt consists of various finance leases of equipment.

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

1 unchanged sentence

Total future payment $ 194,030

unamortized debt discount ( 5,074 )

debt issuance cost ( 5,374 )

43 unchanged sentences

Financing leases 7.51 % 6.89 %

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, 2024 and 2023 (in thousands):

4 unchanged sentences

Financing cash flows from finance leases 1,725 1,247

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Sale-leaseback transactions

During 2022, the Company sold and leased back land and buildings for net proceeds of $ 32.1 million.

In November 2024, the Company sold and leased back land and buildings for net proceeds of $ 20.3 million.

The initial annual rent for the assets is $ 1.7 million with initial term of 15 years, subject to annual increase.

The transactions met the requirements of sale-leaseback accounting.

The related assets were removed from property and equipment and the appropriate operating lease asset and liabilities of approximately $ 24.8 million were recorded in the consolidated balance sheets.

The related assets were removed from property and equipment and the appropriate operating lease assets and liabilities of approximately $ 19.1 million were recorded in the consolidated balance sheets.

The components of income (loss) before income taxes were as follows (in thousands):

6 unchanged sentences

federal and state $ 1,545 $ 101

22,929 11,165

Total current 24,474 11,266

3 unchanged sentences

Income tax expense $ 6,900 $ 11,062

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.

12 unchanged sentences

Our effective tax rate was 5.4 % and 141.6 % for the years ended December 31, 2024 and 2023, respectively.

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.

1 unchanged sentence

Notes to consolidated financial statements (continued)

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

As of January 1, 2024, numerous countries, including European Union member states, have enacted a global minimum tax and more countries are expected to enact similar minimum tax regimes in 2025.

Based on current enacted legislation, we do not expect a material impact on our future effective tax rate.

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

13 unchanged sentences

Deferred tax liabilities

Property and equipment $ ( 3,771 ) $ —

Operating lease assets ( 16,924 ) ( 13,903 )

5 unchanged sentences

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

At December 31, 2023, we had $ 316.4 million of U.S.

At December 31, 2024, we had $ 334.6 million of gross U.S.

net operating loss carryforwards and $ 10.4 million of state net operating losses.

1 unchanged sentence

The remaining $ 311.3 million will not expire.

We also had $ 227.6 million of non-U.S.

We also had $ 65.3 million of gross non-U.S.

net operating loss carryforwards with indefinite expiration dates.

In addition to our net operating loss carryforwards, we also had U.S.

interest limitation carryforwards of $ 36.0 million with indefinite expiration dates.

In addition to our net operating loss carryforwards, we also had gross U.S.

interest limitation carryforwards of $ 206.5 million and gross non-U.S.

interest limitation carryforwards of $ 200.3 million, all with indefinite expiration dates.

The ultimate realization of income tax benefits for these net operating loss and interest limitation carryforwards depends on our ability to generate sufficient taxable income in the respective taxing jurisdictions.

2 unchanged sentences

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.

During 2023, we recognized $ 8.3 million of tax expense related to the increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable.

We increased our valuation allowance related to our U.S.

and foreign deferred tax assets by $ 6.5 million and $ 1.8 million, respectively.

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

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

the U.S, the U.K, Singapore and China.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

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.

During 2024, we recognized $ 25.1 million of tax expense related to the net increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable.

We increased our valuation allowance related to our U.S.

deferred tax assets by $ 29.5 million along with a $ 6.9 million increase to certain non-U.S.

deferred tax assets in the U.K.

Singapore and China.

In addition, we released $ 11.3 million of valuation allowance on our deferred tax assets generated from operations in Germany and Saudi Arabia.

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.

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.

17 unchanged sentences

We estimate that $ 9.8 million of the unrecognized tax benefits at December 31, 2024, excluding consideration of valuation allowance, would impact our future effective income tax rate, if recognized.

We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive income (loss).

We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive loss.

As of December 31, 2024 and 2023, we had accrued approximately $ 0.6 million and $ 0.3 million in interest and penalties, respectively.

During the years ended December 31, 2024 and 2023, we recognized no material change in the interest and penalties related to uncertain tax positions.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Fair Value Measurements

The Company had zero outstanding balance under the Credit Facility at December 31, 2023 and December 31, 2022.

The Company had $ 90.4 million and no outstanding balance under the Credit Facility at December 31, 2024 and December 31, 2023, respectively.

The Credit Facility incurs interest at a variable interest rate and therefore, the carrying amount approximates fair value.

The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments.

At December 31, 2023, the fair value and the carrying value of the Company’s 2025 Notes approximated $ 130.9 million and $ 127.9 million, respectively.

The fair values of the Company’s 2029 Bonds and 2025 Notes were estimated using Level 2 inputs in the fair value hierarchy and were based on quoted prices for those or similar instruments.

