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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-35504
FORUM ENERGY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware61-1488595
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization)
10344 Sam Houston Park Drive Suite 300HoustonTexas77064
(Address of Principal Executive Offices)(Zip Code)
(281)949-2500
(Registrant’s telephone number, including area code)
______________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockFETNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
As of August 3, 2021 there were 5,627,653 common shares outstanding.
1



Table of Contents

2


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

Forum Energy Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
  Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share information)2021202020212020
Revenue$137,420 $113,275 $251,937 $295,907 
Cost of sales105,216 100,373 193,548 260,915 
Gross profit32,204 12,902 58,389 34,992 
Operating expenses
Selling, general and administrative expenses42,184 48,362 83,658 108,523 
Impairments of intangible assets, property and equipment 112  17,432 
Gain on disposal of assets and other(360)(550)(1,269)(534)
Total operating expenses41,824 47,924 82,389 125,421 
Operating loss(9,620)(35,022)(24,000)(90,429)
Other expense (income)
Interest expense7,775 6,420 16,937 13,144 
Foreign exchange and other losses (gains), net(939)631 2,531 (4,376)
Loss (gain) on extinguishment of debt4,161 (36,285)5,094 (43,744)
Deferred loan costs written off 130  1,959 
Total other expense (income), net10,997 (29,104)24,562 (33,017)
Loss before income taxes(20,617)(5,918)(48,562)(57,412)
Income tax expense (benefit)1,189 (424)2,907 (14,774)
Net loss(21,806)(5,494)(51,469)(42,638)
Weighted average shares outstanding
Basic5,638 5,580 5,625 5,569 
Diluted5,638 5,580 5,625 5,569 
Loss per share
Basic$(3.87)$(0.98)$(9.15)$(7.66)
Diluted(3.87)(0.98)(9.15)(7.66)
Other comprehensive income (loss), net of tax:
Net loss(21,806)(5,494)(51,469)(42,638)
Change in foreign currency translation, net of tax of $0
66 1,900 3,218 (6,946)
Gain (loss) on pension liability(21)(22)56 (1)
Comprehensive loss$(21,761)$(3,616)$(48,195)$(49,585)
The accompanying notes are an integral part of these condensed consolidated financial statements.

