FORUM ENERGY TECHNOLOGIES, INC. 10-K

Item 7A. Quantitative and qualitative disclosures about market risk Not required under Regulation S-K for “smaller reporting companies.” 44 Item 8. Consolidated Financial Statements and Supplementary Data Page Report of independent registered public accounting firm - Deloitte & Touche LLP 46 Consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023 49 Consolidated balance sheets as of December 31, 2024 and 2023 50 Consolidated statements of cash flows for the years ended December 31, 2024 and 2023 51 Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2024 and 2023 52 Notes to consolidated financial statements 53 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Forum Energy Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Forum Energy Technologies, Inc. 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. 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, 2024, 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 3, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 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. 46 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 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. 47 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 Houston, Texas March 3, 2025 We have served as the Company’s auditor since 2019. 48 Forum Energy Technologies, Inc. and subsidiaries Consolidated statements of comprehensive loss Year ended December 31, (in thousands, except per share information) 2024 2023 Revenue $ 816,425 $ 738,864 Cost of sales 561,392 534,711 Gross profit 255,033 204,153 Operating expenses Selling, general and administrative expenses 219,325 180,389 Transaction expenses 7,728 2,892 Impairment of intangible assets 119,123 — Gain on sale-leaseback transactions ( 4,860 ) — Loss on disposal of assets and other 484 156 Total operating expenses 341,800 183,437 Operating income (loss) ( 86,767 ) 20,716 Other expense (income) Interest expense 31,490 18,297 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 Loss before income taxes ( 128,426 ) ( 7,814 ) Income tax expense 6,900 11,062 Net loss $ ( 135,326 ) $ ( 18,876 ) Weighted average shares outstanding Basic 12,299 10,212 Diluted 12,299 10,212 Loss per share Basic $ ( 11.00 ) $ ( 1.85 ) Diluted $ ( 11.00 ) $ ( 1.85 ) Other comprehensive income (loss), net of tax of $ 0 : Net loss $ ( 135,326 ) $ ( 18,876 ) Change in foreign currency translation ( 8,168 ) 12,757 Gain (loss) on pension liability 157 ( 508 ) Comprehensive loss $ ( 143,337 ) $ ( 6,627 ) The accompanying notes are an integral part of these consolidated financial statements. 49 Forum Energy Technologies, Inc. and subsidiaries Consolidated balance sheets (in thousands, except share information) December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 44,661 $ 46,165 Accounts receivable—trade, net of allowances of $ 9,529 and $ 10,850 153,926 146,747 Inventories, net 265,487 299,639 Prepaid expenses and other current assets 19,179 21,887 Costs and estimated profits in excess of billings 11,632 13,365 Accrued revenue 752 1,801 Total current assets 495,637 529,604 Property and equipment, net of accumulated depreciation 63,421 61,401 Operating lease assets 70,389 55,399 Deferred financing costs, net 2,154 1,159 Goodwill 61,653 — Intangible assets, net 109,230 167,970 Deferred tax assets, net 11,445 368 Other long-term assets 2,025 5,160 Total assets $ 815,954 $ 821,061 Liabilities and equity Current liabilities Current portion of long-term debt $ 1,866 $ 1,186 Accounts payable—trade 109,651 125,918 Accrued liabilities 77,239 62,463 Deferred revenue 8,584 10,551 Billings in excess of costs and profits recognized 4,516 4,221 Total current liabilities 201,856 204,339 Long-term debt, net of current portion 186,525 129,567 Deferred tax liabilities, net 23,678 940 Operating lease liabilities 73,145 61,450 Other long-term liabilities 10,850 12,132 Total liabilities 496,054 408,428 Commitments and contingencies Equity Common stock, $ 0.01 par value, 14,800,000 shares authorized, 12,999,246 and 10,901,878 shares issued 130 109 Additional paid-in capital 1,419,871 1,369,288 Treasury stock at cost, 708,900 and 708,900 shares ( 142,057 ) ( 142,057 ) Retained deficit ( 834,797 ) ( 699,471 ) Accumulated other comprehensive loss ( 123,247 ) ( 115,236 ) Total equity 319,900 412,633 Total liabilities and equity $ 815,954 $ 821,061 The accompanying notes are an integral part of these consolidated financial statements. 50 Forum Energy Technologies, Inc. and subsidiaries Consolidated statements of cash flows Year ended December 31, (in thousands, except share information) 2024 2023 Cash flows from 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 Inventory write downs 2,716 2,784 Provision for doubtful accounts 389 1,527 Deferred income taxes ( 17,574 ) ( 204 ) Loss on extinguishment of debt 2,854 — Gain on sale-leaseback transactions ( 4,860 ) — Other 6,441 5,116 Changes in operating assets and liabilities Accounts receivable—trade 13,590 6,678 Inventories 41,467 ( 31,928 ) Prepaid expenses and other current assets 8,132 2,686 Cost and estimated profits in excess of billings 1,615 2,144 Accounts payable, deferred revenue and other accrued liabilities ( 7,668 ) ( 4,894 ) Billings in excess of costs and profits recognized 438 3,851 Net cash provided by operating activities 92,191 8,183 Cash flows from investing activities Capital expenditures for property and equipment ( 8,145 ) ( 7,944 ) Proceeds from sale of property and equipment 703 1,371 Acquisition of businesses, net of cash acquired ( 150,408 ) — Proceeds from sale-leaseback transactions 20,324 — Net cash used in investing activities ( 137,526 ) ( 6,573 ) Cash flows from financing activities Borrowings on revolving Credit Facility 714,643 451,738 Repayments on revolving Credit Facility ( 624,250 ) ( 451,738 ) 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 provided by (used in) financing activities 45,242 ( 7,582 ) Effect of exchange rate changes on cash ( 1,411 ) 1,108 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 Cash, cash equivalents and restricted cash at end of period $ 44,661 $ 46,165 Supplemental cash flow disclosures Cash paid for interest $ 26,764 $ 17,088 Cash paid for income taxes 23,119 8,804 Noncash investing and financing activities Operating lease assets obtained in exchange for lease obligations $ 26,205 $ 7,535 Finance lease assets obtained in exchange for lease obligations 2,098 2,108 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. 