Forum Energy Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549___________________________________FORM 10-K____________________________________þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2018ORo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to __________Commission File Number 001-35504FORUM ENERGY TECHNOLOGIES, INC.(Exact name of registrant as specified in its charter)Delaware 61-1488595(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)920 Memorial City Way, Suite 1000Houston, Texas 77024(Address of principal executive offices)Registrant’s telephone number, including area code: (281) 949-2500Securities registered pursuant to Section 12(b) of the Act:Common stock, $0.01 par value New York Stock Exchange(Title of Each Class) (Name of Each Exchange on Which Registered)Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þIndicate 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 12months (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 oIndicate 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 during thepreceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a 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 oSmaller 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þThe aggregate market value of Common Stock held by non-affiliates on June 29, 2018, determined using the per share closing price on the New York Stock Exchange Compositetape of $12.35 on June 29, 2018, was approximately $1.0 billion. For this purpose, our executive officers and directors and SCF Partners L.P. and its affiliates are consideredaffiliates.As of February 22, 2019, there were 109,896,858 common shares outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of our Proxy Statement for the 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.1Table of ContentsForum Energy Technologies, Inc.Index to Form 10-KPART IItem 1.Business3Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments28Item 2.Properties29Item 3.Legal Proceedings30Item 4.Mine Safety Disclosures30PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities32Item 6.Selected Financial Data34Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations35Item 7A.Quantitative and Qualitative Disclosures About Market Risk56Item 8.Financial Statements and Supplementary Data57Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure102Item 9A.Controls and Procedures102Item 9B.Other Information103PART IIIItem 10.Directors, Executive Officers and Corporate Governance103Item 11.Executive Compensation104Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters104Item 13.Certain Relationships and Related Transactions, and Director Independence104Item 14.Principal Accounting Fees and Services104PART IVItem 15.Exhibits, Financial Statement Schedules104Item 16.Form 10-K Summary108SIGNATURES1092Table of ContentsPART IItem 1. BusinessForum Energy Technologies, Inc., a Delaware corporation (“Forum,” the “Company,” “we” or “us”), is a global oilfield products company, serving thedrilling, subsea, completions, production and infrastructure sectors of the oil and natural gas industry. Our common shares are listed on the NewYork Stock Exchange (“NYSE”) under the symbol “FET.” Our principal executive offices are located at 920 Memorial City Way, Suite 1000,Houston, Texas 77024, our telephone number is (281) 949-2500, and our website is www.f-e-t.com. Our Annual Reports on Form 10-K, quarterlyreports on Form 10-Q and current reports on Form 8-K, and all amendments thereto, are available free of charge on our website as soon asreasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Thesereports are also available on the SEC’s website at www.sec.gov. Information contained on or accessible from our website is not incorporated byreference into this Annual Report on Form 10-K and should not be considered part of this report or any other filing that we make with the SEC.OverviewWe are a global oilfield products company, serving the drilling, subsea, completions, production and infrastructure sectors of the oil and natural gasindustry. We design, manufacture and distribute products and engage in aftermarket services, parts supply and related services that complementour product offering. Our product offering includes a mix of frequently replaced consumable products and highly engineered capital products thatare used in the exploration, development, production and transportation of oil and natural gas. Our consumable products are used in drilling, wellconstruction and completions activities, within the supporting infrastructure, and at processing centers and refineries. Our engineered capitalproducts are directed at: drilling rig equipment for new rigs, upgrades and refurbishment projects; subsea construction and development projects;the placement of production equipment on new producing wells; pressure pumping equipment; and downstream capital projects. In 2018,approximately 80% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derivedfrom capital products with a small amount from rental and other services.We seek to design, manufacture and supply reliable high quality products that create value for our diverse customer base, which includes, amongothers, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and servicecompanies, and pipeline and refinery operators.We operate three business segments that cover all stages of the well cycle, Drilling & Subsea, Completions, and Production & Infrastructure. Weincorporate by reference the segment and geographic information for the last three years set forth in Note 16 Business Segments and theinformation with respect to acquisitions set forth in Note 4 Acquisitions & Dispositions.Drilling & Subsea segmentIn our Drilling & Subsea segment, we design, manufacture and supply products and provide related services to the drilling and subsea markets.Through this segment, we offer drilling technologies, including capital equipment and a broad line of products consumed in the drilling process; andsubsea technologies, including robotic vehicles and other capital equipment, specialty components and tooling, a broad suite of complementarysubsea technical services, and products used in pipeline infrastructure.There are several factors that drive demand for our Drilling & Subsea segment. Our Drilling Technologies product line is influenced by global drillingactivity; the level of capital investment in drilling rigs; rig upgrades and equipment replacement as drilling contractors modify their existing rigs toincrease capability or improve efficiency and safety; and the number of rigs in use and the severity of the conditions under which they operate.Demand for our subsea products is impacted by global offshore activity, defense spending, subsea equipment and pipeline installation, repair andmaintenance spending, and growth in offshore resource development.Drilling Technologies. We provide both drilling capital equipment and consumables, with a focus on products that enhance our customers’ handlingof tubulars and drilling fluids on the drilling rig. Our product offering includes powered and manual tubular handling equipment; customized offlinecrane systems; drilling data acquisition management systems; pumps, pump parts, valves, and manifolds; drilling fluid end components; a broadline of items consumed in the drilling process; and digital monitoring products.Drilling capital equipment. We design and manufacture a range of powered and manual tubular handling tools used on onshore and offshore drillingrigs. Our Forum B+V Oil Tools and Wrangler™ branded tools reduce direct human involvement in the handling of pipe during drilling operations,improving safety, speed and efficiency of operations.3Table of ContentsOur tubular handling tools include elevators, clamps, slip handles, tong handles, powered slips, spiders and kelly spinners. Our hydraulic catwalksmechanize the lifting and lowering of tubulars to and from the drill floor, eliminating or reducing the need for traditional drill pipe and casing “pick-upand lay-down” operations with associated personnel. In addition, our make-up and break-out tools, called FloorhandTM and Wrangler Roughneck™,automate a potentially dangerous rig floor task and improve rig drilling speed and safety. In addition, we design and manufacture a range of rig-based offline activity cranes and multi-purpose cranes.In addition to powered tubular handling equipment, we design and manufacture drilling manifold systems and high pressure piping packages.Finally, we repair and service drilling equipment for both land and offshore rigs. Many of our service employees work in the field to addressproblems at the rig site.Consumable products. We manufacture a range of consumable products used on drilling rigs, well servicing rigs, and hydraulic fracturing systems.Our consumable products include valves, centrifugal pumps, mud pump fluid end components, mud pump modules, rig sensors, inserts, and dies.We are also a supplier of oilfield bearings to original equipment manufacturers and repair businesses for use in drilling and well stimulationequipment.Subsea Technologies. We design and manufacture capital equipment and specialty components used in the subsea sector and provide a broadsuite of complementary subsea technical services. We have a core focus on the design and manufacture of remotely operated vehicle (“ROV”)systems, other specialty subsea vehicles, and rescue submarines, as well as critical components of these vehicles. Many of our related technicalservices complement our vehicle offerings.Subsea vehicles. We are a leading designer and manufacturer of a wide range of ROVs that we supply to the offshore subsea construction,observation and related service markets. The market for subsea ROVs can be segmented into three broad classes of vehicles based on size andcategory of operations: (1) large work-class vehicles and trenchers for subsea construction and installation activities, (2) drilling-class vehiclesdeployed from and for use around an offshore rig and (3) observation-class vehicles for inspection and light manipulation. We are a leading providerof work-class and observation class vehicles.We design and manufacture large work-class ROVs through our Perry® brand. These vehicles are principally used in deepwater constructionapplications with the largest vehicles providing up to 200 horsepower, exceeding 1,200 pounds of payload capacity and having the capability towork in depths up to 4,000 meters. In addition to work-class ROVs, we design and manufacture large subsea trenchers that travel along the seafloor for digging, installation and burial operations. The largest of these subsea trenchers provides up to 1,500 horsepower and is able to cut overthree meters deep into the seafloor to lay pipelines, power cables or communications cables.Our Forum Sub-Atlantic® branded observation-class vehicles are electrically powered and are principally used for inspection, survey and lightmanipulation, and serve a wide range of industries.Our subsea vehicle customers are primarily large offshore construction companies, including non-oil and natural gas entities, such as a range ofgovernmental organizations including navies, maritime science and geoscience research organizations, offshore wind power companies, and otherindustries operating in marine environments.Subsea products and technical services. In addition to subsea vehicles, we are a leading manufacturer of subsea products and components. Wedesign and manufacture a group of products that are used in and around the ROV. For example, we manufacture Dynacon® branded ROV launchand recovery systems, Syntech® branded syntactic foam buoyancy components, Sub-Atlantic® branded ROV thrusters, and a wide range ofhydraulic power units and valve packs. We design and manufacture these ROV components for incorporation into our own vehicles as well as forsale to other ROV manufacturers. We also provide a broad suite of subsea tooling, both industry standard and custom designed. In addition tovehicle-related subsea products, we provide a broad suite of subsea technical services.Subsea rental. On January 3, 2018, we contributed our Forum Subsea Rentals (“FSR”) business into Ashtead Technology, in exchange for a 40%interest in the combined business. The transaction created a market leading independent provider of subsea survey and ROV equipment rentalservices. Our interest in the combined business is presented in our consolidated financial statements as an equity method investment in theDrilling and Subsea segment, for post-closing periods.Completions segmentIn our Completions segment, we design, manufacture and supply products and provide related services to the well construction, completion,stimulation and intervention markets. Through this segment, we offer downhole technologies,4Table of Contentsincluding cementing and casing tools, completion products, and a range of downhole cable protection solutions; and we also offer stimulation andintervention technologies, including pumps and well stimulation consumable