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EX-32.2 - EXHIBIT 32.2 - FORUM ENERGY TECHNOLOGIES, INC.fetex3222017q310-q.htm
EX-32.1 - EXHIBIT 32.1 - FORUM ENERGY TECHNOLOGIES, INC.fetex3212017q310-q.htm
EX-31.2 - EXHIBIT 31.2 - FORUM ENERGY TECHNOLOGIES, INC.fetex3122017q310-q.htm
EX-31.1 - EXHIBIT 31.1 - FORUM ENERGY TECHNOLOGIES, INC.fetex3112017q310-q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the Quarterly Period Ended September 30, 2017
OR
o
 
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)
Delaware
 
61-1488595
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
920 Memorial City Way, Suite 1000
Houston, Texas 77024
(Address of principal executive offices)
(281) 949-2500
(Registrant’s telephone number, including area code)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 filer þ
 
Accelerated filer o
Non-accelerated filer o
 
(Do not check if a smaller reporting company)
 
 
Smaller reporting company o
 
 
Emerging growth company o
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 o No þ
As of October 31, 2017, there were 108,096,622 common shares outstanding.




Table of Contents



2


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Forum Energy Technologies, Inc. and subsidiaries
Condensed consolidated statements of comprehensive income (loss)
(Unaudited)
  
Three months ended September 30,
 
Nine months ended September 30,
(in thousands, except per share information)
2017
 
2016
 
2017
 
2016
Net sales
$
198,709

 
$
138,268

 
$
570,920

 
$
440,432

Cost of sales
151,150

 
108,984

 
435,127

 
371,310

Gross profit
47,559

 
29,284

 
135,793

 
69,122

Operating expenses
 
 
 
 
 
 
 
Selling, general and administrative expenses
63,191

 
53,362

 
185,760

 
171,638

Transaction expenses
882

 
341

 
1,755

 
571

Goodwill and intangible asset impairment
638

 

 
68,642

 

Loss on sale of assets and other
128

 
2,217

 
1,517

 
2,233

Total operating expenses
64,839

 
55,920

 
257,674

 
174,442

Earnings from equity investment
3,361

 
414

 
7,391

 
1,207

Operating loss
(13,919
)
 
(26,222
)
 
(114,490
)
 
(104,113
)
Other expense (income)
 
 
 
 
 
 
 
Interest expense
6,366

 
6,746

 
19,331

 
20,664

Deferred financing costs written off

 

 

 
2,588

Foreign exchange losses (gains) and other, net
2,360

 
(3,152
)
 
6,508

 
(14,546
)
Total other expense
8,726

 
3,594

 
25,839

 
8,706

Loss before income taxes
(22,645
)
 
(29,816
)
 
(140,329
)
 
(112,819
)
Income tax benefit
(7,817
)
 
(11,821
)
 
(31,860
)
 
(43,374
)
Net loss
(14,828
)
 
(17,995
)
 
(108,469
)
 
(69,445
)
Less: Income (loss) attributable to noncontrolling interest

 
(6
)
 

 
24

Net loss attributable to common stockholders
(14,828
)
 
(17,989
)
 
(108,469
)
 
(69,469
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
96,275

 
90,860

 
96,103

 
90,682

Diluted
96,275

 
90,860

 
96,103

 
90,682

Loss per share
 
 
 
 
 
 
 
Basic
$
(0.15
)
 
$
(0.20
)
 
$
(1.13
)
 
$
(0.77
)
Diluted
$
(0.15
)
 
$
(0.20
)
 
$
(1.13
)
 
$
(0.77
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Net loss
(14,828
)
 
(17,995
)
 
(108,469
)
 
(69,445
)
Change in foreign currency translation, net of tax of $0
11,547

 
(6,243
)
 
34,094

 
(25,618
)
Loss on pension liability
(36
)
 
(14
)
 
(133
)
 
(33
)
Comprehensive loss
(3,317
)
 
(24,252
)
 
(74,508
)
 
(95,096
)
Less: comprehensive income attributable to noncontrolling interests

 
(27
)
 

 
(156
)
Comprehensive loss attributable to common stockholders
$
(3,317
)
 
$
(24,279
)
 
$
(74,508
)
 
$
(95,252
)
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)
September 30,
2017
 
December 31,
2016
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
156,392

 
$
234,422

Accounts receivable—trade, net
154,376

 
105,268

Inventories, net
394,103

 
338,583

Income tax receivable
1,872

 
32,801

Prepaid expenses and other current assets
27,705

 
29,443

Costs and estimated profits in excess of billings
9,395

 
9,199

Total current assets
743,843

 
749,716

Property and equipment, net of accumulated depreciation
149,016

 
152,212

Deferred financing costs, net
657

 
1,112

Intangible assets
224,565

 
216,418

Goodwill
619,632

 
652,743

Investment in unconsolidated subsidiary
64,499

 
59,140

Deferred income taxes, net
9,719

 
851

Other long-term assets
2,924

 
3,000

Total assets
$
1,814,855

 
$
1,835,192

Liabilities and equity
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
1,133