3


Forum Energy Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share information)June 30,
2021
December 31, 2020
Assets
Current assets
Cash and cash equivalents$60,361 $128,617 
Accounts receivable—trade, net of allowances of $10,073 and $9,217
106,909 80,606 
Inventories, net227,987 251,747 
Prepaid expenses and other current assets21,593 19,018 
Accrued revenue1,205 1,687 
Costs and estimated profits in excess of billings8,879 8,516 
Total current assets426,934 490,191 
Property and equipment, net of accumulated depreciation104,526 113,668 
Operating lease assets28,503 31,520 
Deferred financing costs, net 249 
Intangible assets, net227,638 240,444 
Deferred income taxes, net132 102 
Other long-term assets16,428 13,752 
Total assets$804,161 $889,926 
Liabilities and equity
Current liabilities
Current portion of long-term debt$1,024 $1,322 
Accounts payable—trade72,288 46,351 
Accrued liabilities65,790 67,581 
Deferred revenue6,547 7,863 
Billings in excess of costs and profits recognized5,505 1,817 
Total current liabilities151,154 124,934 
Long-term debt, net of current portion231,696 293,373 
Deferred income taxes, net1,595 1,952 
Operating lease liabilities39,433 44,536 
Other long-term liabilities18,573 18,895 
Total liabilities442,451 483,690 
Commitments and contingencies
Equity
Common stock, $0.01 par value, 14,800,000 shares authorized, 6,038,371 and 5,992,400 shares issued
60 60 
Additional paid-in capital1,246,389 1,242,720 
Treasury stock at cost, 410,877 shares
(134,499)(134,499)
Retained deficit(653,125)(601,656)
Accumulated other comprehensive loss(97,115)(100,389)
Total equity361,710 406,236 
Total liabilities and equity$804,161 $889,926 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Forum Energy Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
(in thousands)20212020
Cash flows from operating activities
Net loss$(51,469)$(42,638)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense9,222 13,296 
Amortization of intangible assets12,662 13,371 
Impairments of intangible assets, property and equipment 17,432 
Impairments of operating lease assets 9,338 
Inventory write down2,617 16,379 
Stock-based compensation expense3,810 5,760 
Loss (gain) on extinguishment of debt5,094 (43,744)
Deferred loan costs written off 1,959 
Deferred income taxes(320)385 
Noncash losses and other, net3,909 686 
Changes in operating assets and liabilities
Accounts receivable—trade(27,585)60,900 
Inventories21,463 18,279 
Prepaid expenses and other assets(5,153)(13,236)
Cost and estimated profit in excess of billings165 (957)
Accounts payable, deferred revenue and other accrued liabilities24,262 (56,198)
Billings in excess of costs and estimated profits earned3,679 (3,089)
Net cash provided by (used in) operating activities$2,356 $(2,077)
Cash flows from investing activities
Capital expenditures for property and equipment(704)(1,538)
Proceeds from sale of property and equipment2,106 1,336 
Net working capital settlement from sale of business(1,283) 
Net cash provided by (used in) investing activities$119 $(202)
Cash flows from financing activities
Borrowings on revolving Credit Facility 85,000 
Repayments on revolving Credit Facility(13,126) 
Cash paid to repurchase 2025 Notes and 2021 Notes(56,731)(27,615)
Payment of capital lease obligations(783)(565)
Repurchases of stock(141)(181)
Deferred financing costs (2,259)
Net cash provided by (used in) financing activities$(70,781)$54,380 
Effect of exchange rate changes on cash50 (334)
Net increase (decrease) in cash, cash equivalents and restricted cash(68,256)51,767 
Cash, cash equivalents and restricted cash at beginning of period128,617 57,911 
Cash, cash equivalents and restricted cash at end of period$60,361 $109,678 
Noncash activities
Operating lease right of use assets obtained in exchange for lease obligations874 690 
Finance lease right of use assets obtained in exchange for lease obligations228 1,384 


The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Forum Energy Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Six Months Ended June 30, 2021
(in thousands)Common stockAdditional paid-in capitalTreasury stockRetained
deficit
Accumulated
other
comprehensive
income / (loss)
Total equity
Balance at December 31, 2020$60 $1,242,720 $(134,499)$(601,656)$(100,389)$406,236 
Stock-based compensation expense— 1,896 — — — 1,896 
Restricted stock issuance, net of forfeitures— (139)— — — (139)
Currency translation adjustment— — — — 3,152 3,152 
Change in pension liability— — — — 77 77 
Net loss— — — (29,663)— (29,663)
Balance at March 31, 2021$60 $1,244,477 $(134,499)$(631,319)$(97,160)$381,559 
Stock-based compensation expense— 1,914 — — — 1,914 
Restricted stock issuance, net of forfeitures— (2)— — — (2)
Currency translation adjustment— — — — 66 66 
Change in pension liability— — — — (21)(21)
Net loss— — — (21,806)— (21,806)
Balance at June 30, 2021$60 $1,246,389 $(134,499)$(653,125)$(97,115)$361,710 

