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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, 2022
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 1, 2022 there were 5,721,072 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)2022202120222021
Revenue$172,246 $137,420 $327,420 $251,937 
Cost of sales123,673 105,216 240,228 193,548 
Gross profit48,573 32,204 87,192 58,389 
Operating expenses
Selling, general and administrative expenses43,497 42,184 87,802 83,658 
Gain on disposal of assets and other(908)(360)(886)(1,269)
Total operating expenses42,589 41,824 86,916 82,389 
Operating income (loss)5,984 (9,620)276 (24,000)
Other expense (income)
Interest expense7,842 7,775 15,466 16,937 
Foreign exchange and other losses (gains), net(12,838)(939)(18,824)2,531 
Loss on extinguishment of debt 4,161  5,094 
Total other expense (income), net(4,996)10,997 (3,358)24,562 
Income (loss) before income taxes10,980 (20,617)3,634 (48,562)
Income tax expense1,716 1,189 3,569 2,907 
Net income (loss)9,264 (21,806)65 (51,469)
Weighted average shares outstanding
Basic5,747 5,638 5,715 5,625 
Diluted10,481 5,638 5,910 5,625 
Earnings (loss) per share
Basic$1.61 $(3.87)$0.01 $(9.15)
Diluted1.15 (3.87)0.01 (9.15)
Other comprehensive income (loss), net of tax:
Net income (loss)9,264 (21,806)65 (51,469)
Change in foreign currency translation, net of tax of $0
(16,518)66 (23,510)3,218 
Gain (loss) on pension liability57 (21)87 56 
Comprehensive loss$(7,197)$(21,761)$(23,358)$(48,195)
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, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$26,904 $46,858 
Accounts receivable—trade, net of allowances of $9,630 and $11,114
147,090 123,903 
Inventories, net271,182 241,740 
Prepaid expenses and other current assets23,843 23,702 
Accrued revenue893 2,245 
Costs and estimated profits in excess of billings15,274 8,285 
Total current assets485,186 446,733 
Property and equipment, net of accumulated depreciation88,699 94,005 
Operating lease assets22,237 25,431 
Deferred financing costs, net1,325 1,484 
Intangible assets, net203,787 217,405 
Deferred income taxes, net628 203 
Other long-term assets5,630 6,075 
Total assets$807,492 $791,336 
Liabilities and equity
Current liabilities
Current portion of long-term debt$690 $860 
Accounts payable—trade110,744 99,379 
Accrued liabilities63,705 58,436 
Deferred revenue7,658 7,276 
Billings in excess of costs and profits recognized1,514 9,705 
Total current liabilities184,311 175,656 
Long-term debt, net of current portion268,845 232,370 
Deferred income taxes, net1,049 834 
Operating lease liabilities30,275 34,745 
Other long-term liabilities14,558 18,605 
Total liabilities499,038 462,210 
Commitments and contingencies
Equity
Common stock, $0.01 par value, 14,800,000 shares authorized, 6,188,188 and 6,100,886 shares issued
62 61 
Additional paid-in capital1,252,647 1,249,962 
Treasury stock at cost, 467,153 shares
(135,562)(135,562)
Retained deficit(684,242)(684,307)
Accumulated other comprehensive loss(124,451)(101,028)
Total equity308,454 329,126 
Total liabilities and equity$807,492 $791,336 
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)20222021
Cash flows from operating activities
Net income (loss)$65 $(51,469)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense6,742 9,222 
Amortization of intangible assets12,384 12,662 
Inventory write down827 2,617 
Stock-based compensation expense2,772 3,810 
Loss on extinguishment of debt 5,094 
Deferred income taxes(1,225)(320)
Noncash losses and other, net3,068 3,909 
Changes in operating assets and liabilities
Accounts receivable—trade(25,322)(27,585)
Inventories(33,595)21,463 
Prepaid expenses and other assets1,589 (5,153)
Cost and estimated profit in excess of billings(7,994)165 
Accounts payable, deferred revenue and other accrued liabilities(1,846)24,262 
Billings in excess of costs and estimated profits earned(8,024)3,679 
Net cash provided by (used in) operating activities$(50,559)$2,356 
Cash flows from investing activities
Capital expenditures for property and equipment(3,570)(704)
Proceeds from sale of property and equipment2,608 2,106 
Payments related to business acquisitions and dispositions$(485)$(1,283)
Net cash provided by (used in) investing activities$(1,447)$119 
Cash flows from financing activities
Borrowings on revolving Credit Facility274,472  
Repayments on revolving Credit Facility(240,899)(13,126)
Cash paid to repurchase 2025 Notes (56,731)
Payment of capital lease obligations(570)(783)
Repurchases of stock(361)(141)
Net cash provided by (used in) financing activities$32,642 $(70,781)
Effect of exchange rate changes on cash(590)50 
Net decrease in cash, cash equivalents and restricted cash(19,954)(68,256)
Cash, cash equivalents and restricted cash at beginning of period46,858 128,617 
Cash, cash equivalents and restricted cash at end of period$26,904 $60,361 
Noncash activities
Operating lease right of use assets obtained in exchange for lease obligations1,348 874 
Finance lease right of use assets obtained in exchange for lease obligations458 228 
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, 2022
(in thousands)Common stockAdditional paid-in capitalTreasury stockRetained
deficit
Accumulated
other
comprehensive
income / (loss)
Total equity
Balance at December 31, 2021$61 $1,249,962 $(135,562)$(684,307)$(101,028)$329,126 
Stock-based compensation expense— 2,151 — — — 2,151 
Restricted stock issuance, net of forfeitures1 (361)— — — (360)
Currency translation adjustment— — — — (6,992)(6,992)
Change in pension liability— — — — 30 30 
Net loss— — — (9,199)— (9,199)
Balance at March 31, 2022$62 $1,251,752 $(135,562)$(693,506)$(107,990)$314,756 
Stock-based compensation expense— 621 — — — 621 
Restricted stock issuance, net of forfeitures— (1)— — — (1)
Liability awards converted to share settled— 275 — — — 275 
Currency translation adjustment— — — — (16,518)(16,518)
Change in pension liability— — — — 57 57 
Net Income— — — 9,264 — 9,264 
Balance at June 30, 2022$62 $1,252,647 $(135,562)$(684,242)$(124,451)$308,454 
The accompanying notes are an integral part of these condensed consolidated financial statements.