 
$
124

Accounts payable—trade
123,148

 
73,775

Accrued liabilities
64,718

 
55,604

Deferred revenue
8,506

 
8,338

Billings in excess of costs and profits recognized
1,530

 
4,004

Total current liabilities
199,035

 
141,845

Long-term debt, net of current portion
398,145

 
396,747

Deferred income taxes, net
4,175

 
26,185

Other long-term liabilities
34,858

 
34,654

Total liabilities
636,213

 
599,431

Commitments and contingencies

 


Equity
 
 
 
Common stock, $0.01 par value, 296,000,000 shares authorized, 104,789,172 and 103,682,128 shares issued
1,048

 
1,037

Additional paid-in capital
1,016,458

 
998,169

Treasury stock at cost, 8,190,362 and 8,174,963 shares
(134,293
)
 
(133,941
)
Retained earnings
389,705

 
498,174

Accumulated other comprehensive loss
(94,276
)
 
(128,237
)
Total stockholders’ equity
1,178,642

 
1,235,202

Noncontrolling interest in subsidiary

 
559

Total equity
1,178,642

 
1,235,761

Total liabilities and equity
$
1,814,855

 
$
1,835,192

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)
  
Nine Months Ended September 30,
(in thousands, except share information)
2017
 
2016
Cash flows from operating activities
 
 
 
Net loss
$
(108,469
)
 
$
(69,445
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
 
 
 
Depreciation expense
25,212

 
27,141

Amortization of intangible assets
20,030

 
19,709

Goodwill and intangible asset impairment
68,642

 

Share-based compensation expense
15,219

 
15,521

Inventory write down
1,376

 
24,479

Deferred income taxes
(31,041
)
 
(12,988
)
Deferred loan cost written off

 
2,588

Earnings from unconsolidated subsidiary, net of distributions
(4,317
)
 
(804
)
Other
4,548

 
4,137

Changes in operating assets and liabilities
 
 
 
Accounts receivable—trade
(43,167
)
 
35,673

Inventories
(44,288
)
 
44,538

Prepaid expenses and other current assets
1,684

 
7,113

Income tax receivable
30,929

 
(32,801
)
Accounts payable, deferred revenue and other accrued liabilities
49,126

 
(15,130
)
Costs and estimated profits in excess of billings, net
(2,567
)
 
(5,511
)
Net cash provided by (used in) operating activities
$
(17,083
)
 
$
44,220

Cash flows from investing activities
 
 
 
Acquisition of businesses, net of cash acquired
(47,890
)
 
(2,700
)
Capital expenditures for property and equipment
(19,656
)
 
(13,438
)
Proceeds from sale of business, property and equipment
1,849

 
3,710

Investment in unconsolidated subsidiary
$
(1,041
)
 
$

Net cash used in investing activities
$
(66,738
)
 
$
(12,428
)
Cash flows from financing activities
 
 
 
Repayment of debt
(1,140
)
 
(254
)
Cash paid for net treasury shares withheld
(4,667
)
 
(1,273
)
Proceeds from stock issuance
2,896

 
2,742

Deferred financing costs

 
(513
)
Net cash provided by (used in) financing activities
$
(2,911
)
 
$
702

Effect of exchange rate changes on cash
8,702

 
(9,209
)
Net increase (decrease) in cash and cash equivalents
(78,030
)
 
23,285

Cash and cash equivalents
 
 
 
Beginning of period
234,422

 
109,249

End of period
$
156,392

 
$
132,534

Noncash investing activities
 
 
 
Acquisition via issuance of stock
$
4,500

 
$

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

5


Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements
(Unaudited)
1. Organization and basis of presentation
Forum Energy Technologies, Inc. (the "Company"), a Delaware corporation, is a global oilfield products company, serving the drilling, subsea, completion, production and infrastructure sectors of the oil and natural gas industry. The Company designs, manufactures and distributes products and engages in aftermarket services, parts supply and related services that complement the Company’s product offering.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
The Company's investment in an operating entity where the Company has the ability to exert significant influence, but does not control operating and financial policies is accounted for using the equity method. The Company's share of the net income of this entity is recorded as "Earnings from equity investment" in the condensed consolidated statements of comprehensive income (loss). The investment in this entity is included in "Investment in unconsolidated subsidiary" in the condensed consolidated balance sheets. The Company reports its share of equity earnings within operating income (loss) as the investee's operations are integral to the operations of the Company.
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 nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 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, 2016, which are included in the Company’s 2016 Annual Report on Form 10-K filed with the SEC on February 28, 2017 (the "Annual Report").
2. Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), which are adopted by the Company 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.
In September 2017, the FASB issued Accounting Standard Updates ("ASU") No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments. This ASU codifies the text of the SEC announcement, as it relates to revenue recognition and leases. The ASU also rescinds certain codified SEC announcements and comments that are no longer applicable upon adoption of ASU No. 2014-09 and ASU No. 2016-02. These recent accounting pronouncements related to revenue and leases are discussed later in this footnote.
In May 2017, the FASB issued ASU No. 2017-09 Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share based payment award as a modification. Under the new ASU, an entity should apply modification accounting unless the fair value, the vesting conditions, and the classification of the award as equity or liability of the modified award all remain the same as the original award. The ASU should be adopted prospectively for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. This guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-04 Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test where the implied fair value of goodwill needs to be determined and compared to the carrying amount of that goodwill to measure the impairment loss. The Company is required to adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and