products, premium industrial heat exchanger and cooling systems,and related recertification and refurbishment services.There are several factors driving demand for our Completions segment. Our Downhole Technologies product line is impacted by the level of wellcompletion activity and complexity of well construction and completion. Our Stimulation & Intervention and Coiled Tubing product lines areimpacted by the use of hydraulic fracturing to develop oil and natural gas reserves in shale or tight sand basins across North America and the levelof workover and intervention activity.Downhole Technologies. We manufacture a broad line of downhole products that are consumed during the well construction, completion andproduction phases of a well’s lifecycle.Downhole protection systems. We offer a full range of downhole protection solutions and artificial lift accessories products through our variousbrands such as Cannon Services™ and Multilift. The Cannon Services clamp, Forum cast clamp and protection products are used to shielddownhole control lines, cables and gauges during installation and to provide protection during production enhancement operations. We design andmanufacture a full range of downhole protection solutions for electrical submersible pump (“ESP”) cabling, encapsulated control lines, sub-surfacesafety valves and permanent downhole gauges. We provide both standard and customized protection systems, and we utilize a range of materialsin our products for various downhole environments. SandGuard™ and Cyclone™ completion tools extend the useful life of an ESP by protecting itagainst sand and other solids after shutdown.Casing and cementing tools. Through our Davis-Lynch™ branded downhole well construction operations, we design and manufacture productsused in the construction of oil and natural gas wells. We design and manufacture a full range of centralizers, float equipment, stage cementingtools, inflatable packers, flotation collars, cementing plugs, mudline suspension and surge reduction equipment. Our products are used globally inthe construction of onshore and offshore wells.Completion products. We manufacture a line of downhole composite plugs, which are primarily used for zonal isolation during multi-stage hydraulicfracturing in horizontal and vertical wells.Our primary customers in this product line are oil and natural gas producers, and service companies providing completions, artificial lift and otherintervention services to producers.Stimulation and Intervention. We provide a broad range of high pressure pumps and flow equipment used by well stimulation, or pressure pumping,companies during stimulation, intervention (principally plug and perforation activity) and flowback processes. We design and manufacture powerend and fluid end assemblies, industrial heat exchanger and cooling systems, manifolds and manifold trailers, and treating iron. Frequentrefurbishment and recertification of flow equipment is critical to ensuring the reliable and safe operation of a pressure pumping company’s fleet.We perform these services at various locations as well as operating a fleet of mobile refurbishment and recertification tractor trailers, which can bedeployed to the customer’s yards. We serve many of the most active basins across North America and seek to position our stocking and servicelocations in proximity to our customers’ operations.We also manufacture pressure control products that are used for well intervention operations and sold to oilfield service companies and equipmentrental companies both domestically and internationally including blowout preventers for wireline units and our Hydraulic Latch Assembly. Inaddition, we manufacture state of the art electro-mechanical wireline cables as well as EnviroLite (greaseless) cables. We also conductaftermarket refurbishment and recertification services for pressure control equipment.Our primary customers in the Stimulation and Intervention product line are pressure pumping and flowback service companies, although we alsogenerate sales to original equipment manufacturers of pressure pumping units.Coiled Tubing. We manufacture Global Tubing® branded coiled tubing strings and coiled line pipe and provide related services. Coiled tubingstrings are consumable components of coiled tubing units that perform well completion and intervention activities. Our coiled line pipe offeringserves as an alternative to the conventional line pipe in onshore and subsea applications.We invested in Global Tubing, LLC (“Global Tubing”) with a joint venture partner (with Global Tubing’s management retaining a small interest) in2013. In the fourth quarter of 2017, we acquired the remaining membership interests in Global Tubing. Additional details about the acquisition areincluded in Note 4 Acquisitions & Dispositions.Our primary customers in the Coiled Tubing product line are service companies that provide coiled tubing services globally.5Table of ContentsProduction & Infrastructure segmentIn our Production & Infrastructure segment, we design, manufacture and supply products and provide related equipment and services to productionand infrastructure markets. Through this segment, we supply production equipment, including well site production and process equipment, and abroad range of industrial and process valves.The level of spending to bring new wells on production, including the related infrastructure, is the primary driver for our Production & Infrastructuresegment. Our Production Equipment product line also has exposure to the amount of spending on midstream and downstream projects, as it offersproducts that go from the well site to inside the refinery fence. Our Valve Solutions product line is impacted by the level of infrastructure additions,upgrades and maintenance activities across the oil and natural gas industry, including the upstream, midstream and downstream sectors. Inaddition, our valves are used in the power, process, petrochemical and mining industries.Production Equipment. Our Production Equipment product line provides engineered process systems and field services for capital equipment usedat the wellsite and, for production processing, in the U.S. Once a well has been drilled, completed and brought on stream, we provide the welloperator or producer with the process equipment necessary to make the oil or natural gas ready for transmission. We engineer, fabricate and installseparators, packaged production systems and American Society of Mechanical Engineers (“ASME”) and American Petroleum Institute (“API”)coded pressure vessels, skidded vessels with gas measurement, modular process plants, header and manifold skids, process and flow controlequipment and separators to help clean and process oil or natural gas as it travels from the wellhead and along the transmission line to therefinery. Our customers are principally oil and natural gas operators or producers.We also design and provide process oil treatment equipment, including desalters and dehydrators, used in refineries worldwide. We have a team oftechnicians and field service engineers for repair and installation, and we supply a broad range of replacement parts for our equipment and othermanufacturers. This equipment removes sand, water and suspended solids from hydrocarbons prior to their refining.Valve Solutions. We design, manufacture and provide a wide range of industrial valves that principally serve the upstream, midstream anddownstream markets of the oil and natural gas industry. To a lesser extent, our valves serve general industrial, power and process industrycustomers as well as the mining industry. We provide ball, gate, globe, check and butterfly valves across a range of sizes and applications.We market our valves to our customers and end users through our recognized brands: PBV®, DSI®, Quadrant®, Accuseal®, Cooper AlloyTM, andABZ®. Much of our production is sold through distribution supply companies, with our marketing efforts targeting end users for pull through of ourvalve products. Our global sales force and representatives cover approximately 30 countries, with local sales and distribution in Canada. OurCanadian operations provide significant exposure to the heavy oil projects.Our manufacturing and supply chain systems enable us to design and produce high-quality engineered valves, as well as provide standardizedproducts, while maintaining competitive pricing and minimizing capital requirements. We also utilize our international manufacturing partners toproduce components and completed products for a number of our other valve brands.Depending on the product, we manufacture our valves to conform to the standards of one or more of the API, American National StandardsInstitute, American Bureau of Shipping, and International Organization for Standardization and/or other relevant standards governing the designand manufacture of industrial valves. Through our Valve Solutions product line, we participate in the API’s standard-setting process.Business historyForum was incorporated in 2005 and formed through a series of acquisitions. In August 2010, Forum Oilfield Technologies, Inc. was renamedForum Energy Technologies, Inc., when four other companies were merged into Forum. On April 17, 2012, we completed our initial public offering.6Table of ContentsBacklogAs we provide a mix of consumable products, capital goods, repair parts, and rental services, a majority of our business does not require lengthylead times. The majority of the orders and commitments included in our backlog as of December 31, 2018 were scheduled to be delivered withinsix months. Our backlog was approximately $276 million at December 31, 2018 and approximately $222 million at December 31, 2017.Substantially all of the projects currently in our backlog are subject to change and/or termination at the option of the customer. In the case of achange or termination, the customer is generally required to pay us for work performed and other costs necessarily incurred as a result of thechange or termination. It is difficult to predict how much of our current backlog will be delayed or terminated, or subject to changes, as well as ourability to collect termination or change fees.Our consumable and repair products are predominantly off-the-shelf items requiring short lead-times, generally less than six months, and ourrelated refurbishment or other services are also not contracted with significant lead time. The composition of our backlog is reflective of our mix ofcapital equipment, consumable products, aftermarket and other related items. Our bookings, which consist of written orders or commitments forour products or related services, during the years ended December 31, 2018 and 2017 were approximately $1,116 million and $870 million,respectively.CustomersNo customer represented more than 10% of consolidated revenue in any of the last three years.SeasonalityA substantial portion of our business is not significantly impacted by seasonality. We do, however, generally experience lower sales andprofitability in the fourth quarter due to a decrease in working days caused by calendar year-end holidays, and manufacturing and shipping delayscaused by weather. In addition, given the geographic proximity of a number of our facilities to the Gulf Coast, we are subject to businessinterruptions caused by hurricanes and tropical storms. A small portion of the revenue we generate from select Canadian operations often benefitsfrom higher first quarter activity levels, as operators take advantage of the winter freeze to gain access to remote drilling and production areas.Revenue exposed to this type of seasonality, however, comprised less than 5% of our overall revenue in 2018.CompetitionThe markets in which we operate are highly competitive. We compete with a number of companies, some of which have greater financial and otherresources than we do. The principal competitive factors in our markets are product quality and performance, price, breadth of product offering,availability of products and services, distribution capabilities, responsiveness to customer needs, reputation for service and intellectual propertyrights. We believe our products and services in each segment are at least comparable in price, quality, performance and dependability with ourcompetitors’ offerings. We seek to differentiate ourselves from our competitors by providing a rapid response to the needs of our customers, a highlevel of customer service, and innovative product development initiatives. Some of our competitors expend greater amounts of money on formalresearch and engineering efforts than we do. We believe, however, that our product development efforts are enhanced by the investment ofmanagement time we make to improve our customer service and to work with our customers on their specific product needs and challenges.Although we have no single competitor across all of our product lines, the companies we compete with across the greatest number of our productlines include Cameron International Corporation (a subsidiary of Schlumberger), Gardner Denver Holdings, Inc., National Oilwell Varco, Inc.,TechnipFMC plc, Tenaris S.A., Weatherford International, Ltd., and Weir SPM, a subsidiary of The Weir Group.Patents, trademarks and other intellectual propertyWe currently hold multiple U.S. and international patents and trademarks and have a number of pending patent and trademark applications.Although in the aggregate our patents, trademarks and licenses are important to us, we do not regard any single patent, trademark or license asmaterial to our business as a whole.Raw materialsWe acquire component parts, products and raw materials from suppliers, including foundries, forge shops, and original equipment manufacturers.The prices we pay for our raw materials may be affected by, among other things, energy, steel and other commodity prices, tariffs and duties onimported materials and foreign currency exchange rates. Certain of our component parts, products or raw materials, such as bearings, are onlyavailable from a limited number of suppliers. Please see “Risk factors—Risks related to our business—We are subject to the risk of supplierconcentration.”7Table of ContentsWe may not be able to continue to purchase raw materials on a timely basis or at acceptable prices. We generally try to purchase raw materialsfrom multiple suppliers so that we are not dependent on any one supplier, but this is not always possible.Working capitalWe fund our business operations through a combination of available cash and cash equivalents, short-term investments, and cash flow generatedfrom operations. In addition, our senior secured revolving credit facility (the “Credit Facility”) is available for working capital needs. For a summaryof our Credit Facility, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and CapitalResources.”InventoryAn important consideration for many of our customers in selecting a vendor is timely availability of the product. Customers may pay a premium forearlier or immediate availability because of the cost of delays in critical operations. We stock our consumable products in regional warehousesaround the world so that these products are available for our customers when needed. This availability is especially critical for certain consumableproducts, causing us to carry substantial inventories for these products. For critical capital items in which demand is expected to be strong, weoften build certain items before we have a firm order. Our having such goods available on short notice can be of great value to our customers. Wealso stock raw materials and components in order to be in a position to build products in response to market demand.We typically offer our customers payment terms of 30 days, although during downturns in activity such as our industry experienced in the fourthquarter of 2018, customers often take 60 days or more to settle accounts. For sales into certain countries or for select customers, we mightrequire payment upfront or credit support through a letter of credit. For longer term projects, we typically require progress payments as importantmilestones are reached. On average, we collect our receivables in about 60 days from shipment resulting in a substantial investment in accountsreceivable. Likewise, standard terms with our vendors are 60 days. For critical items sourced from significant vendors, we have settled accountsmore quickly, sometimes in exchange for early payment discounts.Environmental, transportation, health and safety regulationOur operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment,health and safety aspects of our operations, or otherwise relating to human health and environmental protection. We also operate vehicles that aresubject to federal and state transportation regulations. Failure to comply with these laws or regulations or to obtain or comply with permits mayresult in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements, and the impositionof injunctions to prohibit certain activities or force future compliance.The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact theenvironment, and thus, any changes in environmental laws and regulations or in enforcement policies that result in more stringent and costly wastehandling, storage, transport, disposal, or remediation requirements could have a material adverse effect on our operations and financial position.Moreover, accidental releases or spills of regulated substances may occur in the course of our operations, and if so, we may incur significantcosts and liabilities as a result of such releases or spills, including any third party claims for damage to property, natural resources or persons.The following is a summary of the more significant existing environmental, health and safety laws and regulations to which our business operationsare subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations or financial position.Hazardous substances and wasteThe Resource Conservation and Recovery Act (the “RCRA”) and comparable state statutes, regulate the generation, transportation, treatment,storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the Environmental Protection Agency (the “EPA”),the individual states administer some or all of the provisions of the RCRA, sometimes in conjunction with their own, more stringent requirements.We are required to manage the transportation, storage and disposal of hazardous and non-hazardous wastes in compliance with the RCRA.8Table of ContentsThe Comprehensive Environmental Response, Compensation, and Liability Act (the “CERCLA”), also known as the Superfund law, imposes jointand several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of ahazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone whodisposed or arranged for the disposal of a hazardous substance released at the site. We currently own, lease, or operate numerous properties thathave been used for manufacturing and other operations for many years. We also contract with waste removal services and landfills. Theseproperties and the substances disposed or released on them may be subject to the CERCLA, RCRA and analogous state laws. Under such laws,we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations toprevent future contamination. In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury andproperty damage allegedly caused by hazardous substances released into the environment.Water dischargesThe Federal Water Pollution Control Act (the “Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect tothe discharge of pollutants, including spills and leaks of oil and other substances, into waters of the U.S. The discharge of pollutants into regulatedwaters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. A responsible partyincludes the owner or operator of a facility from which a discharge occurs. The Clean Water Act and analogous state laws provide foradministrative, civil and criminal penalties for unauthorized discharges and, together with the Oil Pollution Act of 1990, impose rigorousrequirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, anddamages in connection with any unauthorized discharges.Air emissionsThe Federal Clean Air Act (the “Clean Air Act”) and comparable state laws regulate emissions of various air pollutants through air emissionspermitting programs and the imposition of other emission control requirements. In addition, the EPA has developed, and continues to develop,stringent regulations governing emissions of toxic air pollutants at specified sources. Non-compliance with air permits or other requirements of theClean Air Act and associated state laws and regulations can result in the imposition of administrative, civil and criminal penalties, as well as theissuance of orders or injunctions limiting or prohibiting non-compliant operations.Climate changeIn December 2009, the EPA determined that emissions of carbon dioxide, methane and other “greenhouse gases” (“GHGs”) present anendangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of theearth’s atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations to restrictemissions of greenhouse gases under existing provisions of the Clean Air Act.In addition, the U.S. Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases and almost one-halfof the states have already taken legal measures to reduce emissions of greenhouse gases primarily through the planned development ofgreenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Most of these cap and trade programs work byrequiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, toacquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve theoverall greenhouse gas emission reduction goal. In April 2016, the U.S. signed the Paris Agreement, which requires member countries to reviewand “represent a progression” in their nationally determined contributions, which set GHG emission reduction goals, every five years. In June 2017,President Trump announced that the U.S. will withdraw from the Paris Agreement unless it is renegotiated. The State Department informed theUnited Nations of the U.S. withdrawal in August 2017. However, the earliest effective date of this withdrawal pursuant to the terms of the ParisAgreement is November 2020.The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs,such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reportingrequirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil andnatural gas produced by our customers. Consequently, legislation and regulatory programs to reduce emissions of greenhouse gases could havean adverse effect on our business, financial condition and results of operations. Finally, it should be noted that some scientists have concludedthat increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects,such as increased frequency and severity of storms, droughts, and9Table of Contentsfloods and other climatic events. If any such effects were to occur, they could have an adverse effect on our business, financial condition, resultsof operations and cash flow. For more information, please read “Risk Factors-Climate change legislation or regulations restricting emissions ofgreenhouse gases could increase our operating costs or reduce demand for our products.”Hydraulic fracturingA significant percentage of our customers’ oil and natural gas production is being developed from unconventional sources, such as hydrocarbonshales. These formations require hydraulic fracturing completion processes to release the oil or natural gas from the rock so that it can flowthrough the formations. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulateproduction. A number of federal agencies, including the EPA and the U.S. Department of Energy, are analyzing, or have been requested to review,a variety of environmental issues associated with shale development, including hydraulic fracturing. In addition, some states have adopted, andother states are considering adopting, regulations that could impose more stringent disclosure and/or well construction requirements on hydraulicfracturing operations. Local governments may also seek to adopt ordinances within their jurisdictions regulating the time, place and manner ofdrilling activities in general or hydraulic fracturing activities in particular, in some cases banning hydraulic fracturing entirely. We cannot predictwhether any such legislation will ever be enacted and if so, what its provisions would be. If additional levels of regulation and permits were requiredthrough the adoption of new laws and regulations at the federal or state level, that could lead to delays, increased operating costs and processprohibitions for our customers that could reduce demand for our products and services, which would have a material adverse impact on ourrevenues, results of operations and cash flows. For more information, please read “Risk Factors-Potential legislation or regulations restricting theuse of hydraulic fracturing could reduce demand for our products.”Employee health and safetyWe are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”) andcomparable state statutes, establishing requirements to protect the health and safety of workers. In addition, the OSHA hazard communicationstandard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act andcomparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that thisinformation be provided to employees, state and local government authorities and the public. Substantial fines and penalties can be imposed andorders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulationsrelating to worker health and safety. For more information, please read “Risk Factors-Potential legislation or regulations restricting the use ofhydraulic fracturing could reduce demand for our products.”Offshore regulationEvents in recent years have heightened environmental and regulatory concerns about the offshore oil and natural gas industry. From time to time,governing bodies may propose and have enacted legislation or regulations that may materially limit or prohibit offshore drilling in certain