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


6


Forum Energy Technologies, Inc. and subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Six Months Ended June 30, 2020
(in thousands)Common stockAdditional paid-in capitalTreasury stockRetained
deficit
Accumulated
other
comprehensive
income / (loss)
Total equity
Balance at December 31, 2019$1,189 $1,231,650 $(134,493)$(503,369)$(108,938)$486,039 
Stock-based compensation expense— 3,223 — — — 3,223 
Restricted stock issuance, net of forfeitures5 (178)— — — (173)
Shares issued in employee stock purchase plan2 344 — — — 346 
Adjustment for adoption of ASU 2016-13
— — — (1,398)— (1,398)
Treasury stock— — (6)— — (6)
Currency translation adjustment— — — — (8,846)(8,846)
Change in pension liability— — — — 21 21 
Net loss— — — (37,144)— (37,144)
Balance at March 31, 2020$1,196 $1,235,039 $(134,499)$(541,911)$(117,763)$442,062 
Stock-based compensation expense— 2,537 — — — 2,537 
Restricted stock issuance, net of forfeitures— (2)— — — (2)
Currency translation adjustment— — — — 1,900 1,900 
Change in pension liability— — — — (22)(22)
Net loss— — — (5,494)— (5,494)
Balance at June 30, 2020$1,196 $1,237,574 $(134,499)$(547,405)$(115,885)$440,981 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

1. Organization and Basis of Presentation
Forum Energy Technologies, Inc. (the “Company,” "FET," “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil, natural gas, industrial and renewable energy industries. FET provides value added solutions that increase the safety and efficiency of energy exploration and production. We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other interim period.
These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on March 2, 2021.
COVID-19 Impacts
The outbreak of COVID-19 in 2020 caused significant disruptions in the U.S. and world economies which led to significant reductions in demand for crude oil. As a result, many companies in the energy industry have sought protection under Chapter 11 of the U.S. Bankruptcy Code. During the first half of 2021, distribution of vaccines resulted in reopening of certain economies and increasing demand for oil and natural gas. However, ongoing COVID-19 outbreaks and new variants of the virus continue to cause disruptions in global supply chains which have led to inflationary pressures for certain goods and services. We anticipate that our liquidity, financial condition and future results of operations will continue to be impacted by ongoing developments from the COVID-19 pandemic.
2. Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption.
Accounting Standards Adopted in 2021
Income Tax. In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740) - Disclosure Framework - Simplifying the Accounting for Income Taxes, which simplified the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and clarifying and amending existing guidance. We adopted this new standard as of January 1, 2021. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements.
Accounting Standards Issued But Not Yet Adopted
Convertible Debt. In August 2020, the FASB issued ASU No. 2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
share guidance. This guidance may be adopted through either a modified retrospective or fully retrospective method of transition. This guidance will be effective for us in the first quarter of 2022. We are currently evaluating the impact of this new guidance. However, we currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements.
3. Revenue
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. For a detailed discussion of our revenue recognition policies, refer to the Company’s 2020 Annual Report on Form 10-K.
Disaggregated Revenue
Refer to Note 11 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, we record a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract. Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales.
The following table reflects the changes in our contract assets and contract liabilities balances for the six months ended June 30, 2021 (in thousands):
June 30, 2021December 31, 2020Increase / (Decrease)
$%
Accrued revenue$1,205 $1,687 
Costs and estimated profits in excess of billings8,879 8,516 
Contract assets$10,084 $10,203 $(119)(1)%
Deferred revenue$6,547 $7,863 
Billings in excess of costs and profits recognized5,505 1,817 
Contract liabilities$12,052 $9,680 $2,372 25 %
During the six months ended June 30, 2021, our contract assets decreased by $0.1 million and our contract liabilities increased by $2.4 million due to the timing of billings for significant projects within our Subsea product line.
During the six months ended June 30, 2021, we recognized $7.4 million of revenue that was included in the contract liability balance at the beginning of the period.
As substantially all of our contracts are less than one year in duration, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.
4. Dispositions
2020 Disposition of ABZ and Quadrant Valves
On December 31, 2020, we sold certain assets of our ABZ and Quadrant valve brands for cash consideration of $104.6 million. This transaction was accounted for as a disposition of a business. We recognized a gain on disposition of $88.4 million based on the difference in cash received less $14.9 million of net book value of assets sold and $1.3 million of cash paid in the second quarter 2021 for the net working capital settlement related to this disposition. Pro forma results of operations for this disposition have not been presented because the effects were not material to the consolidated financial statements.
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Inventories
Our significant components of inventory at June 30, 2021 and December 31, 2020 were as follows (in thousands):
June 30, 2021December 31, 2020
Raw materials and parts$83,910 $151,531 
Work in process17,432 15,946 
Finished goods202,141 229,212 
Gross inventories303,483 396,689 
Inventory reserve(75,496)(144,942)
Inventories$227,987 $251,747 