6


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.
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.
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 three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 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, 2021, which are included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC on March 4, 2022.
COVID-19 Impacts
The outbreak of COVID-19 in 2020 caused significant disruptions in the U.S. and world economies which led to significant reductions in demand for crude oil. During 2021, distribution of vaccines resulted in reopening of certain economies and increasing demand for oil and natural gas. However, ongoing COVID-19 outbreaks and related work restrictions continue to contribute to disruptions in global supply chains which have contributed 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 2022
Convertible Debt. In August 2020, the FASB issued ASU No. 2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-share guidance. We adopted this new standard as of January 1, 2022. The adoption of this new standard did not have a material impact on our unaudited condensed 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 2021 Annual Report on Form 10-K.
Disaggregated Revenue
Refer to Note 10 Business Segments for disaggregated revenue by product line and geography.
8

Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
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, 2022 (in thousands):
June 30, 2022December 31, 2021Increase / (Decrease)
$%
Accrued revenue$893 $2,245 
Costs and estimated profits in excess of billings15,274 8,285 
Contract assets$16,167 $10,530 $5,637 54 %
Deferred revenue$7,658 $7,276 
Billings in excess of costs and profits recognized1,514 9,705 
Contract liabilities$9,172 $16,981 $(7,809)(46)%
During the six months ended June 30, 2022, our contract assets increased by $5.6 million and our contract liabilities decreased by $7.8 million primarily due to the timing of milestone billings for projects in our subsea product line.
During the six months ended June 30, 2022, we recognized $12.0 million of revenue that was included in the contract liability balance at the beginning of the period.
As 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. Acquisitions
2021 Acquisition of Hawker Equipment Solutions
On December 20, 2021, we acquired certain assets of Hawker Equipment Solutions, LLC (“Hawker”) for total cash consideration of $5.1 million, of which, $3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the subsequent five years, including $0.5 million paid in the first half of 2022. Hawker is a manufacturer of hydraulic pickup and laydown units. This acquisition is included in the Drilling product line within the Drilling and Downhole segment. The fair values of the assets acquired and liabilities assumed, as well as the pro forma results of operations for this acquisition, have not been presented because they are not material to the consolidated financial statements.
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Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Inventories
Our significant components of inventory at June 30, 2022 and December 31, 2021 were as follows (in thousands):
June 30, 2022December 31, 2021
Raw materials and parts$106,251 $97,053 
Work in process29,876 24,618 
Finished goods187,350 182,954 
Gross inventories323,477 304,625 
Inventory reserve(52,295)(62,885)
Inventories$271,182 $241,740 