51 Forum Energy Technologies, Inc. and subsidiaries Consolidated statements of changes in stockholders’ equity (in thousands) Common stock Additional paid-in capital Treasury stock Retained deficit Accumulated other comprehensive income / (loss) Total common stockholders’ equity Balance at December 31, 2022 $ 62 $ 1,253,613 $ ( 138,560 ) $ ( 680,595 ) $ ( 127,485 ) $ 307,035 Restricted stock issuance, net of forfeitures 1 ( 2,500 ) — — — ( 2,499 ) Stock-based compensation expense — 4,571 — — — 4,571 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 loss — — — ( 18,876 ) — ( 18,876 ) Balance at December 31, 2023 $ 109 $ 1,369,288 $ ( 142,057 ) $ ( 699,471 ) $ ( 115,236 ) $ 412,633 Restricted stock issuance, net of forfeitures 1 ( 1,091 ) — — — ( 1,090 ) Stock-based compensation expense — 7,137 — — — 7,137 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 Currency translation adjustment — — — — ( 8,168 ) ( 8,168 ) Net loss — — — ( 135,326 ) — ( 135,326 ) Balance at December 31, 2024 $ 130 $ 1,419,871 $ ( 142,057 ) $ ( 834,797 ) $ ( 123,247 ) $ 319,900 The accompanying notes are an integral part of these consolidated financial statements. 52 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements 1. Nature of Operations Forum Energy Technologies, Inc. (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. 2. Summary of Significant Accounting Policies 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 (“U.S. GAAP”). Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries after elimination of intercompany balances and transactions. Use of estimates 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. Actual results could differ from these estimates. The financial reporting of contracts depends on estimates, which are assessed continually during the term of those contracts. The amounts of revenues and income recognized are subject to revisions as the contract progresses to completion and changes in estimates are reflected in the period in which the facts that give rise to the revisions become known. Additional information that enhances and refines the estimating process that is obtained after the balance sheet date, but before issuance of the consolidated financial statements, is reflected in the consolidated financial statements. Cash and cash equivalents Cash and cash equivalents consist of cash on deposit and high quality, short-term money market instruments with an original maturity of three months or less. Cash equivalents are based on quoted market prices, a Level 1 fair value measure. Accounts receivable-trade Trade accounts receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus receivables do not bear interest, although a finance charge may be applied to amounts past due. We maintain an allowance for doubtful accounts for estimated losses that may result from the inability of our customers to make required payments. Such allowances are based upon several factors including, but not limited to, credit approval practices, industry and customer historical experience as well as the current and projected financial condition of the specific customer. Accounts receivable outstanding longer than contractual terms are considered past due. We write-off accounts receivable to the allowance for doubtful accounts when they become uncollectible. Any payments subsequently received on receivables previously written-off are credited to bad debt expense. 53 Table of Contents Forum Energy Technologies, Inc. and subsidiaries 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 December 31, 2023 10,690 1,527 ( 1,367 ) 10,850 December 31, 2024 10,850 389 ( 1,710 ) 9,529 Inventories Inventories, consisting of finished goods and materials and supplies held for resale, are carried at the lower of cost or net realizable value. For certain operations, cost, which includes the cost of raw materials and labor for finished goods, is determined using standard cost which approximates a first-in first-out basis. For other operations, this cost is determined on an average cost, first-in first-out or specific identification basis. Net realizable value means estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. We continuously evaluate inventories based on an analysis of inventory levels, historical sales experience and future sales forecasts, to determine obsolete, slow-moving and excess inventory. 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 loss. See Note 5 Inventories for further information related to these charges. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Finance leases of property and equipment are stated at the present value of future minimum lease payments. Expenditures for property and equipment and for items which substantially increase the useful lives of existing assets are capitalized at cost and depreciated over their estimated useful life utilizing the straight-line method. Routine expenditures for repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives of assets, generally two to 30 years. Property and equipment held under finance leases are amortized straight-line over the shorter of the lease term or estimated useful life of the asset. Gains or losses resulting from the disposition of assets are recognized in income with the related asset cost and accumulated depreciation removed from the balance sheet. Assets acquired in connection with business combinations are recorded at fair value. 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. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. 