areas. Iflaws are enacted or other governmental actions are taken that delay, restrict or prohibit offshore operations in our customers’ expected areas ofoperation, our business could be materially adversely affected. New or newly interpreted regulations and other regulatory initiatives by U.S.governmental agencies have created significant uncertainty regarding the outlook for offshore activity in the U.S. Gulf of Mexico and possibleimplications for regions outside of the U.S. Gulf of Mexico. Third party challenges to industry operations in the U.S. Gulf of Mexico may also serveto further delay or restrict activities. If the new regulations, operating procedures and possibility of increased legal liability are viewed by our currentor future customers as a significant impairment to expected profitability on projects, then they could discontinue or curtail their offshore operationsthereby reducing demand for our offshore products and services.We also operate in non-U.S. jurisdictions, which may impose similar regulations, prohibitions or liabilities.Operating risk and insuranceWe maintain insurance coverage of types and amounts that we believe to be customary and reasonable for companies of our size and with similaroperations. In accordance with industry practice, however, we do not maintain insurance coverage against all of the operating risks to which ourbusiness is exposed. Therefore, there is a risk our insurance program may not be sufficient to cover any particular loss or all losses. Currently, ourinsurance program includes coverage for, among other things, general liability, umbrella liability, sudden and accidental pollution, personalproperty, vehicle, workers’ compensation, and employer’s liability coverage.10Table of ContentsEmployeesAs of December 31, 2018, we had approximately 2,500 employees. Of our total employees, approximately 2,000 were in the U.S., 200 were in theUnited Kingdom, 100 were in Germany, 100 were in Canada and 100 were in all other locations. We are not a party to any collective bargainingagreements, other than in our Hamburg, Germany and Monterrey, Mexico facilities. We consider our relations with our employees to besatisfactory.11Table of ContentsItem 1A. Risk FactorsRisks related to our businessWe derive a substantial portion of our revenues from companies in or affiliated with the oil and natural gas industry, a historicallycyclical industry, with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices. As a result,this cyclicality has caused, and will continue to cause fluctuations in our revenues and results of our operations.We have experienced, and will continue to experience, fluctuations in revenues and operating results due to economic and business cycles. Thewillingness of oil and natural gas operators to make capital expenditures to explore for and produce oil and natural gas, the willingness of oilfieldservice companies to invest in capital equipment and the need of these customers to replenish consumable parts depends largely upon prevailingindustry conditions that are influenced by numerous factors over which we have no control. Such factors include:•supply of and demand for oil and natural gas;•prices, and expectations about future prices, of oil and natural gas;•ability or willingness of the members of the Organization of Petroleum Exporting Countries (“OPEC”) and other countries, such as Russia, toinfluence oil and natural gas prices through voluntary production limits; cost of exploring for, developing, producing and delivering oil andnatural gas;•level of drilling and completions activity;•expected decline in rates of current and future production, or faster than anticipated declines in production;•discovery rates of new oil and natural gas reserves;•ability of our customers to access new markets or areas of production or to continue to access current markets;•weather conditions, including hurricanes, that can affect oil and natural gas operations over a wide area;•more stringent environmental regulations;•moratoriums on drilling activity resulting in a cessation or disruption of operations;•domestic and worldwide economic conditions;•financial stability of our customers and other industry participants;•political instability in oil and natural gas producing countries;•shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and naturalgas;•conservation measures and technological advances affecting energy consumption;•price and availability of alternative energy resources;•availability of alternative fuels;•uncertainty in capital and commodities markets, and the ability of oil and natural gas companies to raise equity capital and debt financing; and•merger and divestiture activity among oil and natural gas producers, drilling contractors and oilfield service companies.In the second half of 2014, the oil and natural gas industry began to experience a prolonged reduction in the overall level of exploration anddevelopment activities as a result of the decline in commodity prices that continued into late 2016. As a result, many of our customers reduced ordelayed their oil and natural gas exploration and production spending, reducing the demand for our products and services and exerting downwardpressure on the prices that we charge. These conditions adversely impacted our business. The crude oil prices started to increase over the courseof 2017, and continued to strengthen in 2018, but declined again in the fourth quarter of 2018. Although we have experienced strong incrementaldemand growth over the last years, it is uncertain whether commodity prices and demand will maintain these levels or increase materially in 2019.Furthermore, there can be no assurance that the demand or pricing for oil and natural gas will follow historic patterns or continue to recovermeaningfully in the near term. Declines in oil and natural gas prices and decreased levels of exploration, development, and production activityrelative to historical norms may negatively affect:•revenues, cash flows, and profitability;12Table of Contents•the ability to maintain or increase borrowing capacity;•the ability to obtain additional capital to finance our business and the cost of that capital;•the ability to collect outstanding amounts from our customers; and•the ability to attract and retain skilled personnel to maintain our business or that will be needed in the event of an upturn in the demand for ourproducts.The markets in which we operate are highly competitive, and some of our competitors hold substantial market share and havesubstantially greater resources than we do. We may not be able to compete successfully in this environment and, in particular, against amuch larger competitor.The markets in which we operate are highly competitive and our products and services are subject to competition from significantly largerbusinesses. One competitor in particular holds a substantially greater market share than us in one of our product lines and has substantiallygreater resources than we do. We also have several other competitors that are large national and multinational companies that have longeroperating histories, greater financial, technical and other resources and greater name recognition than we do. Some of our competitors may be ableto respond more quickly to new or emerging technologies and services and changes in customer requirements. In addition, several of ourcompetitors provide a much broader array of services, and have a stronger presence in more geographic markets. Our larger competitors may beable to use their size and purchasing power to seek economies of scale and pricing concessions. Furthermore, some of our customers are alsoour competitors and they may cease buying from us. We also have competitors outside of the U.S. with lower structural costs due to labor and rawmaterial cost in and around their manufacturing centers, and prices based on foreign currencies. Accordingly, currency fluctuations may causeU.S. dollar-priced products to be less competitive than our competitors’ products that are priced in other currencies. Moreover, our competitorsmay utilize available capacity during a period of depressed energy prices to gain market share.New competitors have also entered the markets in which we compete. We consider product quality, price, breadth of product offering, availabilityof products and services, performance, distribution capabilities, responsiveness to customer needs and reputation for service to be the primarycompetitive factors. Competitors may be able to offer more attractive pricing, duplicate strategies, or develop enhancements to products that couldoffer performance features that are superior to our products. In addition, we may not be able to retain key employees of entities that we acquire inthe future and those employees may choose to compete against us. Competitive pressures, including those described above, and other factorscould adversely affect our competitive position, resulting in a loss of market share or decreases in prices. For more information about ourcompetitors, please read “Business-Competition.”Given the uncertainty related to long-term commodity prices and associated customer demand, we may hold excess or obsoleteinventory and experience a reduction in gross margins and financial results.We cannot accurately predict what or how many products our customers will need in the future. Orders are placed with our suppliers based onforecasts of customer demand and, in some instances, we may establish buffer inventories to accommodate anticipated demand. At certain timeswe have built capital equipment before receiving customer orders, and we have kept our standardized downhole protection systems and certain ofour flow iron products in stock and readily available for delivery on short notice from customers. Our forecasts of customer demand are based onmultiple assumptions, each of which may introduce errors into the estimates. In addition, many of our suppliers, such as those for certain of ourstandardized valves, require a longer lead time to provide products than our customers demand for delivery of our finished products. If weunderestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially losemarket share and damage our customer relationships. Conversely, if we overestimate customer demand, we may allocate resources to thepurchase of material or manufactured products that we may not be able to sell when we expect to, if at all. As a result, we would hold excess orobsolete inventory, which would reduce gross margin and adversely affect financial results upon writing down the value of inventory. For example,during 2018 we recognized $36.6 million of inventory write downs. In addition, any future significant cancellations or deferrals of product orders orthe return of previously sold products could materially and adversely affect profit margins, increase product obsolescence and restrict our ability tofund our operations.13Table of ContentsWe may not realize revenue on our current backlog due to customer order reductions, cancellations or acceptance delays, which maynegatively impact our financial results.Decreases in oil and natural gas prices and the resulting uncertainty regarding demand for our customers’ services have resulted in orderreductions, cancellations and acceptance delays in the past, and we may experience more of these in the future. We may be unable to collectrevenue for all of the orders reflected in our backlog, or we may be unable to collect cancellation penalties, to the extent we have the right toimpose them, or the revenues may be pushed into future periods. In addition, customers who are more highly leveraged or otherwise unable to paytheir creditors in the ordinary course of business may become insolvent or be unable to operate as a going concern. We may be unable to collectamounts due or damages we are awarded from these customers, and our efforts to collect such amounts may damage our customer relationships.Our results of operations and overall financial condition may be negatively impacted by a reduction in revenue as a result of these circumstances.Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.We currently have a substantial amount of indebtedness, including $400.0 million of 6.25% senior unsecured notes due October 2021, and $119.0million outstanding under our $300.0 million Credit Facility. Our level of indebtedness may adversely affect our operations and limit our growth, andwe may have difficulty making debt service payments on our indebtedness as such payments become due. Our level of indebtedness may affectour operations in several ways, including the following:•our indebtedness may increase our vulnerability to general adverse economic and industry conditions;•the covenants contained in the agreements that govern our indebtedness limit our ability to borrow funds, dispose of assets, pay dividendsand make certain investments;•our debt covenants also affect our flexibility in planning for, and reacting to, changes in the economy and in its industry;•any failure to comply with the financial or other covenants of our indebtedness could result in an event of default, which could result in some orall of our indebtedness becoming immediately due and payable;•our indebtedness could impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions orother general corporate purposes; and•our business may not generate sufficient cash flow from operations to enable us to meet our debt obligations.Tariffs imposed by the United States government could continue to adversely affect our results of operations.The President of the United States has issued proclamations imposing tariffs on imports of selected products, including those sourced from China.In particular, the U.S. government has imposed global tariffs on certain imported steel and aluminum products pursuant to Section 232 of theTrade Expansion Act of 1962, as well as tariffs on $250 billion worth of Chinese imports pursuant to Section 301 of the Trade Act of 1974. Inresponse, China and other countries have imposed retaliatory tariffs on a wide range of U.S. products, including those containing steel andaluminum. Our efforts to mitigate the impact of these tariffs on raw materials through the diversification of our supply chain may not be sufficientlysuccessful. Furthermore, a prolonged imposition of tariffs on our goods could have a significant adverse effect on our results of operations.Facility consolidations or expansions may subject us to risks of operating inefficiencies, construction delays and cost overruns.We have consolidated and may continue to consolidate facilities to achieve operating efficiencies and reduce costs. These facility consolidationsmay be delayed and cause us to incur increased costs, product or service delivery delays, decreased responsiveness to customer needs,liabilities under terms and conditions of sale or other operational inefficiencies, or may not provide the benefits we anticipate. We may lose keypersonnel and operational knowledge that might lead to quality issues or delays in production.In the future, we may grow our businesses through the construction of new facilities and expansions of our existing facilities. These projects, andany other capital asset construction projects that we may commence, are subject to similar risks of delay or cost overruns inherent in anyconstruction project resulting from numerous factors, including the following:•difficulties or delays in obtaining land;•shortages of key equipment, materials or skilled labor;•unscheduled delays in the delivery of ordered materials and equipment;14Table of Contents•unanticipated cost increases;•weather interferences; anddifficulties in obtaining necessary permits or in meeting permit conditions.The industry in which we operate is undergoing continuing consolidation that may impact our results of operations.Some of our largest customers have consolidated and are using their size and purchasing power to achieve economies of scale and pricingconcessions. This consolidation could result in reduced capital spending by such customers or decreased demand for our products and services.If we cannot maintain sales levels for customers that have consolidated or replace such revenues with increased business activities from othercustomers, this consolidation activity could have a significant negative impact on our results of operations or financial condition. We are unable topredict what effect consolidations in the industry may have on prices, capital spending by customers, selling strategies, competitive position,customer retention or our ability to negotiate favorable agreements with customers.A portion of our business is driven by our customers’ spending on capital equipment such as drilling rigs. As a result of a greater focusby our customers on maintaining capital discipline, spending may decline or remain at a low level despite an increase in commodityprices.Leading up to 2014, in various segments of the energy industry, high levels of investment in capital intensive equipment were typically linked withhigh commodity prices. Following 2014, as commodity prices and activity levels declined, there was an oversupply of capital equipment andcorresponding reduction in the demand for construction of these products. More recently, our customers and their investors have adopted businessstrategies placing significant emphasis on capital discipline that may limit the level of their future spending. As a result, we cannot provide anyassurance that our capital equipment sales will increase if there is an increase in commodity prices.Technological advances have rendered drilling more efficient, reducing the amount of capital equipment required to drill the samenumber of wells and the demand for our products.New techniques and technological advances have reduced the number of days required to drill wells. The number of days required for a drilling rigto be on a site to drill a well has in many areas been reduced by at least half over the last several years. This has exacerbated the oversupply ofdrilling rigs and may lengthen the time until significant capital investment is required by our drilling company customers. These advances may alsoresult in a lower overall level of capital investment when the current generation of drilling rigs is required to be replaced.We may be impacted by disruptions in the political, regulatory, economic and social conditions of the foreign countries in which we areexpected to conduct business.Instability and unforeseen changes in the international markets in which we conduct business, including economically and politically volatile areassuch as North Africa, the Middle East, Latin America and the Asia Pacific region, could cause or contribute to factors that could have an adverseeffect on the demand for the products and services we provide. For example, we have previously transferred management and operations fromcertain Latin American countries, due to the presence of political turmoil, to other countries in the region that are more politically stable.In addition, worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are likely to continue to doso in the future. Depending on the market prices of oil and natural gas, oil and natural gas exploration and development companies may cancel orcurtail their drilling programs, thereby reducing demand for our products and services.Our common stock price has been volatile, and we expect it to continue to remain volatile in the future.The market price of common stock of companies engaged in the oil and natural gas equipment manufacturing and services industry has beenvolatile. Likewise, the market price of our common stock has varied significantly in the past. For example, in 2018, the market price of ourcommon stock reached a high of $17.95 per share on January 23, 2018 and a low of $3.51 per share on December 26, 2018. We expect it tocontinue to remain volatile given the cyclical nature of our industry.15Table of ContentsGiven the historically cyclical nature of the oil and natural gas industry, our operating history may not be sufficient for investors toevaluate our business and prospects.Relative to many of our competitors, we have a relatively short operating history as a public company. In addition, we have completed sixteenacquisitions since our initial public offering. Furthermore, the oil and natural gas industry is historically cyclical, which may cause analysts’evaluation of our business, in our view, to be inaccurate. These factors may make it more difficult for investors to evaluate our business andprospects, and to forecast our future operating results. As a result, historical financial data may not provide an accurate indication of what ouractual results would have been if subsequent acquisitions had been completed at the beginning of the periods presented or what our future resultsof operations are likely to be. Our future results will depend on our ability to efficiently manage our combined operations and execute our businessstrategy.We are subject to the risk of supplier concentration.Certain of our product lines depend on a limited number of third party suppliers. In some cases, the suppliers own the intellectual property rights tothe products we sell, or possess the technology or specialized tooling required to manufacture them. As a result of this concentration in part of oursupply chain, our business and operations that have been negatively affected if our key suppliers were to experience significant disruptionsaffecting the price, quality, availability or timely delivery of their products, or if they were to decide to terminate their relationships with us. Forexample, we have a limited number of suppliers for our bearings product lines and certain of our valve product lines. The limited number of thesesuppliers restricted the quantity and timeliness of customer deliveries. The partial or complete loss of any one of our key suppliers, or a significantadverse change in the relationship with any of these suppliers, through consolidation or otherwise, would limit our ability to manufacture and sellcertain of our products.Our business depends upon our ability to obtain key raw materials and specialized equipment from suppliers. Increased costs of rawmaterials and other components may result in increased operating expenses.Should our suppliers be unable to provide the necessary raw materials or finished products or otherwise fail to deliver such materials and productstimely and in the quantities required, resulting delays in the provision of products or services to customers could have a material adverse effect onour business. In particular, because many of our products are manufactured out of steel, we are particularly susceptible to fluctuations in steelprices. Our results of operations may be adversely affected by our inability to manage the rising costs and availability of raw materials andcomponents used in our products.If suppliers cannot provide adequate quantities of materials to meet customers’ demands on a timely basis or if the quality of thematerials provided does not meet established standards, we may lose customers or experience lower profitability.Some of our customer contracts require us to compensate customers if we do not meet specified delivery obligations. We rely on suppliers toprovide required materials and in many instances these materials must meet certain specifications. Managing a geographically diverse supplybase poses inherently significant logistical challenges. Furthermore, the ability of third party suppliers to deliver materials to our specifications maybe affected by events beyond our control. As a result, there is a risk that we could experience diminished supplier performance resulting in longerthan expected lead times and/or product quality issues. For example, in the past, we have experienced issues with the quality of certain forgingsused to produce materials utilized in our products. As a result, we were required to seek alternative suppliers for those forgings, which resulted inincreased costs and a disruption in our supply chain. We have also been required in certain circumstances to provide better economic terms tosome of our suppliers in exchange for their agreement to increase their capacity to satisfy our supply needs. The occurrence of any of theforegoing factors could have a negative impact on our ability to deliver products to customers within committed time frames.A failure or breach of our information technology infrastructure, including as a result of cyber attacks or failures of data protectionmeasures, could adversely impact our business and results of operations and expose us to potential liabilities.The efficient operation of our business is dependent on our information technology (“IT”) systems. Accordingly, we rely upon the capacity,reliability and security of our IT hardware and software infrastructure and our ability to expand and update this infrastructure in response to ourchanging needs. Despite our implementation of security measures, our IT systems are vulnerable to computer viruses, natural disasters,incursions by intruders or hackers, failures in hardware or software, power fluctuations, cyber terrorists and other similar disruptions. The failure ofour IT systems to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerousadverse consequences, including reduced effectiveness and efficiency of our operations and that of our customers, inappropriate disclosure ofconfidential information, increased overhead costs, and loss of intellectual property, which16Table of Contentscould lead to liability to third parties or otherwise and have a material adverse effect on our business and results of operations. In addition, we maybe required to incur significant costs to prevent damage caused by these disruptions or security breaches in the future.In addition, recent laws and regulations governing data privacy and the unauthorized disclosure of confidential information, including the EuropeanUnion General Data Protection