6. Intangible Assets
Intangible assets consisted of the following as of June 30, 2022 and December 31, 2021, respectively (in thousands):
June 30, 2022
Gross Carrying AmountAccumulated AmortizationNet IntangiblesAmortization Period (In Years)
Customer relationships$266,871 $(139,601)$127,270 
10 - 15
Patents and technology88,731 (32,361)56,370 
5 - 19
Non-compete agreements188 (185)3 
2 - 6
Trade names42,698 (26,031)16,667 
7 - 19
Trademarks5,089 (1,612)3,477 
15
Intangible Assets Total$403,577 $(199,790)$203,787 
December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet IntangiblesAmortization Period (In Years)
Customer relationships$269,589 $(133,451)$136,138 
10 - 15
Patents and technology89,449 (29,785)59,664 
5 - 19
Non-compete agreements191 (173)18 
2 - 6
Trade names43,125 (25,187)17,938 
7 - 19
Trademarks5,089 (1,442)3,647 
15
Intangible Assets Total$407,443 $(190,038)$217,405 

10

Table of Contents
Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
7. Debt
Notes payable and lines of credit as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands): 
June 30, 2022December 31, 2021
2025 Notes256,970 256,970 
Unamortized debt discount(17,748)(20,035)
Debt issuance cost(4,356)(4,918)
Credit Facility33,573  
Other debt1,096 1,213 
Total debt269,535 233,230 
Less: current maturities(690)(860)
Long-term debt$268,845 $232,370 
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. As of June 30, 2022, approximately $123 million principal amount of the 2025 Notes 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 is 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 September 2021, we amended our senior secured revolving credit facility ("Credit Facility") to, among other things, extend the maturity date to September 2026, reduce the aggregate amount of the commitment under the Credit Facility, and change the interest rate applicable to outstanding loans. Following such amendment, our Credit Facility provides revolving credit commitments of $179.0 million (with a sublimit of up to $45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $20.0 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
11

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Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
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 $126.5 million (subject to a quarterly reduction of $0.5 million) and 80.0% of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of June 30, 2022, our total borrowing base was $162.4 million, of which $33.6 million was drawn and $14.5 million was used for security of outstanding letters of credit, resulting in remaining availability of $114.3 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 0.00%, 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 LIBOR plus 1.00% per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.00%.
Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the Canadian Dollar Offered Rate ("CDOR") rate, subject to a floor of 0.00%, plus a margin of 2.25% to 2.75%, or (b) a base rate plus a margin of 1.25% to 1.75%, in each case based upon the Company's quarterly net leverage ratio. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR 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 0.00%. The weighted average interest rate under the Credit Facility was approximately 4.43% for the six months ended June 30, 2022.
The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% on the unused portion of commitments if average usage of the Credit Facility is greater than 50% and (b) 0.500% on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50%.
If excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base and $22.4 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.
Deferred Loan Costs
We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility. In connection with the September 2021 Credit Facility amendment, we deferred approximately $1.6 million of loan costs that will be amortized over the facility's remaining life.
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 $19.1 million in total outstanding letters of credit as of June 30, 2022 and December 31, 2021, respectively.
8. 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, 2022, we recorded a tax expense of $1.7 million and $3.6 million, respectively. For the three and six months ended June 30, 2021, we recorded a tax expense of $1.2 million and $2.9 million, respectively. The estimated annual effective tax rates for all periods were impacted by losses in jurisdictions where the recording of a tax benefit is not available. 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.
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
12