6. Intangible Assets
Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020, respectively (in thousands):
June 30, 2021
Gross Carrying AmountAccumulated AmortizationNet IntangiblesAmortization Period (In Years)
Customer relationships$268,870 $(126,066)$142,804 
10 - 15
Patents and technology89,229 (27,044)62,185 
5 - 19
Non-compete agreements190 (155)35 
2 - 6
Trade names42,988 (24,191)18,797 
7 - 19
Trademarks5,089 (1,272)3,817 
15
Intangible Assets Total$406,366 $(178,728)$227,638 
December 31, 2020
Gross Carrying AmountAccumulated AmortizationNet IntangiblesAmortization Period (In Years)
Customer relationships$272,470 $(121,294)$151,176 
10 - 15
Patents and technology89,626 (24,440)65,186 
5 - 19
Non-compete agreements190 (137)53 
2 - 6
Trade names42,984 (22,941)20,043 
7 - 19
Trademarks5,089 (1,103)3,986 
15
Intangible Assets Total$410,359 $(169,915)$240,444 

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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
7. Impairments of Long-Lived Assets
Long-lived assets with definite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
During the six months ended June 30, 2021, there were no impairments of long-lived assets.
During the six months ended June 30, 2020, the COVID-19 pandemic and associated preventative actions taken around the world to mitigate its spread caused oil demand to deteriorate and economic activity to decrease. As a result, oil prices declined significantly during the period and created an extremely challenging market for all sub-sectors of the oil and natural gas industry. In addition, responses to the spread of COVID-19, including significant government restrictions on movement, resulted in sharp declines in global economic activity.
As a result, during the six months ended June 30, 2020, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. The fair value was determined either through analysis of discounted future cash flows or, for certain real estate, based on a third party's sales price estimate (classified within level 3 of the fair value hierarchy).
Following is a summary of impairment charges recognized in our segments during the six months ended June 30, 2020 (in thousands):
Impairments of:Drilling & DownholeCompletionsProductionTotal Impairments
Property and equipment (1)
1,068 9,608 1,498 12,174 
Intangible assets (2)
5,258   5,258 
Operating lease right of use assets (3)
1,284 6,139 1,915 9,338 
Total impairments$7,610 $15,747 $3,413 $26,770 