Regulation and laws enacted in certain U.S. jurisdictions, pose increasingly complex compliance challenges andpotentially elevate our costs. Any failure by us to comply with these laws and regulations, including as a result of a security or privacybreach, could result in significant penalties and liabilities for us. Additionally, if we acquire a company that has violated or is not in compliance withapplicable data protection laws, we may incur significant liabilities and penalties as a result.Our success depends on our ability to implement new technologies and services more efficiently and quickly than our competitors.Our success depends on our ability to develop and implement new product designs and improvements that meet our customer’s needs in amanner equal to or more effective than those offered by our competitors. If we are not able to continue to provide new and innovative services andtechnologies in a manner that allows us to meet evolving industry requirements at prices acceptable to our customers, our financial results may benegatively affected. In addition, some of our competitors are large national and multinational companies that may be able to devote greaterfinancial, technical, manufacturing and marketing resources to research and develop more or better systems, services and technologies than weare able to do. Moreover, as a result of the currently depressed levels of customer activity, we may be unable to allocate material amounts ofcapital to research and new product development activities, which may limit our ability to compete in the market and generate revenue.Our success will be affected by the use and protection of our proprietary technology. Due to the limitations of our intellectual propertyrights, our ability to exclude others from the use of our proprietary technology may be reduced.Our success will be affected by our development and implementation of new product designs and improvements and by our ability to protect andmaintain intellectual property assets related to these developments. Although in many cases our products are not protected by any registeredintellectual property rights, in some cases we rely on a combination of patents and trade secret laws to establish and protect this proprietarytechnology.We currently hold multiple U.S. and international patents and have several pending patent applications associated with our products andprocesses. Patent rights give the owner of a patent the right to exclude third parties from making, using, selling, and offering for sale theinventions claimed in the patents in the applicable country. Patent rights do not necessarily grant the owner of a patent the right to practice theinvention claimed in a patent, but merely the right to exclude others from practicing the invention claimed in the patent. It may also be possible fora third party to design around our patents. Furthermore, patent rights have strict territorial limits. Some of our work will be conducted ininternational waters and may, therefore, not fall within the scope of any country’s patent jurisdiction. We may not be able to enforce our patentsagainst infringement occurring in international waters and other “non-covered” territories. Also, we do not have patents in every jurisdiction in whichwe conduct business and our patent portfolio will not protect all aspects of our business and may relate to obsolete or unusual methods, whichwould not prevent third parties from entering the same market.In addition, by customarily entering into confidentiality and/or license agreements with our employees, customers and potential customers andsuppliers, we attempt to limit access to and distribution of our technology. Our efforts to maintain information as trade secrets or proprietarytechnology are subject to determination by the judicial system and may not be successful. Furthermore, our rights in our confidential information,trade secrets, and confidential know-how will not prevent third parties from independently developing similar information. Publicly availableinformation, including information in expired issued patents, published patent applications, and scientific literature, can also be used by thirdparties to independently develop technology. We cannot provide assurance that this independently developed technology will not be equivalent orsuperior to our proprietary technology.Our competitors may infringe upon, misappropriate, violate or challenge the validity or enforceability of our intellectual property and we may notable to adequately protect or enforce our intellectual property rights in the future.We may be adversely affected by disputes regarding intellectual property rights and the value of our intellectual property rights isuncertain.As discussed above, we may become involved in legal proceedings from time to time to protect and enforce our intellectual property rights. Thirdparties from time to time may initiate litigation against us by asserting that the conduct of our business infringes, misappropriates or otherwiseviolates intellectual property rights. We may not prevail in any such legal proceedings related to such claims, and our products and services maybe found to infringe, impair,17Table of Contentsmisappropriate, dilute or otherwise violate the intellectual property rights of others. Any legal proceeding concerning intellectual property is likely tobe protracted and costly and is inherently unpredictable, and could have a material adverse effect on our business, regardless of its outcome.Further, our intellectual property rights may not have the value expected and such value may change over time as new products are designed andimproved.Our executive officers and certain key personnel are critical to our business and these officers and key personnel may not remain withus in the future.Our future success depends in substantial part on our ability to hire and retain our executive officers and other key personnel. In particular, we arehighly dependent on certain of our executive officers. These individuals possess extensive expertise, talent and leadership, and they are critical toour success. The diminution or loss of the services of these individuals, or other integral key personnel affiliated with entities that we acquire in thefuture, could have a material adverse effect on our business. Furthermore, we may not be able to enforce all of the provisions in the agreementswe have entered into with our executive officers and such employment agreements may not otherwise be effective in retaining such individuals.During the years ended December 31, 2018 and 2017 we incurred impairment charges, and we may incur additional impairment chargesin the future.For goodwill and intangible assets with indefinite lives, an assessment for impairment is performed annually or when there is an indication animpairment may have occurred. Goodwill is reviewed for impairment by comparing the carrying value of each reporting unit’s net assets, includingallocated goodwill, to the estimated fair value of the reporting unit. We determine the fair value of each of our seven reporting units using adiscounted cash flow approach. Determining the fair value of a reporting unit requires the use of estimates and assumptions. If the reporting unit’scarrying value is greater than its calculated fair value, we recognize a goodwill impairment charge for the amount by which the carrying value ofgoodwill exceeds its fair value.For the years ended December 31, 2018 and 2017, we recognized goodwill impairment charges totaling $298.8 million and $68.0 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statement of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges. There was no impairment of goodwill during the year endedDecember 31, 2016.There are significant inherent uncertainties and management judgment in estimating the fair value of each reporting unit. While we believe we havemade reasonable estimates and assumptions to estimate the fair value of our reporting units, it is possible that a material change could occur. Ifactual results are not consistent with our current estimates and assumptions, or if changes in macroeconomic conditions outside the control ofmanagement change such that it results in a significant negative impact to our estimated fair values, the fair value of these reporting units maydecrease below their net carrying value, which could result in a material impairment of our goodwill.We evaluate our long-lived assets, including property and equipment and intangible assets with definite lives, for potential impairment wheneverevents or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. In performing our review forimpairment, future cash flows expected to result from the use of the asset and its eventual value upon disposal are estimated. If the undiscountedfuture cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired. The amount of theimpairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value is determined eitherthrough the use of an external valuation, or by means of an analysis of discounted future cash flows based on expected utilization.For the years ended December 31, 2018 and 2017, we recognized intangible asset impairment charges totaling $64.7 million and $1.1 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statement of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges. There were no impairments of intangible assets during the yearended December 31, 2016.If we determine that the carrying value of our long-lived assets, goodwill or intangible assets is less than their fair value, we may be required torecord additional charges in the future, which could adversely affect our financial condition and results of operations.The indenture governing our notes and our Credit Facility contains operating and financial restrictions that may restrict our businessand financing activities.Our indenture and Credit Facility contain, and any future indebtedness we incur may contain, a number of restrictive covenants that will imposesignificant operating and financial restrictions on us, including restrictions on our ability to, among other things:•pay dividends on, purchase or redeem our common stock;18Table of Contents•make certain investments;•incur or guarantee additional indebtedness or issue certain types of equity securities;•create certain liens;•sell assets, including equity interests in our restricted subsidiaries;•redeem or prepay subordinated debt;•restrict dividends or other payments of our restricted subsidiaries;•consolidate, merge or transfer all or substantially all of our assets; •engage in transactions with affiliates;•create unrestricted subsidiaries; or•execute our acquisition strategy.Our Credit Facility also contains covenants, which, among other things, require us in certain circumstances, on a consolidated basis, to maintainspecified financial ratios or conditions. As a result of these covenants, we may be limited in the manner in which we conduct our business, and wemay be unable to engage in favorable business activities or finance future operations or capital needs. Our ability to borrow under the CreditFacility and comply with some of the covenants, ratios or tests contained in our indenture and Credit Facility may be affected by events beyondour control. If market or other economic conditions deteriorate, and there is a decrease in our accounts receivable and inventory, our ability toborrow under our Credit Facility will be reduced and our ability to comply with these covenants, ratios or tests may be impaired. A failure to complywith the covenants, ratios or tests or any future indebtedness could result in an event of default, which, if not cured or waived, could have amaterial adverse effect on our business, financial condition and results of operations.A downgrade in our credit ratings could negatively impact our cost of and ability to access capital.Our ability to access capital markets or to otherwise obtain sufficient financing is enhanced by our senior unsecured debt ratings as provided bymajor U.S. credit rating agencies. Factors that may impact our credit ratings include debt levels, liquidity, asset quality, cost structure, commoditypricing levels and other considerations. A ratings downgrade could adversely impact our ability in the future to access debt markets, increase thecost of future debt, and potentially require us to post letters of credit for certain obligations.Our exposure to currency exchange rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect on ourresults of operations.Fluctuations in currency exchange rates could be material to us depending upon, among other things, our manufacturing locations and the sourcingfor our raw materials and components. In particular, we are sensitive to fluctuations in currency exchange rates between the U.S. dollar and eachof the Canadian dollar, the British pound sterling, the Euro, and, to a lesser degree, the Mexican peso, the Chinese yuan, the Singapore dollar, andthe Saudi riyal. There may be instances