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. Lease obligations We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our consolidated balance sheets. Leases with an initial term greater than 12 months are recognized in our consolidated balance sheets based on lease classification as either operating or financing. Operating leases are included in operating lease assets, accrued liabilities and operating lease liabilities. Finance leases are included in property and equipment, current portion of long-term debt, and long-term debt. Some of our lease agreements include lease and non-lease components for which we have elected to not separate for all classes of underlying assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate to third parties when we have no future use for the property. Our lease portfolio primarily consists of operating leases for certain manufacturing facilities, warehouses, service facilities, office spaces, equipment and vehicles. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments at the commencement date. 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 54 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 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. We review operating lease assets 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. If the undiscounted future cash flows are less than the carrying amount of the asset, there is an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value is determined by means of an analysis of discounted future cash flows based on expected utilization. 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 %. 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 two to 19 years. These assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset are estimated. If the undiscounted future cash flows are less than the carrying amount of the asset, there is an indication that the asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cash flows. 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 In the ordinary course of business, we are subject to various claims, suits and complaints. We, in consultation with internal and external legal advisors, will provide for a contingent loss in the consolidated financial statements if, at the date of the consolidated financial statements, it is probable that a liability has been incurred and the amount can be reasonably estimated. If it is determined that the reasonable estimate of the loss is a range and that there is no best estimate within that range, a provision will be made for the lower amount of the range. Legal costs are expensed as incurred. An assessment is made of the areas where potential claims may arise under contract warranty clauses. Where a specific risk is identified, and the potential for a claim is assessed as probable and can be reasonably estimated, an appropriate warranty provision is recorded. Warranty provisions are eliminated at the end of the warranty period except where warranty claims are still outstanding. The liability for product warranty is included in accrued liabilities in the consolidated balance sheets. 55 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Revenue recognition and deferred revenue Revenue is recognized in accordance with Accounting Standards Codification Topic (“ASC”) 606, when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Contract Identification . We account for a contract when it is approved, both parties are committed, the rights of the parties are identified, payment terms are defined, the contract has commercial substance and collection of consideration is probable. Performance Obligations . A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under ASC 606. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. For contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. In accordance with ASC 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. We have elected to apply the practical expedient to account for shipping and handling costs associated with outbound freight after control of a product has transferred to a customer as a fulfillment cost which is included in cost of sales. 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. Contract Value . Revenue is measured based on the amount of consideration specified in the contracts with our customers and excludes any amounts collected on behalf of third parties. We have elected the practical expedient to exclude amounts collected from customers for all sales (and other similar) taxes. The estimation of total revenue from a customer contract is subject to elements of variable consideration. Certain customers may receive rebates or discounts which are accounted for as variable consideration. We estimate variable consideration as the most likely amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is resolved. Our estimate of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historic, current, forecast) that is reasonably available to us. Timing of Recognition . We recognize revenue when we satisfy a performance obligation by transferring control of a product or service to a customer. Our performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods transferred to customers at a point in time accounted for 94 % of revenues for the year ended December 31, 2024. The majority of this revenue is product sales, which are generally recognized when items are shipped from our facilities and title passes to the customer. The amount of revenue recognized for products is adjusted for expected returns, which are estimated based on historical data. Revenue from goods transferred to customers over time accounted for 6 % of revenues for the year ended December 31, 2024, which is related to certain contracts in our Subsea and Production Equipment product lines. Recognition over time for these contracts is supported by our assessment of the products supplied as having no alternative use to us and by clauses in the contracts that provide us with an enforceable right to payment for performance completed to date. We use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of assets to the customer which occurs as costs are incurred on the contract. The amount of revenue recognized is calculated based on the ratio of costs incurred to-date compared to total estimated costs which requires management to calculate reasonably dependable estimates of total contract costs. Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period. We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of profit to be established. In such cases, no profit is recognized during the period. 56 Table of Contents 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. 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. Contracts are sometimes modified to account for changes in product specifications or requirements. Most of our contract modifications are for goods and services that are not distinct from the existing contract. As such, these modifications are accounted for as if they were part of the existing contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis. No adjustment to any one contract was material to our consolidated financial statements for the years ended December 31, 2024 and 2023. We sell our products through a number of channels including a direct sales force, marketing representatives, and distributors. We have elected to expense sales commissions when incurred as the amortization period would be less than one year. These costs are recorded within cost of sales. Portfolio Approach . We have elected to apply ASC 606 to a portfolio of contracts with similar characteristics as we reasonably expect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio. Disaggregated Revenue . Refer to Note 17 Business Segments for disaggregated revenue by product line and geography. Contract Balances . Contract balances are determined on a contract by contract basis. 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. Such contract liabilities typically result from billings in excess of costs incurred and advance payments received on product sales. Concentration of credit risk Trade accounts receivable are financial instruments which potentially subject the Company to credit risk. Trade accounts receivable consist of uncollateralized receivables from domestic and international customers. For the years ended December 31, 2024 and 2023, 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 We measure all stock-based compensation awards at fair value on the date they are granted to employees and directors, and recognize compensation cost over the requisite service period for awards with only a service condition, and over a graded vesting period for awards with service and performance or market conditions. The fair value of stock-based compensation awards with market conditions is measured using a Monte Carlo Simulation model and, in accordance with ASC 718, is not adjusted based on actual achievement of the performance goals. The Black-Scholes option pricing model is used to measure the fair value of options. Forfeitures are accounted for as they occur. Income taxes We follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based upon temporary differences between the carrying amounts and tax bases of our assets and liabilities at the balance sheet date, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period in which the change occurs. We record a valuation allowance in each reporting period when management believes that it is more likely than not that any deferred tax asset created will not be realized. See Note 10 Income Taxes for more information on valuation allowances recognized. Accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. 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. 57 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Non-U.S. local currency translation We have global operations and the majority of our non-U.S. 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 loss as incurred. Financial statements of our foreign operations where the functional currency is not the U.S. dollar are translated into U.S. dollars using the current rate method whereby assets and liabilities are translated at the balance sheet rate and income and expenses are translated at the average exchange rates in effect during the period. The resultant translation adjustments are reported as a component of accumulated other comprehensive loss within equity in our consolidated balance sheets. Fair value The carrying amounts for financial instruments classified as current assets and current liabilities approximate fair value, due to the short maturity of such instruments. The book values of other financial instruments, such as our debt related to the Credit Facility, approximates fair value because interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with a market index. For financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The established fair value hierarchy divides fair value measurement into three broad levels: • 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; • Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and • Level 3 - inputs are unobservable for the asset or liability, which reflect the best judgment of management. The financial assets and liabilities that are disclosed at fair value for disclosure purposes are categorized in one of the above three levels based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. Recent accounting pronouncements 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 2024 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 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 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. 58 Table of Contents 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. 3. Revenues Disaggregated revenues Refer to Note 17 Business Segments for disaggregated revenues by product line and geography. Contract balances 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, 2024 December 31, 2023 Decrease $ % Accrued revenue $ 752 $ 1,801 Costs and estimated profits in excess of billings 11,632 13,365 Contract assets - current 12,384 15,166 Contract assets - non-current — 1,828 Contract assets $ 12,384 $ 16,994 $ ( 4,610 ) ( 27 ) % Deferred revenue $ 8,584 $ 10,551 Billings in excess of costs and profits recognized 4,516 4,221 Contract liabilities $ 13,100 $ 14,772 $ ( 1,672 ) ( 11 ) % 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, 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 such obligation is part of a contract that has an original expected duration of one year or less. 4. Acquisition 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 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. 