At December 31, 2024, the fair value and the carrying value of the Company’s 2029 Bonds approximated $ 99.5 million and $ 94.6 million, respectively.

At December 31, 2023, the fair value and the carrying value of the Company’s 2025 Notes approximated $ 130.9 million and $ 127.9 million, respectively.

1 unchanged sentence

The Company did not change its 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 years ended December 31, 2024 and 2023.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The carrying values of goodwill, intangible assets and other long-lived assets are tested annually or more frequently if an event occurs that indicates an impairment loss may have been incurred, using fair value measurements with unobservable inputs (Level 3).

Refer to Note 7 Goodwill and Intangible Assets for further discussion.

Commitments and Contingencies

17 unchanged sentences

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.

There were an average of approximately 29 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

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

approximately 112 lawsuits pending against this subsidiary.

Our subsidiary has over $ 17 million in face amount of insurance per occurrence and over $ 23 million of aggregate primary insurance coverage.

14 unchanged sentences

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

8 unchanged sentences

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.

At December 31, 2024 and 2023, the Company had $ 17.8 million and $ 20.3 million in letters of credit outstanding, respectively.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Earnings (Loss) Per Share

1 unchanged sentence

Year ended December 31,

Net income (loss) attributable to common stockholders $ ( 18,876 ) $ 3,712

Net loss attributable to common stockholders $ ( 135,326 ) $ ( 18,876 )

Basic - weighted average shares outstanding 12,299 10,212

5 unchanged sentences

Diluted $ ( 11.00 ) $ ( 1.85 )

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 years ended December 31, 2024 and 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.

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

6 unchanged sentences

The expense under the Company’s retirement plan was $ 5.4 million and $ 4.4 million for the years ended December 31, 2024 and 2023, respectively.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Long-Term Incentive Compensation

5 unchanged sentences

Our stockholders approved amendments to the 2016 Plan in May 2019, May 2020 and May 2022, increasing the shares authorized for issuance thereunder to 605 thousand shares.

On May 10, 2024, shareholders approved an additional 800 thousand shares added to the 2016 Plan.

Approximately 582 thousand shares remained available under the 2016 Plan for future grants as of December 31, 2024.

2 unchanged sentences

Future grants will result in additional compensation expense.

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Stock options

19 unchanged sentences

Restricted stock

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

Restricted stock generally vests over a period of one year from the date of grant.

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

1 unchanged sentence

Nonvested at December 31, 2023 7

Forfeited ( 7 )

Nonvested at December 31, 2024 40

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The weighted average grant date fair value of restricted stock granted during the year ended December 31, 2024 and 2023 was $ 18.81 and $ 22.47 per share, respectively.

No restricted stock was vested during 2024 and 2023.

Restricted stock units

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

Restricted stock units generally vest over a one to three year period from the date of grant.

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

4 unchanged sentences

Nonvested at December 31, 2024 329

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

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.

Of the restricted stock units granted during 2024, 29 thousand and 169 thousand shares vest ratably over one year and three years , respectively.

The remaining 39 thousand shares vest after two years .

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to consolidated financial statements (continued)

The weighted average grant date fair value of the restricted stock units was $ 19.73 and $ 31.70 per share during the years ended December 31, 2024, and 2023, respectively.

The total grant date fair value of units vested was $ 3.0 million and $ 3.8 million during 2024 and 2023, respectively.

Performance share awards

During 2024, the Company granted 169 thousand shares of 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, 2024 through December 31, 2024, January 1, 2024 through December 31, 2025 and January 1, 2024 through December 31, 2026, 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 performance restricted stock units was $ 19.79 during the year ended December 31, 2024.

Related Party Transactions

2 unchanged sentences

Business Segments

The Company reports results of operations in the following three reporting segments:

Drilling & Downhole, Completions and Production.

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

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

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

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

In the first quarter 2024, following the Variperm Acquisition, we aligned our reportable segments with business activity drivers, our customer base, and the manner in which management reviews and evaluates operating performance.

FET now operates in the following two reportable segments:

(1) Drilling and Completions and (2) Artificial Lift and Downhole.

Our historical results of operations were recast retrospectively to reflect these changes in accordance with U.S.

The Drilling and Completions segment designs, manufactures and supplies products and solutions to the drilling, subsea, coiled tubing, well stimulation and intervention markets, including applications in oil and natural gas, renewable energy, defense and communications.

The Artificial Lift and Downhole segment designs, manufactures and supplies products and solutions for the artificial lift, production and infrastructure markets.

The Company’s reportable segments are strategic units that offer distinct products and services.

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The Company evaluates the performance of its reportable segments based on operating income.

This segmentation is representative of the manner in which our Chief Operating Decision Maker and our board of directors view the business.

This segmentation is representative of the manner in which our Chief Operating Decision Maker and our board of directors make decisions on how to allocate resources and assess performance.