in which costs and revenue will not be matched with respect to currency denomination. As a result, to theextent that we continue our expansion on a global basis, management expects that increasing portions of revenue, costs, assets and liabilities willbe subject to fluctuations in foreign currency valuations. We may experience economic loss and a negative impact on earnings or net assetssolely as a result of foreign currency exchange rate fluctuations. Further, the markets in which we operate could restrict the removal or conversionof the local currency, resulting in our inability to hedge against these risks.Our ability to access capital markets could be limited.From time to time, we may need to access capital markets to obtain financing. Our ability to access capital markets for financing could be limitedby, among other things, oil and natural gas prices, our existing capital structure, our credit ratings, the state of the economy, the health of thedrilling and overall oil and natural gas industry, and the liquidity of the capital markets. Many of the factors that affect our ability to access capitalmarkets are outside of our control. No assurance can be given that we will be able to access capital markets on terms acceptable to us whenrequired to do so, which could have a material adverse impact on our business, financial condition and results of operations.During periods of high market activity, if we cannot continue operating our manufacturing facilities at adequate levels, our results ofoperations could be adversely affected.We operate a number of manufacturing facilities. The equipment and management systems necessary for such operations may break down,perform poorly or fail, resulting in fluctuations in manufacturing efficiencies. Such fluctuations may affect our ability to deliver quality products toour customers on a timely basis.19Table of ContentsIf we are unable to continue operating successfully overseas or to successfully expand into new international markets, our revenues maydecrease.For the year ended December 31, 2018, we derived approximately 24% of our revenue from sales outside the U.S. (based on product destination).In addition, one of our key growth strategies is to market products in international markets. We may not succeed in selling, marketing, branding,and distributing products to generate revenues in these new international markets.If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or preventfraud.Effective internal control over financial processes and reporting are necessary for us to provide reliable financial reports that effectively preventfraud and operate successfully. Our efforts to maintain internal control systems may not be successful. The existence of a material weakness or afailure of our internal controls could affect our ability to obtain financing or increase the cost of any such financing. The identification of a materialweakness could also cause investors to lose confidence in the reliability of our financial statements and could result in a decrease in the value ofour common stock. In addition, the entities that we acquire in the future may not maintain effective systems of internal control or we mayencounter difficulties integrating our system of internal controls with those of acquired entities. If we are unable to maintain effective internalcontrols and, as a result, fail to provide reliable financial reports and effectively prevent fraud, our reputation and operating results would beharmed.Our operations and our customers’ operations are subject to a variety of governmental laws and regulations that may increase our andour customers’ costs, prohibit or curtail our customers’ operations in certain areas, limit the demand for our products and services orrestrict our operations.Our business and our customers’ businesses may be significantly affected by:•federal, state and local U.S. and non-U.S. laws and other regulations relating to oilfield operations, worker safety and protection of theenvironment;•changes in these laws and regulations; and•the level of enforcement of these laws and regulations.In addition, we depend on the demand for our products and services from the oil and natural gas industry. This demand is affected by changingtaxes, price controls and other laws and regulations relating to the oil and natural gas industry in general. For example, the adoption of laws andregulations curtailing exploration and development drilling for oil and natural gas for economic or other policy reasons could adversely affect ouroperations by limiting demand for our products. In addition, some non-U.S. countries may adopt regulations or practices that provide an advantageto local oil companies in bidding for oil leases, or require local companies to perform oilfield services currently supplied by international servicecompanies. To the extent that such companies are not our customers, or we are unable to develop relationships with them, our business maysuffer. We cannot determine the extent to which our future operations and earnings may be affected by new legislation, new regulations or changesin existing regulations.Because of our non-U.S. operations and sales, we are also subject to changes in non-U.S. laws and regulations that may encourage or requirehiring of local contractors or require non-U.S. contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. If we fail tocomply with any applicable law or regulation, our business, results of operations or financial condition may be adversely affected.Potential legislation or regulations restricting the use of hydraulic fracturing could reduce demand for our products.Hydraulic fracturing is an important and common practice in the oil and natural gas industry which involves the injection of water, sand andchemicals under pressure into a formation to fracture the surrounding rock and stimulate production of hydrocarbons. Certain environmentaladvocacy groups have suggested that additional federal, state and local laws and regulations may be needed to more closely regulate thehydraulic fracturing process, and have made claims that hydraulic fracturing techniques are harmful to surface water and drinking water resources.Various governmental entities (within and outside the U.S.) are in the process of studying, restricting, regulating or preparing to regulate hydraulicfracturing, directly or indirectlyFor example, the EPA released the final results of its comprehensive research study on the potential adverse impacts that hydraulic fracturingmay have on drinking water resources in December 2016. The EPA concluded that hydraulic fracturing activities can impact drinking waterresources under some circumstances, including large volume spills and inadequate mechanical integrity of wells. In May 2016, the EPA issuedfinal new source performance standard requirements that impose more stringent controls on methane and volatile organic compounds emissionsfrom oil and20Table of Contentsnatural gas development and production operations, including hydraulic fracturing and other well completion activity. The EPA finalizedamendments to some requirements in these standards in March 2018 and proposed additional amendments in October, including rescission ofcertain requirements and revisions to other requirements such as fugitive emissions monitoring frequency. The EPA has also issued the federalSafe Drinking Water Act (“SDWA”) permitting guidance for hydraulic fracturing operations involving the use of diesel fuel in fracturing fluids in thosestates where the EPA is the permitting authority. Additionally, the BLM issued final rules to regulate hydraulic fracturing on federal lands in March2015. These rules were struck down by a federal court in Wyoming in June 2016, but reinstated on appeal by the Tenth Circuit in September 2017.While this appeal was pending, BLM proposed a rulemaking in July 2017 to rescind these rules in their entirety. BLM published a final rulerescinding the 2015 rules on December 29, 2017. Several states filed judicial challenges to the BLM’s proposed rescission; however, thesechallenges were stayed by a federal court in April 2018 pending the finalization or withdrawal of the BLM’s February 2018 proposal. In September2018, BLM published a final rule that largely adopted the February 2018 proposal and rescinded several requirements. The September 2018 rulewas challenged in the U.S. District Court for the Northern District of California almost immediately after issuance. The challenge is still pending.In past sessions, Congress has considered, but not passed, the adoption of legislation to provide for federal regulation of hydraulic fracturing underthe SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. Some states have adopted, and other states areconsidering adopting, legal requirements that could impose more stringent permitting, public disclosure or well construction requirements onhydraulic fracturing activities. Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place andmanner of drilling activities in general or hydraulic fracturing activities in particular, in some cases banning hydraulic fracturing entirely. Forexample, in February 2018, the Oklahoma Corporation Commission released a protocol that requires operators to suspend hydraulic fracturing wellcompletion operations in response to certain levels of seismic activity.If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where our oil andnatural gas exploration and production customers operate, they could incur potentially significant added costs to comply with such requirements,experience delays or curtailment in the pursuit of exploration, development, and production activities, and perhaps even be precluded from drillingwells, some or all of which could adversely affect demand for our products and services from those customers.Our tax position may be adversely affected by changes in tax laws relating to multinational corporations, or increased scrutiny by taxauthorities.We have operations in multiple countries which are subject to the jurisdiction of a significant number of taxing authorities. The final determinationof our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as thesignificant use of estimates and assumptions. The U.S. Congress and government agencies in non-U.S. jurisdictions where we, and our affiliates,do business have recently focused on issues related to the taxation of multinational corporations.Additionally, we are impacted by U.S. legislation enacted in December 2017, known as the Tax Cuts and Jobs Act of 2017 (“the Act”). The Actmade substantial changes in the taxation of U.S. and multinational corporations, which included, among other things, reducing the U.S. corporateincome tax rate to 21% starting in 2018 and creating a quasi-territorial tax system with a one-time mandatory tax on previously deferred earningsof non-U.S. subsidiaries. As a result of the enactment of the Act, we recognized a $10.1 million tax expense in the fourth quarter of 2017 and a$15.6 million tax benefit in 2018. We cannot predict whether any additional legislation or any regulatory or other administrative guidance couldmaterially adversely affect us.Our operations are subject to environmental and operational safety laws and regulations that may expose us to significant costs andliabilities.Our operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment,health and safety aspects of our operations, or otherwise relating to human health and environmental protection. These laws and regulations may,among other things, regulate the management and disposal of hazardous and nonhazardous wastes; require acquisition of environmental permitsrelated to our operations; restrict the types, quantities, and concentrations of various materials that can be released into the environment; limit orprohibit operational activities in certain ecologically sensitive and other protected areas; regulate specific health and safety criteria addressingworker protection; require compliance with operational and equipment standards; impose testing, reporting and recordkeeping requirements; andrequire remedial measures to mitigate pollution from former and ongoing operations. Failure to comply with these laws and regulations or to obtainor comply with permits may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective actionrequirements and the imposition of injunctions to prohibit certain activities or force future compliance. Certain environmental laws may impose jointand several liability, without regard to fault or legality of conduct, on classes of persons who are considered21Table of Contentsto be responsible for the release of a hazardous substance into the environment. In addition, these risks may be greater for us because thecompanies we acquire or have acquired may not have allocated sufficient resources and management focus to environmental compliance,potentially requiring rehabilitative efforts during the integration process or exposing us to liability before such rehabilitation