59 Table of Contents Forum Energy Technologies, Inc. and subsidiaries 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, 2024 2023 Revenue $ 816,425 $ 868,015 Net income (loss) ( 135,326 ) ( 14,131 ) 60 Table of Contents 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. 5. Inventories The Company’s significant components of inventories at December 31, 2024 and 2023 were as follows (in thousands): December 31, 2024 2023 Raw materials and parts $ 99,185 $ 92,563 Work in process 27,880 28,693 Finished goods 174,114 216,570 Total Inventories 301,179 337,826 Less: inventory reserve ( 35,692 ) ( 38,187 ) Inventories, net $ 265,487 $ 299,639 The changes in inventory reserve during the two-year period ended December 31, 2024 were as follows (in thousands): Period ended Balance at beginning of period Charged to expense Deductions or other Balance at end of period December 31, 2023 $ 39,291 $ 2,784 $ ( 3,888 ) $ 38,187 December 31, 2024 38,187 2,716 ( 5,211 ) 35,692 6. Property and Equipment Property and equipment consisted of the following (in thousands): Estimated useful lives December 31, 2024 2023 Land $ 2,394 $ 4,843 Buildings and leasehold improvements 5 - 30 26,354 46,596 Computer equipment 3 - 7 44,690 44,944 Machinery & equipment 5 - 10 136,600 119,687 Other 2 - 10 22,533 18,115 Construction in progress 5,329 1,562 237,900 235,747 Less: accumulated depreciation ( 174,479 ) ( 174,346 ) Property and equipment, net $ 63,421 $ 61,401 Depreciation expense was $ 16.9 million and $ 10.8 million for the years ended December 31, 2024 and 2023, respectively. 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. 61 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 7. Goodwill and Intangible Assets Goodwill 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 At December 31, 2024 and 2023, intangible assets consisted of the following (in thousands): December 31, 2024 Cost Accumulated amortization Net Amortization period (in years) Customer relationships $ 212,990 $ ( 121,405 ) $ 91,585 2 - 15 Patents and technology 29,166 ( 17,867 ) 11,299 10 - 19 Trade names and other $ 28,913 $ ( 22,567 ) $ 6,346 8 - 19 Total intangible assets $ 271,069 $ ( 161,839 ) $ 109,230 December 31, 2023 Cost Accumulated amortization Net Amortization period (in years) Customer relationships $ 267,838 $ ( 164,672 ) $ 103,166 10 - 35 Patents and technology 89,151 ( 41,189 ) 47,962 5 - 19 Trade names and other 43,037 ( 29,164 ) 13,873 7 - 19 Trademark 5,089 ( 2,120 ) 2,969 15 Total intangible assets $ 405,115 $ ( 237,145 ) $ 167,970 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. 62 Table of Contents 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. The estimated future amortization expense for the next five years is as follows (in thousands): Year ending December 31, Amount 2025 $ 19,516 2026 16,819 2027 15,487 2028 14,188 2029 13,817 8. Debt Debt as of December 31, 2024 and December 31, 2023 consisted of the following (in thousands): December 31, 2024 2023 2029 Bonds $ 100,000 $ — 2025 Notes — 134,208 Credit Facility 90,392 — Other debt 3,373 2,864 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 Less: current portion ( 1,866 ) ( 1,186 ) Long-term debt, net of current portion $ 186,525 $ 129,567 2025 Notes 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. 63 Table of Contents 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 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. 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 . 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. and Canada. 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, 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 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. The U.S. 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 %. 64 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 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). 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. 2029 Bonds 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. 65 Table of Contents Forum Energy Technologies, Inc. and subsidiaries 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 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): Year ending December 31, Amount 2025 $ 2,045 2026 1,135 2027 444 2028 90,406 2029 100,000 Total future payment $ 194,030 Less: debt issuance cost ( 5,374 ) Less: present value discount on finance leases ( 265 ) Total debt $ 188,391 9. Leases 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, 2024 and 2023 (in thousands): December 31, Classification 2024 2023 Assets Operating lease assets Operating lease assets $ 70,389 $ 55,399 Finance lease assets Property and equipment, net 3,579 3,063 Total lease assets $ 73,968 $ 58,462 Liabilities Current Operating Accrued liabilities $ 11,056 $ 9,200 Finance Current portion of long-term debt 1,866 1,186 Noncurrent Operating Operating lease liabilities 73,145 61,450 Finance Long-term debt, net of current portion 1,507 1,678 Total lease liabilities $ 87,574 $ 73,514 66 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) The following table summarizes the components of lease expenses (in thousands): Year ended December 31, Lease Cost Classification 2024 2023 Operating lease cost Cost of sales and Selling, general and administrative expenses $ 16,622 $ 14,641 Finance lease cost Amortization of leased assets Selling, general and administrative expenses 1,720 1,265 Interest on lease liabilities Interest expense 269 180 Sublease income Cost of sales and Selling, general and administrative expenses ( 875 ) ( 1,238 ) Net lease cost $ 17,736 $ 14,848 The maturities of lease liabilities as of December 31, 2024 are as follows (in thousands): Operating Leases Finance Leases Total 2025 $ 16,721 $ 2,045 $ 18,766 2026 14,699 1,135 15,834 2027 13,608 444 14,052 2028 11,746 14 11,760 2029 10,698 — 