(1) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss.
(2) These charges are included in Impairments of intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss and primarily include customer relationships, technology and distributor relationships.
(3) $8.6 million of these charges are included in Cost of sales and $0.7 million are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss.
8. Debt
Notes payable and lines of credit as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands): 
June 30, 2021December 31, 2020
2025 Notes258,837 316,863 
Unamortized debt discount(22,348)(30,248)
Debt issuance cost(5,486)(7,318)
Credit Facility 13,126 
Other debt1,717 2,272 
Total debt232,720 294,695 
Less: current maturities(1,024)(1,322)
Long-term debt$231,696 $293,373 
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2025 Notes
In August 2020, we exchanged $315.5 million principal amount of our previous 6.25% unsecured notes due 2021 (“2021 Notes”) for new 9.00% convertible secured notes due August 2025 (the “2025 Notes”). This transaction was accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date. We estimated the fair value of the 2025 Notes to be $282.6 million at the issuance date, resulting in a $32.9 million discount (“Debt Discount”) at issuance. As a result, we recognized a $28.7 million gain on extinguishment of debt that reflects the difference in the $314.8 million net carrying value of the 2021 Notes exchanged, including debt issuance costs and unamortized debt premium, less the $282.6 million estimated fair value of 2025 Notes and a $3.5 million early participation fee paid to bondholders that participated in the exchange. The Debt Discount is being amortized as non-cash interest expense over the term of the 2025 Notes using the effective interest method.
The 2025 Notes pay interest at the rate of 9.00%, of which 6.25% is payable in cash and 2.75% is payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis. A portion of the 2025 Notes, initially equal to $150.0 million total principal amount, is mandatorily convertible into shares of our common stock at a conversion rate of 37.0370 shares per $1,000 principal amount of 2025 Notes converted, equivalent to a conversion price of $27.00 per share, subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20-trading day period is at least $30.00 per share. Holders of the 2025 Notes also have optional conversion rights in the event that the Company elects to redeem the 2025 Notes in cash and at the final maturity of the new notes. Any interest that the Company elects to pay in additional notes are also subject to the mandatory and optional conversion rights.
During the six months ended June 30, 2021, we repurchased an aggregate $58.0 million of principal amount of our 2025 Notes for $56.7 million. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $51.6 million, resulting in a $5.1 million loss on extinguishment of debt.
Credit Facility
In connection with the issuance of the 2025 Notes, we amended our senior secured revolving credit facility ("Credit Facility"). Following such amendment, our Credit Facility provides revolving credit commitments of $250.0 million (with a sublimit of up to $45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $25.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a sublimit of up to $3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).
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. Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's other assets. The amount of eligible inventory included in the borrowing base is restricted to the lesser of $130.0 million (subject to a quarterly reduction of $0.5 million that started on October 1, 2020) and 80.0% of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of June 30, 2021, our total borrowing base was $140.6 million, of which no amounts were drawn and $14.8 million was used for security of outstanding letters of credit, resulting in remaining availability of $125.8 million.
Borrowings under the U.S. line bear interest at a rate equal to, at our option, either (a) the LIBOR rate, subject to a floor of 0.75%, plus a margin of 2.50% or (b) a base rate plus a margin of 1.50%. 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 LIBOR plus 1.00% per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.75%.
Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the CDOR rate, subject to a floor of 0.75%, plus a margin of 2.50% or (b) a base rate plus a margin of 1.50%. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR rate plus 1.00% and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.75%.
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% on the unused portion of commitments if average usage of the Credit Facility is greater than 50% and (b) 0.500% on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50%.
The Credit Facility is currently scheduled to mature on October 30, 2022. If excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base and $31.3 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.
Deferred Loan Costs
We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility. In the first quarter of 2020, we wrote-off $1.8 million of deferred loan costs for the termination of previous discussions related to a potential exchange offer for our 2021 Notes.
Other Debt
Other debt consists primarily of various finance leases of equipment.
Letters of Credit and Guarantees
We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts. We had $14.8 million and $15.6 million in total outstanding letters of credit as of June 30, 2021 and December 31, 2020, respectively.
9. Income Taxes