6

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

early adoption is permitted. The Company has early adopted the standard in the first quarter of 2017. During the second quarter of 2017, the Company applied this new ASU to perform the goodwill impairment analysis. See Note 6, Goodwill and intangible assets for more details.
In January 2017, the FASB issued ASU No. 2017-01 Business Combination (Topic 805) - Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance will be effective for annual periods beginning after December 15, 2017, including interim periods within those periods, and is not expected to have a material impact on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230) - Restricted Cash a consensus of the FASB Emerging Issues Task Force. This new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, and is not expected to have a material impact on the Company's consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16 Income Tax (Topic 740) - Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This new guidance eliminates this exception and requires the income tax consequences of an intra-entity transfer of an asset other than inventory be recognized when the transfer occurs. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, and should be applied on a modified retrospective basis through a direct cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The ASU is not expected to have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-15 Cash Flow Statement (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The only issue currently relevant to the Company is distributions received from equity method investees, where the new guidance allows an accounting policy election between the cumulative earnings approach and the nature of the distribution approach. The Company will continue to use the cumulative earnings approach, therefore the guidance is not expected to have a material impact on the Company's consolidated financial statements. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting.  This new guidance includes provisions intended to simplify how share-based payments are accounted for and presented in the financial statements. The Company applied the update prospectively beginning January 1, 2017. This guidance did not have a material impact on the Company's Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases.  Under this new guidance, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of greater than twelve months. The standard will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  The Company is currently evaluating the impact of the adoption of this guidance.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. Entities must apply a five-step process to (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when

7

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

(or as) the entity satisfies a performance obligation. ASU 2014-09 also mandates disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The disclosure requirements include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The guidance permits the entity to use either a full retrospective or modified retrospective transition method. The FASB issued several subsequent updates in 2015 through 2017 containing implementation guidance related to the new standard. These standards provide additional guidance related to principal versus agent considerations, licensing, and identifying performance obligations. Additionally, these standards provide narrow-scope improvements and practical expedients as well as technical corrections and improvements. Overall, the new guidance is to be effective for the fiscal year beginning after December 15, 2017. Companies are able to early adopt the pronouncement, but not before fiscal years beginning after December 15, 2016.
The Company is currently evaluating the impact of the pending adoption of the revised guidance. The status of implementation is as follows:
The Company has put in place an implementation team to provide training and to review contracts subject to the new revenue standard.
The implementation team continues to review contracts for the areas identified during the initial impact assessment and monitor the potential impact on the Company’s financial statements and related disclosures.
The implementation team is putting new processes and controls in place in anticipation of the new guidance.
The implementation team is providing internal training and awareness related to the revised guidance to key stakeholders throughout our organization.
The Company will adopt this standard using the modified retrospective method and elect to apply the revenue standard only to contracts that are not completed as of the date of initial application. The Company does not expect a material adjustment to the consolidated financial statements upon transition.
3. Cash and cash equivalents
Cash and cash equivalents at September 30, 2017 are comprised of bank deposits and short-term investments with an original maturity of three months or less, such as money market funds, the fair value of which is based on quoted market prices, a Level 1 fair value measure.
4. Acquisitions
2017 Acquisitions

On January 9, 2017, the Company acquired substantially all of the assets of Cooper Valves, LLC as well as 100% of the general partnership interests of Innovative Valve Components (collectively, “Cooper”) for total aggregate consideration of $14.0 million, after settlement of working capital adjustments. The aggregate consideration includes the issuance of stock valued at $4.5 million and certain contingent cash payments. These acquisitions are included in the Production and Infrastructure segment. The acquired Cooper brands include the Accuseal® metal seated ball valves engineered to meet Class VI shut off standards for use in severe service applications, as well as a full line of cast and forged gate, globe, and check valves. Innovative Valve Components, in partnership with Cooper Valves, commercialized critical service valves and components for the power generation, mining and oil and natural gas industries. The fair values of the assets acquired and liabilities assumed have not been presented because they are not material to the consolidated financial statements. Pro forma results of operations for this acquisition have not been presented because the effects were not material to the consolidated financial statements.


8

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

On July 3, 2017, the Company acquired Multilift Welltec, LLC and Multilift Wellbore Technology Limited (collectively, "Multilift") for approximately $39.4 million in cash consideration. These acquisitions are included in the Completions segment. Based in Houston, Texas, Multilift manufactures the patented SandGuardTM and the CycloneTM completion tools. This acquisition increases the Company’s product offering related to artificial lift to our completions customers. The Company intends to utilize its distribution system to increase Multilift’s sales with additional customers and through geographic expansion. As the value of certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date, including any post-closing purchase price adjustments. When the valuation is final, any changes to the preliminary valuation of acquired assets and liabilities could result in adjustments to identified intangibles and goodwill. The following table summarizes the current fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):
 
2017 Acquisitions
Current assets, net of cash acquired
$
3,767

Property and equipment
96

Intangible assets (primarily developed technologies and customer relationships)
17,211

Tax-deductible goodwill
16,711

Non-tax deductible goodwill
2,623

Current liabilities
(1,014
)
Long-term liabilities

Net assets acquired
$
39,394


Revenue and net income related to the 2017 acquisitions were not significant for the quarter ended September 30, 2017. Pro forma results of operations for the 2017 acquisitions have not been presented because the effects were not material to the consolidated financial statements.
Subsequent to September 30, 2017, the Company acquired the remaining membership interests in Global Tubing, LLC (“Global Tubing”). See Note 15, Subsequent event, for more details.