10,698 Thereafter 46,759 — 46,759 Total lease payments 114,231 3,638 117,869 Less: present value discount ( 30,030 ) ( 265 ) ( 30,295 ) Present value of lease liabilities $ 84,201 $ 3,373 $ 87,574 The following table summarizes the weighted-average remaining term and weighted average discount rates related to leases as of December 31, 2024 and 2023: Year ended December 31, 2024 2023 Weighted-average remaining lease term (years) Operating leases 8.8 7.9 Financing leases 1.9 2.3 Weighted-average discount rate Operating leases 6.85 % 6.60 % Financing leases 7.51 % 6.89 % The following table summarizes the supplemental cash flow information related to leases for the years ended December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 15,904 $ 14,027 Operating cash flows from finance leases 269 180 Financing cash flows from finance leases 1,725 1,247 67 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Sale-leaseback transactions 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 assets and liabilities of approximately $ 19.1 million were recorded in the consolidated balance sheets. 10. Income Taxes The components of income (loss) before income taxes were as follows (in thousands): Year ended December 31, 2024 2023 U.S. $ ( 170,901 ) $ ( 43,450 ) Non-U.S. 42,475 35,636 Income (loss) before income taxes $ ( 128,426 ) $ ( 7,814 ) The components of income tax expense (benefit) were as follows (in thousands): Year ended December 31, 2024 2023 Current U.S. federal and state $ 1,545 $ 101 Non-U.S. 22,929 11,165 Total current 24,474 11,266 Deferred U.S. federal and state ( 752 ) 85 Non-U.S. ( 16,822 ) ( 289 ) Total deferred ( 17,574 ) ( 204 ) Income tax expense $ 6,900 $ 11,062 The reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to loss before income taxes are outlined below (in thousands): Year ended December 31, 2024 2023 Income tax benefit at the statutory rate $ ( 26,970 ) ( 21.0 ) % $ ( 1,641 ) ( 21.0 ) % State taxes, net of federal tax benefit ( 115 ) ( 0.1 ) % ( 114 ) ( 1.5 ) % Non-U.S. operations 3,143 2.4 % ( 274 ) ( 3.5 ) % Domestic incentives ( 402 ) ( 0.3 ) % 448 5.7 % Prior year federal, non-U.S. and state tax 3,488 2.7 % 3,536 45.3 % Nondeductible expenses 2,124 1.7 % 806 10.3 % Valuation allowance 25,137 19.6 % 8,313 106.4 % Other 495 0.4 % ( 12 ) ( 0.1 ) % Income tax expense $ 6,900 5.4 % $ 11,062 141.6 % Our effective tax rate was 5.4 % and 141.6 % for the years ended December 31, 2024 and 2023, respectively. 68 Table of Contents Forum Energy Technologies, Inc. and subsidiaries 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): December 31, 2024 2023 Deferred tax assets Reserves and accruals $ 5,579 $ 3,821 Operating lease liabilities 20,086 17,384 Inventories 8,894 10,170 Stock awards 935 1,829 Net operating loss and other tax carryforwards 186,118 160,127 Goodwill and intangible assets 19,513 20,091 Fair value discount on 2025 Notes 12,188 19,751 Property and equipment — 6,619 Other 10,114 5,896 Gross deferred tax assets 263,427 245,688 Valuation allowance ( 254,515 ) ( 231,907 ) Total deferred tax assets $ 8,912 $ 13,781 Deferred tax liabilities Property and equipment $ ( 3,771 ) $ — Operating lease assets ( 16,924 ) ( 13,903 ) Prepaid expenses and other ( 450 ) ( 450 ) Total deferred tax liabilities ( 21,145 ) ( 14,353 ) Net deferred tax liabilities $ ( 12,233 ) $ ( 572 ) Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by the Company and the respective sellers at the time of acquisition. We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S., and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. 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. Of these losses, $ 33.7 million will expire no later than 2037 if they are not utilized prior to that date. The remaining $ 311.3 million will not expire. 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 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. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic net operating losses may be limited in future periods depending upon future changes in ownership. Where we have unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income to offset such losses. 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, Singapore and China. 69 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 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. 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. 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 regard to our investment in these foreign subsidiaries. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences is not practicable at this time. We file income tax returns in the U.S. as well as in various states and non-U.S. jurisdictions. With few exceptions, we are no longer subject to income tax examination by tax authorities in these jurisdictions prior to 2017. We account for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands): 2024 Activity Amount Balance at January 1, 2024 $ 10,903 Additional based on tax positions related to prior years 259 Additional based on tax positions related to current year 3,040 Lapse of statute of limitations ( 1,448 ) Balance at December 31, 2024 $ 12,754 The total amount of unrecognized tax benefits at December 31, 2024 was $ 12.8 million, of which it is reasonably possible that $ 4.4 million could be settled during the next twelve-month period as a result of the conclusion of various tax audits or due to the expiration of the applicable statute of limitations. 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 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. 70 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 11. Fair Value Measurements 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 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. There were no other significant outstanding financial instruments as of December 31, 2024 and 2023 that required measuring the amounts at fair value on a recurring basis. 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. 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. 