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

3 unchanged sentences

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

Year ended December 31,

Drilling & Downhole $ 329,576 $ 304,565

Completions 265,628 264,951

Production 145,864 131,519

Eliminations ( 2,204 ) ( 1,122 )

Year ended December 31, 2024 Drilling and Completions Artificial Lift and Downhole Total

Revenue from external customers

$ 470,767 345,680 $ 816,447

Intersegment revenue

( 22 ) — ( 22 )

Total revenue 470,745 345,680 816,425

Segment operating income (loss)

Drilling & Downhole $ 33,767 $ 32,201

Completions 10,788 11,565

Production 6,462 ( 443 )

Corporate ( 27,253 ) ( 34,268 )

Total segment operating income 23,764 9,055

Cost of sales 348,878 212,536 561,414

Selling, general and administrative expenses 104,123 84,250 188,373

Segment operating income

17,744 48,894 66,638

Reconciliation to income (loss) before income taxes

Elimination of intersegment expenses

Other corporate expenses

Transaction expenses 7,728

Impairment of intangible assets 119,123

Gain on sale-leaseback transactions ( 4,860 )

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

Operating income $ 20,716 $ 17,326

Loss on disposal of assets and other 484

Interest expense 31,490

Foreign exchange losses and other, net 7,315

Loss on extinguishment of debt 2,854

Loss before income taxes $ ( 128,426 )

Year ended December 31, 2023 Drilling and Completions Artificial Lift and Downhole Total

Revenue from external customers $ 502,622 236,312 $ 738,934

Intersegment revenue ( 70 ) — ( 70 )

Total revenue 502,552 236,312 738,864

Cost of sales 376,882 157,899 534,781

Selling, general and administrative expenses 106,306 46,830 153,136

Segment operating income 19,364 31,583 50,947

Reconciliation to income (loss) before income taxes

Elimination of intersegment expenses ( 70 )

Other corporate expenses 27,253

Transaction expenses 2,892

Loss on disposal of assets and other 156

Interest expense 18,297

Foreign exchange losses and other, net 10,233

Loss before income taxes $ ( 7,814 )

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

Year ended December 31,

Depreciation and amortization

Drilling & Downhole $ 10,564 $ 11,872

Completions 21,813 21,866

Production 2,105 2,906

Drilling and Completions $ 28,181 $ 29,164

Artificial Lift and Downhole 25,349 5,318

Corporate 187 246

3 unchanged sentences

Capital expenditures 2024 2023

Drilling & Downhole $ 3,128 $ 1,462

Completions 3,526 5,145

Production 543 510

Drilling and Completions $ 5,974 $ 6,444

Artificial Lift and Downhole 1,413 753

Corporate 758 747

Total capital expenditures $ 8,145 $ 7,944

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):

1 unchanged sentence

Assets 2024 2023

Drilling & Downhole $ 347,035 $ 340,819

Completions 350,216 366,771

Production 96,567 95,089

Drilling and Completions $ 418,583 $ 615,033

Artificial Lift and Downhole 371,178 178,785

Corporate 26,193 27,243

4 unchanged sentences

United States $ 125,373 $ 251,901

Europe 24,846 26,962

Canada 172,740 11,131

Asia-Pacific 67 20

Europe & Africa 19,196 24,846

Middle East 2,951 3,508

Asia-Pacific 53 67

Latin America 4 4

Total long-lived assets $ 320,317 $ 291,457

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

The following table presents our revenues disaggregated by geography based on shipping destination (in thousands):

2 unchanged sentences

United States $ 415,132 50.9 % $ 455,871 61.7 %

Canada 152,168 18.6 % 52,833 7.2 %

Middle East 91,500 11.2 % 89,346 12.1 %

Europe & Africa 76,712 9.4 % 64,245 8.7 %

Canada 52,833 7.2 % 48,279 6.9 %

Asia-Pacific 43,971 5.4 % 38,624 5.2 %

1 unchanged sentence

Total Revenue $ 816,425 100.0 % $ 738,864 100.0 %

Forum Energy Technologies, Inc.

and subsidiaries

Notes to consolidated financial statements (continued)

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

1 unchanged sentence

Revenue $ % $ %

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

Downhole Technologies 90,448 12.2 % 84,987 12.1 %

Subsea Technologies 68,478 9.3 % 76,189 10.9 %

Drilling $ 143,269 17.6 % $ 168,547 22.9 %

Subsea 78,118 9.6 % 68,478 9.3 %

Stimulation and Intervention 144,879 17.7 % 158,296 21.4 %

Coiled Tubing 104,501 12.8 % 107,301 14.5 %

Downhole 207,430 25.4 % 90,448 12.2 %

Production Equipment 76,251 9.3 % 81,989 11.1 %

2 unchanged sentences

Total revenue $ 816,425 100.0 % $ 738,864 100.0 %

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