2016 Acquisition

In April 2016, the Company completed the acquisition of the wholesale completion packers business of Team Oil Tools, Inc. The acquisition includes a wide variety of completion and service tools, including retrievable and permanent packers, bridge plugs and accessories which are sold to oilfield service providers, packer repair companies and distributors on a global basis. This acquisition is included in the Completions segment. The fair values of the assets acquired and liabilities assumed have not been presented because they are not material to the consolidated financial statements. Pro forma results of operations for the 2016 acquisition have not been presented because the effects were not material to the consolidated financial statements.
5. Inventories
The Company's significant components of inventory at September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
September 30,
2017
 
December 31,
2016
Raw materials and parts
$
119,572

 
$
106,329

Work in process
45,580

 
23,303

Finished goods
290,657

 
277,303

Gross inventories
455,809

 
406,935

Inventory reserve
(61,706
)
 
(68,352
)
Inventories
$
394,103

 
$
338,583


9

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

6. Goodwill and intangible assets
Goodwill
The changes in the carrying amount of goodwill from December 31, 2016 to September 30, 2017, were as follows (in thousands):
 
Drilling & Subsea
 
Completions
 
Production & Infrastructure
 
Total
Goodwill Balance at December 31, 2016
$
307,806

 
$
327,293

 
$
17,644

 
$
652,743

Acquisitions, net of dispositions

 
19,334

 
1,311

 
20,645

Impairment
(68,004
)
 

 

 
(68,004
)
Impact of non-U.S. local currency translation
10,288

 
3,710

 
250

 
14,248

Goodwill Balance at September 30, 2017
$
250,090

 
$
350,337

 
$
19,205

 
$
619,632

The Company performs its annual impairment tests of goodwill as of October 1 or when there is an indication an impairment may have occurred.
In the second quarter of 2017, there was a decline in oil prices and a developing consensus view that production from lower cost oil basins would be sufficient to meet anticipated demand for a longer period, delaying the need for production from higher cost basins. With this indication of further delays in the recovery of the offshore market, the Company performed an impairment test and determined that the carrying value of the goodwill in our Subsea reporting unit was impaired. The Company recorded an impairment charge of $68.0 million for the quarter ended June 30, 2017. Following the impairment charge, the Subsea reporting unit has no remaining balance in goodwill. There was no indication an impairment may have occurred in the other reporting units.

The fair values used in the impairment analysis were determined using the net present value of the expected future cash flows for the reporting unit. During the Company’s goodwill impairment analysis, the Company determines the fair value of the reporting unit as a whole using a discounted cash flow analysis, which requires significant assumptions and estimates about future operations. The assumptions about future cash flows and growth rates are based on our current budget for the remainder of the current year, for future periods, as well as our strategic plans and management’s beliefs about future activity levels. The discount rate we used for future periods could change substantially if the cost of debt or equity were to significantly increase or decrease, or if we were to choose different comparable companies in determining the appropriate discount rate for our reporting units. Forecasted cash flows in future periods were estimated using a terminal value calculation, which considered long-term earnings growth rates. Accumulated impairment losses on goodwill were $236.8 million and $168.8 million as of September 30, 2017 and December 31, 2016.



10

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

Intangible assets
Intangible assets consisted of the following as of September 30, 2017 and December 31, 2016, respectively (in thousands):
  
September 30, 2017
 
Gross carrying
amount
 
Accumulated
amortization
 
Net amortizable
intangibles
 
Amortization
period (in years)
Customer relationships
$
280,116

 
$
(131,030
)
 
$
149,086

 
4-15
Patents and technology
52,260

 
(14,797
)
 
37,463

 
5-17
Non-compete agreements
6,621

 
(5,950
)
 
671

 
3-6
Trade names
46,813

 
(20,836
)
 
25,977

 
10-15
Distributor relationships
22,160

 
(16,022
)
 
6,138

 
8-15
Trademark
5,230

 

 
5,230

 
Indefinite
Intangible Assets Total
$
413,200

 
$
(188,635
)
 
$
224,565

 
 
  
December 31, 2016
 
Gross carrying
amount
 
Accumulated
amortization
 
Net amortizable
intangibles
 
Amortization
period (in years)
Customer relationships
$
270,586

 
$
(115,381
)
 
$
155,205

 
4-15
Patents and technology
33,936

 
(12,225
)
 
21,711

 
5-17
Non-compete agreements
6,230

 
(5,594
)
 
636

 
3-6
Trade names
44,494

 
(17,944
)
 
26,550

 
10-15
Distributor relationships
22,160

 
(15,074
)
 
7,086

 
8-15
Trademark
5,230

 

 
5,230

 
Indefinite
Intangible Assets Total
$
382,636

 
$
(166,218
)
 
$
216,418

 
 
Intangible 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 quarter ended September 30, 2017, an impairment loss of $0.6 million was recorded on certain intangible assets within the Subsea reporting unit for intangible assets related to a specific product line as the decision was made in the third quarter 2017 to abandon this specific product line.
7. Debt
Notes payable and lines of credit as of September 30, 2017 and December 31, 2016 consisted of the following (in thousands): 
 