12. Commitments and Contingencies Litigation In the ordinary course of business, the Company is, and in the future, could be involved in various pending or threatened legal actions, some of which may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reserves accrued at December 31, 2024 and 2023 are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Asbestos litigation One of our subsidiaries has been named as one of many defendants in a number of product liability claims for alleged exposure to asbestos used in valves. These lawsuits are typically filed on behalf of plaintiffs who allege exposure to asbestos, against numerous defendants, often forty or more, who are alleged to have manufactured or distributed products containing asbestos. 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 New Jersey, New York, and Illinois. These complaints do not typically include requests for a specific amount of damages. Our subsidiary acquired the trademark for the product line in question in 1985. To date, most of the claims against our subsidiary alleging illnesses due to asbestos have generally been based on products manufactured by the previous owner prior to 1985 that are alleged to have contained asbestos. Many claimants alleging illnesses due to asbestos sue on the basis of exposure prior to 1985, as by that date the hazards of asbestos exposure were well known and asbestos had begun to fall into disuse. Our subsidiary has been successful in obtaining dismissals in most lawsuits without any cash contribution including because the “successor liability” law in most states does not hold a purchaser in good faith liable for the actions of the seller prior to the acquisition date unless the purchaser contractually assumed the liabilities, which our subsidiary did not. There are exceptions to the successor liability doctrine in many states, so there are no assurances that our subsidiary will not be found liable for the actions of its predecessor. The law in other states on so called “successor liability” may be different or ambiguous in this regard, and could also expose our subsidiary to liability. 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 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 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 71 Table of Contents 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. In addition, our subsidiary has over $ 950 million in face amount of excess coverage applicable to the claims. There can be no guarantee that all of this can be collected due to policy terms and conditions and insurer insolvencies in the past or in the future. In January 2011, we entered into an agreement with seven of our primary insurers under which they have agreed to pay 80 % of the costs of handling and settling each asbestos claim against the affected subsidiary. The insurers’ portion of the settlements is funded by our primary insurance limits, which are eroded only by settlements and not legal fees. Approximately $ 2.1 million in settlements has been paid by insurers and our subsidiary to date, with approximately $ 45,000 paid over the course of the last two years. 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. Tenaris litigation In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris, S.A. (together “Tenaris”) in the United States District Court for the Southern District of Texas seeking a declaration that its DURACOIL TM products do not infringe certain Tenaris patents related to coiled tubing. Tenaris filed counterclaims against Global Tubing alleging DURACOIL TM products infringe three patents. Tenaris sought unspecified damages and a permanent injunction. In response, Global Tubing alleged that its products do not infringe and the Tenaris patents are invalid and unenforceable. On March 20, 2023, the court agreed with Global Tubing, finding all patents unenforceable and dismissing all Tenaris infringement claims. Global Tubing intends to seek an award of its attorneys’ fees and costs incurred as a result of the litigation. Tenaris has appealed the final judgment and Global Tubing has filed a cross-appeal. 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 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. Based on information currently available, the Company does not believe that these matters will have a material adverse effect on the financial condition, results of operations, cash flows or capital expenditures of the Company. Operating leases The Company has operating leases for warehouses, office space, manufacturing facilities and equipment. The leases generally require the Company to pay certain expenses including taxes, insurance, maintenance, and utilities. See Note 9 Leases for further information. 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 fulfills certain performance obligations relating to certain large contracts. At December 31, 2024 and 2023, the Company had $ 17.8 million and $ 20.3 million in letters of credit outstanding, respectively. 72 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) 13. Earnings (Loss) Per Share The reconciliation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts): Year ended December 31, 2024 2023 Net loss attributable to common stockholders $ ( 135,326 ) $ ( 18,876 ) Basic - weighted average shares outstanding 12,299 10,212 Dilutive effect of stock options and restricted stock — — Dilutive effect of convertible 2025 Notes — — Diluted - weighted average shares outstanding 12,299 10,212 Earnings (loss) per share Basic $ ( 11.00 ) $ ( 1.85 ) Diluted $ ( 11.00 ) $ ( 1.85 ) 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. 14. Employee Benefits We sponsor a 401(k) savings plan for U.S. employees and similar savings plans for certain non-U.S. employees. These plans benefit eligible employees by allowing them the opportunity to make contributions up to certain limits. We contribute by matching a percentage of each employee’s contributions. 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 $ 5.4 million and $ 4.4 million for the years ended December 31, 2024 and 2023, respectively. 