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Forum Energy Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of June 30, 2022, 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, 2022.
9. Fair Value Measurements
The Company had $33.6 million of borrowings outstanding under the Credit Facility as of June 30, 2022. 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, 2022, the fair value and the carrying value of our 2025 Notes approximated $249.8 million and $234.9 million, respectively. At December 31, 2021, the fair value and the carrying value of our 2025 Notes approximated $225.0 million and $232.0 million, respectively.
There were no other significant outstanding financial instruments as of June 30, 2022 and December 31, 2021 that required measuring the amounts at fair value on a recurring basis. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2022.
10. 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,
2022202120222021
Revenue:
Drilling & Downhole$76,493 $61,570 147,753 110,226 
Completions66,079 46,516 118,621 84,359 
Production29,879 29,337 61,384 57,368 
Eliminations(205)(3)(338)(16)
Total revenue$172,246 $137,420 $327,420 $251,937 
Operating income (loss):
Drilling & Downhole$8,528 $2,701 $14,514 $(1,805)
Completions3,587 (370)2,872 (302)
Production(154)(4,041)(1,906)(7,882)
Corporate(6,885)(8,270)(16,090)(15,280)
Segment operating income (loss)5,076 (9,980)(610)(25,269)
Gain on disposal of assets and other(908)(360)(886)(1,269)
Operating income (loss)$5,984 $(9,620)$276 $(24,000)
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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, 2022December 31, 2021
Drilling & Downhole$321,757 $313,493 
Completions373,099 351,908 
Production86,487 83,150 
Corporate26,149 42,785 
Total assets$807,492 $791,336 
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,
2022202120222021
Drilling Technologies$33,540 $27,624 $62,775 $46,144 
Downhole Technologies21,422 16,613 40,986 31,706 
Subsea Technologies21,531 17,333 43,992 32,376 
Stimulation and Intervention37,337 24,354 67,496 43,056 
Coiled Tubing28,742 22,162 51,125 41,303 
Production Equipment16,425 17,399 31,592 31,793 
Valve Solutions13,454 11,938 29,792 25,575 
Eliminations(205)(3)(338)(16)
Total revenue$172,246 $137,420 $327,420 $251,937 
The following table presents our revenues disaggregated by geography (in thousands):
Three Months Ended
June 30,
Six Months Ended June 30,
2022202120222021
United States$114,626 $77,400 $211,858 $145,714 
Canada10,203 10,120 21,592 19,081 
Europe & Africa15,518 15,563 30,895 28,227 
Middle East14,796 11,939 25,949 22,280 
Asia-Pacific8,367 14,915 17,426 23,795 
Latin America8,736 7,483 19,700 12,840 
Total Revenue$172,246 $137,420 $327,420 $251,937 

11. 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, 2022 and December 31, 2021, 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 2021 Annual Report on Form 10-K filed with the SEC on March 4, 2022. There have been no material changes related to these matters during the six months ended June 30, 2022.
12. Earnings (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,
2022202120222021
Net income (loss) - basic$9,264 $(21,806)65 (51,469)
Interest on dilutive convertible notes due 20252,762    
Net income (loss) - diluted$12,026 $(21,806)65 (51,469)
Weighted average shares outstanding - basic5,747 5,638 5,715 5,625 
Dilutive effect of stock options and restricted stock187  195  
Dilutive effect of convertible notes due 20254,547    
Weighted average shares outstanding - diluted10,481 5,638 5,910 5,625 
Earnings (loss) per share
Basic$1.61 $(3.87)$0.01 $(9.15)
Diluted$1.15 $(3.87)$0.01 $(9.15)
The diluted earnings per share calculation excludes approximately 59 thousand shares for the three months ended June 30, 2022, and 116 thousand shares for the six months ended June 30, 2022, because they were anti-dilutive. For the three months and six months ended June 30, 2021, we excluded all potentially dilutive restricted shares, stock options and the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods.
13. Stockholders' Equity
Stock-based compensation
During the six months ended June 30, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years.
During the six months ended June 30, 2022, the Company granted 101,111 restricted stock units to employees that vest ratably over three years contingent upon achieving a minimum stock price of $23.68 for 20 trading days during each performance period. These awards may be settled in cash or shares, at the company's option. These awards were originally classified as cash-settled liability settled awards. On May 10, 2022, shareholders approved additional shares to be added to the employee equity incentive plan. As a result, the fair value of the awards was remeasured as of May 10, 2022 and the classification of these awards was updated from cash-settled to share-settled resulting in equity classification.
14. Related Party Transactions
The Company has sold and purchased inventory, services and fixed assets to and from certain affiliates of certain directors. The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.
15


 
Item 2. Management’s discussion and analysis of financial condition and results of operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 4, 2022, and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Overview
We are a global company serving the oil, natural gas, industrial and renewable energy industries. FET provides value added solutions aimed at improving the safety, efficiency and environmental impact of our customers' operations. We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world. Our products include highly engineered capital equipment as well as consumable products. These consumable products are used in drilling, well construction and completions activities, within the supporting infrastructure, and at processing centers and refineries. Our engineered capital products are directed at drilling rig equipment for new rigs, upgrades and refurbishment projects, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects. For the six months ended June 30, 2022, approximately 77% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.
We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among others, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and service companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies.
We expect that the world's long-term energy demand will continue to rise. We also expect hydrocarbons will continue to play a vital role in meeting the world's l