September 30,
2017
 
December 31,
2016
6.25% Senior Notes due October 2021
$
400,000

 
$
400,000

Unamortized debt premium
1,684

 
1,989

Debt issuance cost
(4,497
)
 
(5,324
)
Senior secured revolving credit facility

 

Other debt
2,091

 
206

Total debt
399,278

 
396,871

Less: current maturities
(1,133
)
 
(124
)
Long-term debt
$
398,145

 
$
396,747

Senior Notes Due 2021
The Senior Notes bear interest at a rate of 6.250% per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021. The Senior Notes are senior unsecured obligations, and are guaranteed on a senior

11

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

unsecured basis by the Company’s subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility to the extent of the value of the collateral securing the Credit Facility.
Credit Facility
On February 25, 2016, we amended our credit facility with Wells Fargo Bank, National Association, as administrative agent, and several financial institutions as lenders (the “Credit Facility”) to reduce lender commitments to $200.0 million. On December 12, 2016, we further amended the Credit Facility (such further amendment, the “Amended Credit Facility”), to, among other things, reduce revolving credit line commitments from $200.0 million to $140.0 million, including up to $25.0 million available for letters of credit and up to $10.0 million in swingline loans. Availability under the Amended Credit Facility was subject to a borrowing base calculated by reference to eligible accounts receivable in the United States, United Kingdom and Canada, eligible inventory in the United States, and cash on hand.
As of September 30, 2017 and December 31, 2016, the Company had no borrowings outstanding under the Credit Facility. As of September 30, 2017, the Company had $7.3 million of outstanding letters of credit. At September 30, 2017, the Company had the capacity to borrow an additional $113.3 million subject to certain limitations in the Credit Facility. Weighted average interest rates under the Credit Facility for the nine months ended September 30, 2017 and the year ended December 31, 2016 were approximately 3.00%. As of September 30, 2017, there had been no changes to the financial covenants described in Item 8 of the Annual Report and the Company was in compliance with all financial covenants.
On October 30, 2017, the Company further amended and restated the Credit Facility (such amended and restated credit agreement, the “2017 Credit Facility”) to, among other things, increase revolving credit commitments from $140.0 million to $300.0 million, including up to $30.0 million available to certain Canadian subsidiaries of the Company for loans in United States or Canadian dollars, $25.0 million available for letters of credit issued for the account of the Company and certain of its domestic subsidiaries and $3.0 million available for letters of credit issued for the account of Canadian subsidiaries of the Company. Availability under the 2017 Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the United States, Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the United States and Canada. The Company’s borrowing capacity under the 2017 Credit Facility could be reduced or eliminated, depending on future receivables and fluctuations in the Company’s inventory. The 2017 Credit Facility matures in July 2021, but if the Company’s outstanding Notes due October 2021 are refinanced or replaced with indebtedness maturing in or after February 2023, the final maturity of the 2017 Credit Facility will automatically extend to October 2022.

If excess availability under the 2017 Credit Facility falls below the greater of 10.0% of the line cap and $20.0 million, the Company 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 availability under the 2017 Credit Facility exceeds such thresholds for at least 60 consecutive days.
8. Income taxes
The Company's effective tax rate was 22.7% for the nine months ended September 30, 2017 and 38.4% for the nine months ended September 30, 2016. The effective tax rate was 34.5% for the three months ended September 30, 2017 and 39.6% for the three months ended September 30, 2016. Impacting the tax rate for the three and nine months ended September 30, 2017 was the change in the proportion of losses being generated in the United States, which are benefited at a higher statutory tax rate, as compared to earnings being generated outside the United States in jurisdictions subject to lower tax rates. Also impacting the tax rate for the nine months ended September 30, 2017 was the implementation of new accounting guidance related to employee share-based compensation accounting, along with the impairment loss related to non-tax deductible goodwill.
9. Fair value measurements
At September 30, 2017 and December 31, 2016, the Company had no debt outstanding under the Credit Facility. At September 30, 2017, the Company had $7.3 million of outstanding letters of credit.
The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At September 30, 2017, the fair value and the carrying value of the Company’s Senior Notes approximated $402.7 million and $401.7 million, respectively. At December 31, 2016, the fair value and the carrying value of the Company’s Senior Notes each approximated $402.0 million.

12

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

There were no outstanding financial assets as of September 30, 2017 and December 31, 2016 that required measuring the amounts at fair value. 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 nine months ended September 30, 2017.
10. Business segments
The Company reports its results of operations in the following three reportable segments: Drilling & Subsea, Completions and Production & Infrastructure.
In order to better align with the predominant customer base of the segment, the Company has moved management and financial reporting of our AMC branded fully rotational torque machine operations from the Drilling and Subsea segment to the Completions segment. Prior period financial information has been revised to conform with current period presentation with no impact to total segment operating results.
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 September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Drilling & Subsea
$
54,700

 
$
50,565

 
$
180,607

 
$
170,120

Completions
60,037

 
34,393

 
156,938

 
95,920

Production & Infrastructure
84,979

 
54,030

 
235,676

 
176,364

Intersegment eliminations
(1,007
)
 
(720
)
 
(2,301
)
 
(1,972
)
Total Revenue
$
198,709

 
$
138,268

 
$
570,920

 
$
440,432

 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
Drilling & Subsea
$
(8,872
)
 