15. Long-Term Incentive Compensation Stock-based compensation 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. In connection with the adoption of the 2016 Plan (as described below), no further awards will be granted under the 2010 Plan, but outstanding awards under the 2010 Plan will continue to be governed by its terms. In May 2016, we adopted a new 2016 Stock and Incentive Plan (the “2016 Plan”), under which we initially reserved a total of 285 thousand shares. 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. The total amount of stock based compensation expense recorded was $ 7.1 million and $ 4.6 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the Company expects to record stock based compensation expense of approximately $ 6.6 million over a weighted average remaining term of approximately two years . Future grants will result in additional compensation expense. 73 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Stock options The exercise price of each option is based on the fair market value of the Company’s stock at the date of grant. Options generally have a ten-year life and vest annually in equal increments over four years . Our policy for issuing stock upon a stock option exercise is to issue new shares. Compensation expense is recognized on a straight line basis over the vesting period. The following table provides additional information related to stock options: 2024 Activity Number of shares (in thousands) Weighted average exercise price Weighted average remaining term (in years) Aggregate intrinsic value (in millions) Outstanding at December 31, 2023 46 $ 322.88 1.9 $ — Granted — $ — Exercised — $ — Forfeited/expired ( 36 ) $ 336.72 Outstanding at December 31, 2024 10 $ 273.86 1.6 $ — Exercisable at December 31, 2024 10 $ 273.86 1.6 $ — The intrinsic value is the amount by which the fair value of the underlying share exceeds the exercise price of the stock option. No stock options were exercised in 2024 or 2023. As of December 31, 2024 and 2023, the share price of the Company was less than the exercise price for all outstanding stock options. Therefore, the intrinsic value for stock options outstanding and exercisable was zero as of each such date. No stock options were granted in 2024 or 2023. Restricted stock 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: 2024 Activity Restricted stock (shares in thousands) Nonvested at December 31, 2023 7 Granted 40 Vested — Forfeited ( 7 ) Nonvested at December 31, 2024 40 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 one to three year period from the date of grant. The following table provides additional information related to our restricted stock units: 2024 Activity Restricted stock units (shares in thousands) Nonvested at December 31, 2023 348 Granted 237 Vested ( 141 ) Forfeited ( 115 ) Nonvested at December 31, 2024 329 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 . 74 Table of Contents Forum Energy Technologies, Inc. and subsidiaries 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. 16. Related Party Transactions The Company has sold and purchased inventory, services and fixed assets to and from affiliates of certain directors. The dollar amounts related to these related party activities are not significant to our consolidated financial statements. 17. Business Segments 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. GAAP. 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. They are managed separately since each business segment requires different marketing strategies. Operating segments have not been aggregated as part of a reportable segment. 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 make decisions on how to allocate resources and assess performance. We consider the Chief Operating Decision Maker to be the Chief Executive Officer. 75 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Summary financial data by reportable segment follows (in thousands): 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 Less: 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 ( 22 ) Other corporate expenses 30,952 Transaction expenses 7,728 Impairment of intangible assets 119,123 Gain on sale-leaseback transactions ( 4,860 ) 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 Less: 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 ) 76 Table of Contents Forum Energy Technologies, Inc. and subsidiaries Notes to consolidated financial statements (continued) Year ended December 31, 2024 2023 Depreciation and amortization Drilling and Completions $ 28,181 $ 29,164 Artificial Lift and Downhole 25,349 5,318 Corporate 187 246 Total depreciation and amortization $ 53,717 $ 34,728 A summary of capital expenditures by reportable segment is as follows (in thousands): Year ended December 31, Capital expenditures 2024 2023 Drilling and Completions $ 5,974 $ 6,444 Artificial Lift and Downhole 1,413 753 Corporate 758 747 Total capital expenditures $ 8,145 $ 7,944 A summary of consolidated assets by reportable segment is as follows (in thousands): Year ended December 31, Assets 2024 2023 Drilling and Completions $ 418,583 $ 615,033 Artificial Lift and Downhole 371,178 178,785 Corporate 26,193 27,243 Total assets $ 815,954 $ 821,061 Corporate assets primarily include cash, certain prepaid expenses and deferred loan costs. A summary of long-lived assets by geography is as follows (in thousands): December 31, Long-lived assets 2024 2023 United States $ 125,373 $ 251,901 Canada 172,740 11,131 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 77 Table of Contents 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): Year ended December 31, 2024 2023 Revenue $ % $ % 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 % Asia-Pacific 43,971 5.4 % 38,624 5.2 % Latin America 36,942 4.5 % 37,945 5.1 % Total Revenue $ 816,425 100.0 % $ 738,864 100.0 % The following table presents our revenues disaggregated by product line (in thousands): Year ended December 31, 2024 2023 Revenue $ % $ % 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 % Valve Solutions 61,999 7.6 % 63,875 8.6 % Eliminations ( 22 ) — % ( 70 ) — % Total revenue $ 816,425 100.0 % $ 738,864 100.0 % 78 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.