For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods. For the three and six months ended June 30, 2021, we recorded a tax expense of $1.2 million and $2.9 million, respectively, compared to a tax benefit of $0.4 million and $14.8 million for the three and six months ended June 30, 2020, respectively. The estimated annual effective tax rates for the six months ended June 30, 2021 and 2020 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.
The tax benefit for the six months ended June 30, 2020 includes a $16.6 million benefit related to a carryback claim for U.S. federal tax losses based on provisions in the U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020. The CARES Act provided relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, increased the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerated refunds for minimum tax credit carryforwards, among other provisions. The tax effects of changes in tax laws are recognized in the period in which the law is enacted.
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. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of June 30, 2021, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S., the U.K., Germany, Singapore, China and Saudi Arabia. As a result, we have certain valuation allowances against our deferred tax assets as of June 30, 2021.
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
10. Fair Value Measurements
The Company had zero and $13.1 million of borrowings outstanding under the Credit Facility as of June 30, 2021 and December 31, 2020, respectively. The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.
The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At June 30, 2021, the fair value and the carrying value of our 2025 Notes approximated $257.0 million and $231.0 million, respectively. At December 31, 2020, the fair value and the carrying value of our 2025 Notes approximated $200.3 million and $279.3 million, respectively.
There were no other outstanding financial assets as of June 30, 2021 and December 31, 2020 that required measuring the amounts at fair value. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2021.
11. Business Segments
The Company reports results of operations in the following three reporting segments: Drilling & Downhole, Completions and Production. The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands):
Three Months Ended
June 30,
Six Months Ended June 30,
2021202020212020
Revenue:
Drilling & Downhole$61,570 $47,183 110,226 123,826 
Completions46,516 17,583 84,359 68,406 
Production29,337 48,597 57,368 104,202 
Eliminations(3)(88)(16)(527)
Total revenue$137,420 $113,275 $251,937 $295,907 
Operating loss
Drilling & Downhole$2,701 $(9,399)$(1,805)$(13,544)
Completions(370)(17,813)(302)(35,131)
Production(4,041)(1,057)(7,882)(9,236)
Corporate(8,270)(7,191)(15,280)(15,620)
Segment operating loss(9,980)(35,460)(25,269)(73,531)
Impairments of intangible assets, property and equipment 112  17,432 
Gain on disposal of assets and other(360)(550)(1,269)(534)
Operating loss$(9,620)$(35,022)$(24,000)$(90,429)
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
A summary of consolidated assets by reportable segment is as follows (in thousands):
June 30, 2021December 31, 2020
Drilling & Downhole$316,630 $314,375 
Completions350,102 356,645 
Production86,186 92,949 
Corporate51,243 125,957 
Total assets$804,161 $889,926 
Corporate assets primarily include cash and certain prepaid assets.
The following table presents our revenues disaggregated by product line (in thousands):
Three Months Ended
June 30,
Six Months Ended June 30,
2021202020212020
Drilling Technologies$27,624 $19,971 $46,144 $56,609 
Downhole Technologies16,613 12,673 31,706 37,624 
Subsea Technologies17,333 14,539 32,376 29,593 
Stimulation and Intervention24,354 8,520 43,056 32,996 
Coiled Tubing22,162 9,063 41,303 35,410 
Production Equipment17,399 19,430 31,793 38,179 
Valve Solutions11,938 29,167 25,575 66,023 
Eliminations(3)(88)(16)(527)
Total revenue$137,420 $113,275 $251,937 $295,907 
The following table presents our revenues disaggregated by geography (in thousands):
Three Months Ended
June 30,
Six Months Ended June 30,
2021202020212020
United States$77,400 $70,296 $145,714 $194,186 
Canada10,120 11,599 19,081 19,551 
Europe & Africa15,563 8,458 28,227 19,604 
Middle East11,939 10,007 22,280 23,147 
Asia-Pacific14,915 4,030 23,795 22,823 
Latin America7,483 8,885 12,840 16,596 
Total Revenue$137,420 $113,275 $251,937 $295,907 

12. Commitments and Contingencies
In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, some of which may or may not be covered by insurance. Management reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reserves accrued at June 30, 2021 and December 31, 2020, respectively, are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
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Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
For further disclosure regarding certain litigation matters, refer to Note 13 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2020 Annual Report on Form 10-K filed with the SEC on March 2, 2021. There have been no material changes related to these matters during the six months ended June 30, 2021.
13. Loss Per Share
The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):
Three Months Ended
June 30,
Six Months Ended June 30,
2021202020212020
Net loss$(21,806)$(5,494)(51,469)(42,638)
Basic - weighted average shares outstanding5,638 5,580 5,625 5,569 
Dilutive effect of stock options and restricted stock    
Dilutive effect of convertible notes due 2025    
Diluted - weighted average shares outstanding5,638 5,580 5,625 5,569 
Loss per share
Basic$(3.87)$(0.98)$(9.15)$(7.66)
Diluted$(3.87)$(0.98)