$
(10,869
)
 
$
(23,580
)
 
$
(41,545
)
Completions
1,614

 
(5,676
)
 
(1,223
)
 
(39,838
)
Production & Infrastructure
4,258

 
(713
)
 
7,124

 
494

Corporate
(9,271
)
 
(6,406
)
 
(24,897
)
 
(20,420
)
Total segment operating loss
(12,271
)
 
(23,664
)
 
(42,576
)
 
(101,309
)
Transaction expenses
882

 
341

 
1,755

 
571

Goodwill and intangible asset impairment
638

 

 
68,642

 

Loss on sale of assets and other
128

 
2,217

 
1,517

 
2,233

Operating loss
$
(13,919
)
 
$
(26,222
)
 
$
(114,490
)
 
$
(104,113
)
A summary of consolidated assets by reportable segment is as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Assets
 
 
 
 
Drilling & Subsea
 
$
650,136

 
$
766,234

Completions
 
768,998

 
696,208

Production & Infrastructure
 
241,433

 
175,940

Corporate
 
154,288

 
196,810

Total assets
 
$
1,814,855

 
$
1,835,192

Corporate assets include, among other items, prepaid assets, cash and deferred financing costs.

13

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

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 that 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 considered to be probable and can be reasonably estimated. The reserves accrued at September 30, 2017 and December 31, 2016, respectively, are immaterial. It is management's opinion that 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.
12. Earnings 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 September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net loss attributable to common stockholders
$
(14,828
)
 
$
(17,989
)
 
$
(108,469
)
 
$
(69,469
)
 
 
 
 
 
 
 
 
Average shares outstanding (basic)
96,275

 
90,860

 
96,103

 
90,682

Common stock equivalents

 

 

 

Diluted shares
96,275

 
90,860

 
96,103

 
90,682

Loss per share
 
 
 
 
 
 
 
Basic loss per share
$
(0.15
)
 
$
(0.20
)
 
$
(1.13
)
 
$
(0.77
)
Diluted loss per share
$
(0.15
)
 
$
(0.20
)
 
$
(1.13
)
 
$
(0.77
)
The diluted loss per share calculation excludes all stock options for the three and nine months ended September 30, 2017 and September 30, 2016 because there was a net loss for the periods.
13. Stockholders' equity

Shares issued for Acquisition
Subsequent to September 30, 2017, the Company issued 11.5 million shares to acquire the remaining membership interests in Global Tubing. See Note15 for further information.
Share-based compensation
During the nine months ended September 30, 2017, the Company granted 278,958 options and 971,722 shares of restricted stock or restricted stock units, which includes 124,213 performance share awards with a market condition. The stock options were granted with an exercise price of $20.10. Of the restricted stock or restricted stock units granted, 789,762 generally vest ratably over four years on each anniversary of the date of grant. 55,971 shares of restricted stock or restricted stock units were granted to the non-employee members of the Board of Directors, which have a twelve month vesting period from the date of grant. The performance share awards granted may settle for between zero and two shares of the Company's common stock. The number of shares issued pursuant to the performance share awards will be determined based on the total shareholder return of the Company's common stock as compared to a group of peer companies, measured annually over a one year, two year and three year performance period.

14

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

14. Related party transactions
The Company has sold and purchased equipment and services to and from certain affiliates of our directors. The dollar amounts related to these related party activities are not material to the Company’s condensed consolidated financial statements.
15. Subsequent event
On October 2, 2017, the Company acquired the remaining membership interests in Global Tubing from its joint venture partner and management for total consideration of approximately $294.0 million, including approximately $120.5 million in cash and approximately 11.5 million shares of the Company’s common stock. The Company acquired Global Tubing with a joint venture partner in 2013. Prior to acquiring a 100% ownership interest in Global Tubing, the Company reported this investment through its Completions segment using the equity method of accounting. Located in Dayton, Texas, Global Tubing provides coiled tubing, coiled line pipe and related services to customers worldwide.

15

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

16. Condensed consolidating financial statements
The Senior Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several, and on an unsecured basis.
Condensed consolidating statements of comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2017
 
 
FET (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
 
 
 
 
(in thousands)
 
 
 
 
Net sales
 
$

 
$
171,031

 
$
43,121

 
$
(15,443
)
 
$
198,709

Cost of sales
 

 
133,503

 
32,877

 
(15,230
)
 
151,150

Gross profit
 

 
37,528

 
10,244

 
(213
)
 
47,559

Operating expenses
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 

 
51,127

 
12,064

 

 
63,191

Transaction expenses
 

 
882

 

 

 
882

Goodwill and intangible asset impairment
 

 
638

 

 

 
638

Loss on sale of assets and other
 

 
91

 
37

 

 
128

Total operating expenses
 

 
52,738

 
12,101

 

 
64,839

Earnings from equity investment
 

 
3,361

 

 

 
3,361

Equity earnings from affiliate, net of tax
 
(10,467
)
 
(3,959
)
 

 
14,426

 

Operating income (loss)
 
(10,467
)
 
(15,808
)
 
(1,857
)
 
14,213

 
(13,919
)
Other expense (income)
 
 
 
 
 
 
 
 
 
 
Interest expense (income)
 
6,710

 
(188
)
 
(156
)
 

 
6,366

Deferred loan costs written off
 

 

 

 

 

Foreign exchange (gains) losses and other, net
 

 
(110
)
 
2,470

 

 
2,360

Total other expense (income)
 
6,710

 
(298
)
 
2,314

 

 
8,726

Income (loss) before income taxes
 
(17,177
)
 
(15,510
)
 
(4,171
)
 
14,213

 
(22,645
)
Benefit for income tax expense
 
(2,349
)
 
(5,043
)
 
(425
)
 

 
(7,817
)
Net income (loss)
 
(14,828
)
 
(10,467
)
 
(3,746
)
 
14,213

 
(14,828
)
Less: Income (loss) attributable to noncontrolling interest
 

 

 

 

 

Net income (loss) attributable to common stockholders
 
(14,828
)
 
(10,467
)
 
(3,746
)
 
14,213

 
(14,828
)
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
(14,828
)
 
(10,467
)
 
(3,746
)
 
14,213

 
(14,828
)
Change in foreign currency translation, net of tax of $0
 
11,547

 
11,547

 
11,547

 
(23,094
)
 
11,547

Change in pension liability
 
(36
)
 
(36
)
 
(36
)
 
72

 
(36
)
Comprehensive income (loss)
 
(3,317
)
 
1,044

 
7,765

 
(8,809
)
 
(3,317
)
Less: comprehensive (income) loss attributable to noncontrolling interests
 

 

 

 

 

Comprehensive income (loss) attributable to common stockholders
 
$
(3,317
)
 
$
1,044

 
$
7,765

 
$
(8,809
)
 
$
(3,317
)


16

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

Condensed consolidating statements of comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2016
 
 
FET (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
 
 
 
 
(in thousands)
 
 
 
 
Net sales
 
$

 
$
101,357

 
$
44,869

 
$
(7,958
)
 
$
138,268

Cost of sales
 

 
81,250

 
36,767

 
(9,033
)
 
108,984

Gross profit
 

 
20,107

 
8,102

 
1,075

 
29,284

Operating expenses
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 

 
42,569

 
10,793

 

 
53,362

Transaction Expense
 

 
306

 
35

 

 
341

Loss (gain) on sale of assets and other
 

 
2,130

 
87

 

 
2,217

Total operating expenses
 

 
45,005

 
10,915

 

 
55,920

Earnings from equity investment
 

 
414

 

 

 
414

Equity earnings from affiliates, net of tax
 
(13,579
)
 
1,620

 

 
11,959

 

Operating income (loss)
 
(13,579
)
 
(22,864
)
 
(2,813
)
 
13,034

 
(26,222
)
Other expense (income)
 
 
 
 
 
 
 
 
 
 
Interest expense (income)
 
6,785

 
(84
)
 
45

 

 
6,746

Foreign exchange gains and other, net
 

 
(19
)
 
(3,133
)
 

 
(3,152
)
Total other expense (income)
 
6,785

 
(103
)
 
(3,088
)
 

 
3,594

Income before income taxes
 
(20,364
)
 
(22,761
)
 
275

 
13,034

 
(29,816
)
Provision for income tax expense (benefit)
 
(2,375
)
 
(9,182
)
 
(264
)
 

 
(11,821
)
Net income (loss)
 
(17,989
)
 
(13,579
)
 
539

 
13,034

 
(17,995
)
Less: Income (loss) attributable to noncontrolling interest
 

 

 
(6
)
 

 
(6
)
Net income (loss) attributable to common stockholders
 
(17,989
)
 
(13,579
)
 
545

 
13,034

 
(17,989
)
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
(17,989
)
 
(13,579
)
 
539

 
13,034

 
(17,995
)
Change in foreign currency translation, net of tax of $0
 
(6,243
)
 
(6,243
)
 
(6,243
)
 
12,486

 
(6,243
)
Change in pension liability
 
(14
)
 
(14
)
 
(14
)
 
28

 
(14
)
Comprehensive income (loss)
 
(24,246
)
 
(19,836
)
 
(5,718
)
 
25,548

 
(24,252
)
Less: comprehensive (income) loss attributable to noncontrolling interests
 

 

 
(27
)
 

 
(27
)
Comprehensive income (loss) attributable to common stockholders
 
$
(24,246
)
 
$
(19,836
)
 
$
(5,745
)
 
$
25,548

 
$
(24,279
)








17

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

Condensed consolidating statements of comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
 
 
FET (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Revenue
 
$

 
$
486,683

 
$
133,798

 
$
(49,561
)
 
$
570,920

Cost of sales
 

 
375,990

 
108,390

 
(49,253
)
 
435,127

Gross profit
 

 
110,693

 
25,408

 
(308
)
 
135,793

Operating expenses
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 

 
149,030

 
36,730

 

 
185,760

Transaction expenses
 

 
1,644

 
111

 

 
1,755

Goodwill and intangible asset impairment
 

 
32,881

 
35,761

 

 
68,642

Loss on sale of assets and other
 

 
1,433

 
84

 

 
1,517

Total operating expenses
 

 
184,988

 
72,686

 

 
257,674

Earnings from equity investment
 

 
7,391

 

 

 
7,391

Equity earnings from affiliates, net of tax
 
(95,415
)
 
(48,535
)
 

 
143,950

 

Operating income (loss)
 
(95,415
)
 
(115,439
)
 
(47,278
)
 
143,642

 
(114,490
)
Other expense (income)
 
 
 
 
 
 
 
 
 
 
Interest expense (income)
 
20,083

 
(374
)
 
(378
)
 

 
19,331

Foreign exchange (gains) losses and other, net
 

 
(297
)
 
6,805

 

 
6,508

Total other expense (income)
 
20,083

 
(671
)
 
6,427

 

 
25,839

Income (loss) before income taxes
 
(115,498
)
 
(114,768
)
 
(53,705
)
 
143,642

 
(140,329
)
Provision (benefit) for income tax expense
 
(7,029
)
 
(19,353
)
 
(5,478
)
 

 
(31,860
)
Net income (loss)
 
(108,469
)
 
(95,415
)
 
(48,227
)
 
143,642

 
(108,469
)
Less: Income (loss) attributable to noncontrolling interest
 

 

 

 

 

Net income (loss) attributable to common stockholders
 
(108,469
)
 
(95,415
)
 
(48,227
)
 
143,642

 
(108,469
)
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
(108,469
)
 
(95,415
)
 
(48,227
)
 
143,642

 
(108,469
)
Change in foreign currency translation, net of tax of $0
 
34,094

 
34,094

 
34,094

 
(68,188
)
 
34,094

Change in pension liability
 
(133
)
 
(133
)
 
(133
)
 
266

 
(133
)
Comprehensive income (loss)
 
(74,508
)
 
(61,454
)
 
(14,266
)
 
75,720

 
(74,508
)
Less: comprehensive (income) loss attributable to noncontrolling interests
 

 

 

 

 

Comprehensive income (loss) attributable to common stockholders
 
$
(74,508
)
 
$
(61,454
)
 
$
(14,266
)
 
$
75,720

 
$
(74,508
)








18

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

Condensed consolidating statements of comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
 
FET (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Revenue
 
$

 
$
321,734

 
$
151,383

 
$
(32,685
)
 
$
440,432

Cost of sales
 

 
281,666

 
123,631

 
(33,987
)
 
371,310

Gross profit
 

 
40,068

 
27,752

 
1,302

 
69,122

Operating expenses
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 

 
137,099

 
34,539

 

 
171,638

Transaction expenses
 

 
536

 
35

 

 
571

Loss (gain) on sale of assets and other
 

 
2,310

 
(77
)
 

 
2,233

Total operating expenses
 

 
139,945

 
34,497

 

 
174,442

Earnings from equity investment
 

 
1,207

 

 

 
1,207

Equity earnings from affiliates, net of tax
 
(54,323
)
 
7,765

 

 
46,558

 

Operating income (loss)
 
(54,323
)
 
(90,905
)
 
(6,745
)
 
47,860

 
(104,113
)
Other expense (income)
 
 
 
 
 
 
 
 
 
 
Interest expense (income)
 
20,713

 
(97
)
 
48

 

 
20,664

Deferred loan costs written off
 
2,588

 

 

 

 
2,588

Foreign exchange gains and other, net
 

 
(553
)
 
(13,993
)
 

 
(14,546
)
Total other expense (income)
 
23,301

 
(650
)
 
(13,945
)
 

 
8,706

Income (loss) before income taxes
 
(77,624
)
 
(90,255
)
 
7,200

 
47,860

 
(112,819
)
Provision (benefit) for income tax expense
 
(8,155
)
 
(35,932
)
 
713

 

 
(43,374
)
Net income (loss)
 
(69,469
)
 
(54,323
)
 
6,487

 
47,860

 
(69,445
)
Less: Income (loss) attributable to noncontrolling interest
 

 

 
24

 

 
24

Net income (loss) attributable to common stockholders
 
(69,469
)
 
(54,323
)
 
6,463

 
47,860

 
(69,469
)
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
(69,469
)
 
(54,323
)
 
6,487

 
47,860

 
(69,445
)
Change in foreign currency translation, net of tax of $0
 
(25,618
)
 
(25,618
)
 
(25,618
)
 
51,236

 
(25,618
)
Change in pension liability
 
(33
)
 
(33
)
 
(33
)
 
66

 
(33
)
Comprehensive income (loss)
 
(95,120
)
 
(79,974
)
 
(19,164
)
 
99,162

 
(95,096
)
Less: comprehensive (income) loss attributable to noncontrolling interests
 

 

 
(156
)
 

 
(156
)
Comprehensive income (loss) attributable to common stockholders
 
$
(95,120
)
 
$
(79,974
)
 
$
(19,320
)
 
$
99,162

 
$
(95,252
)





19

Forum Energy Technologies, Inc. and subsidiaries
Notes to condensed consolidated financial statements (continued)
(Unaudited)

Condensed consolidating balance sheets
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
FET (Parent)
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
 
 
 
 
(in thousands)
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
413

 
$
86,552

 
$
69,427

 
$

 
$
156,392

Accounts receivable—trade, net
 

 
121,199

 
33,177

 

 
154,376

Inventories
 

 
324,444

 
78,407

 
(8,748
)
 
394,103

Income tax receivable
 

 
1,872

 

 

 
1,872

Cost and profits in excess of billings
 

 
8,515

 
880

 

 
9,395

Other current assets
 

 
16,251

 
11,454

 

 
27,705

Total current assets
 
413

 
558,833