occurs.The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact theenvironment. The implementation of new laws and regulations could result in materially increased costs, stricter standards and enforcement, largerfines and liability and increased capital expenditures and operating costs, particularly for our customers.We may incur liabilities, fines, penalties or additional costs, or we may be unable to sell to certain customers if we do not maintain safeoperations.If we fail to comply with safety regulations or maintain an acceptable level of safety at our facilities, we may incur fines, penalties or otherliabilities, or we may be held criminally liable. In addition, a substantial portion of our work force is made up of newer employees who are lessexperienced and therefore more prone to injury. As a result, new employees require ongoing training and a higher degree of oversight. We mayincur additional costs to encourage training and ensure proper oversight of these shorter service employees. Moreover, we may incur costs inconnection with equipment upgrades, or other costs to facilitate our compliance with safety regulations. Failure to maintain safe operations orachieve certain safety performance metrics could disqualify us from doing business with certain customers, particularly major oil companies.Our non-U.S. operations will subject us to special risks.We are subject to various risks inherent in conducting business operations in locations outside of the U.S. These risks may include changes inregional, political or economic conditions, local laws and policies, including taxes, trade protection measures, and unexpected changes inregulatory requirements governing the operations of companies that operate outside of the U.S. In addition, if a dispute arises from internationaloperations, courts outside of the U.S. may have exclusive jurisdiction over the dispute, or we may not be able to subject persons outside of theU.S. to the jurisdiction of U.S. courts.Our business operations worldwide are subject to a number of U.S. federal laws and regulations, including restrictions imposed by theU.S. Foreign Corrupt Practices Act (“FCPA”) as well as trade sanctions administered by the Office of Foreign Assets Control and theCommerce Department, as well as similar laws in non-U.S. jurisdictions that govern our operations by virtue of our presence or activitiesthere.We rely on a large number of agents in non-U.S. countries that have been identified as posing a high risk of corrupt activities and whose local lawsand customs differ significantly from those in the U.S. In many countries, particularly in those with developing economies, it is common to engagein business practices that are prohibited by the regulations applicable to us. The U.S. Foreign Corrupt Practices Act and similar anti-corruptionlaws in other jurisdictions, including the UK Bribery Act 2010, (“anti-corruption laws”) prohibit corporations and individuals from engaging in certainactivities to obtain or retain business or to influence a person working in an official capacity. We may be held responsible for violations by ouremployees, contractors and agents for violations of anti-corruption laws. We may also be held responsible for violations by an acquired companythat occurs prior to an acquisition, or subsequent to an acquisition but before we are able to institute our compliance procedures. In addition, ournon-U.S. competitors that are not subject to the FCPA or similar anti-corruption laws may be able to secure business or other preferentialtreatment in such countries by means that such laws prohibit with respect to us. The UK Bribery Act 2010 is broader in scope than the FCPA andapplies to public and private sector corruption and contains no facilitating payments exception. A violation of any of these laws, even if prohibitedby our policies, could have a material adverse effect on our business. Actual or alleged violations could damage our reputation, be expensive todefend, impair our ability to do business, and cause us to incur civil and criminal fines, penalties and sanctions.Compliance with regulations relating to export controls, trade sanctions and embargoes administered by the countries in which we operate,including the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and similar regulations in non-U.S. jurisdictions alsopose a risk to us. We cannot provide products or services to certain countries, companies or individuals subject to trade sanctions of the U.S. andother countries. Furthermore, the laws and regulations concerning import activity, export recordkeeping and reporting, export controls andeconomic sanctions are complex and constantly changing. Any failure to comply with applicable legal and regulatory trading obligations couldresult in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipmentsand loss of import and export privileges.22Table of ContentsUnionization efforts and labor regulations in certain areas in which we operate could materially increase our costs or limit our flexibility.We are not a party to any collective bargaining agreements, other than in our Hamburg, Germany and Monterrey, Mexico facilities. We operate incertain states within the U.S. and in international areas that have a history of unionization and we may become the subject of a unionizationcampaign. If some or all of our workforce were to become unionized and collective bargaining agreement terms, including any renegotiation of ourHamburg, Germany and Monterrey, Mexico collective bargaining agreements, were significantly different from our current compensationarrangements or work practices, our costs could be increased, our flexibility in terms of work schedules and reductions in force could be limited,and we could be subject to strikes or work slowdowns, among other things.We are subject to litigation risks that may not be covered by insurance.In the ordinary course of business, we become the subject of claims, lawsuits and administrative proceedings seeking damages or other remediesconcerning our commercial operations, products, employees and other matters, including occasional claims by individuals alleging exposure tohazardous materials as a result of our products or operations. Some of these claims relate to the activities of businesses that we have acquired,even though these activities may have occurred prior to our acquisition of such businesses. Our insurance does not cover all of our potentiallosses, and we are subject to various self-insured retentions and deductibles under our insurance. A judgment may be rendered against us incases in which we could be uninsured or which exceed the amounts that we currently have reserved or anticipate incurring for such matters.The number and cost of our current and future asbestos claims could be substantially higher than we have estimated and the timing ofpayment of claims could be sooner than we have estimated.One of our subsidiaries has been and continues to be named as a defendant in asbestos related product liability actions. The actual amountsexpended on asbestos-related claims in any year may be impacted by the number of claims filed, the nature of the allegations asserted in theclaims, the jurisdictions in which claims are filed, and the number of settlements. As of December 31, 2018, our subsidiary has a net liability of$0.3 million for the estimated indemnity cost associated with the resolution of its current open claims and future claims anticipated to be filedduring the next five years.Due to a number of uncertainties, the actual costs of resolving these pending claims could be substantially higher than the current estimate.Among these are uncertainties as to the ultimate number and type of lawsuits filed, the amounts of claim costs, the impact of bankruptcies ofother companies with asbestos suits or of our insurers, and potential legislative changes and uncertainties surrounding the litigation process fromjurisdiction to jurisdiction and from case to case. In addition, future claims beyond the five-year forecast period are possible, but the accrual doesnot cover losses that may arise from such additional future claims. Therefore, any such future claims could result in a loss.Significant costs are incurred in defending asbestos claims and these costs are recorded at the time incurred. Receipt of reimbursement from ourinsurers may be delayed for a variety of reasons. In particular, if our primary insurers claim that certain policy limits have been exhausted, we maybe delayed in receiving reimbursement due to the transition from one set of insurers to another. Our excess insurers may also dispute the claimsof exhaustion, or may rely on certain policy requirements to delay or deny claims. Furthermore, the various per occurrence and aggregate limits indifferent insurance policies may result in extended negotiations or the denial of reimbursement for particular claims. For more information on thecost sharing agreements related to this risk, refer to Note 11 Commitments and Contingencies.Compliance with government regulations regarding the use of “conflict minerals” may result in increased costs and risks to us.As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the SEC has promulgated disclosurerequirements regarding the use of certain minerals, which are mined from the Democratic Republic of Congo and adjoining countries, known asconflict minerals. We are required to publicly disclose our process for determining whether the products we sell contain conflict minerals and couldincur significant costs to meet the mandates of Dodd-Frank. Additionally, customers may rely on us to provide critical data regarding the partsthey purchase and will likely request conflict mineral information. We have many suppliers and each will provide conflict mineral information in adifferent manner, if at all. Accordingly, because the supply chain is complex, we may face reputational challenges if we are unable to sufficientlyverify the origins of certain minerals used in our products. Additionally, customers may demand that the products they purchase be free of conflictminerals. The implementation of this requirement could affect the sourcing and availability of products we purchase from our suppliers. This mayreduce the number of suppliers that are able to provide conflict free products, and may affect our ability to obtain products in sufficient quantitiesto meet customer demand or at competitive prices. In addition, there may be material23Table of Contentscosts associated with complying with the disclosure requirements, such as costs related to determining the source of any relevant minerals usedin our products, as well as costs arising from any changes as a consequence of such verification activities.We may incur liabilities to customers as a result of warranty claims that could adversely affect our reputation, ability to obtain futurebusiness and earnings.We provide warranties as to the proper operation and conformance to specifications of the products we manufacture or install. Failure of ourproducts to operate properly or to meet specifications may increase costs by requiring additional engineering resources and services, replacementof parts and equipment or monetary reimbursement to a customer. We have in the past received warranty claims, and we expect to continue toreceive them in the future. To the extent that we incur substantial warranty claims in any period, our reputation, ability to obtain future businessand earnings could be adversely affected.Our products are used in operations that are subject to potential hazards inherent in the oil and natural gas industry and, as a result, weare exposed to potential liabilities that may affect our financial condition and reputation.Our products are used in potentially hazardous completion, production and drilling applications in the oil and natural gas industry where an accidentor a failure of a product can potentially have catastrophic consequences. Risks inherent to these applications, such as equipment malfunctions;failures; explosions; blowouts or uncontrollable flows of oil, natural gas or well fluids; and natural disasters on land or in deepwater or shallow-waterenvironments, can cause personal injury; loss of life; suspension of operations; damage to formations; damage to facilities; business interruptionand damage to or destruction of property, surface water and drinking water resources, equipment and the environment. These risks can be causedor contributed to by failure of, defects in or misuse of our products. In addition, we provide certain services that could cause, contribute to or beimplicated in these events. If our products or services fail to meet specifications or are involved in accidents or failures, we could face warranty,contract or other litigation claims, which could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil andnatural gas production, and pollution or other environmental damages. Our insurance policies may not be adequate to cover all liabilities. Further,insurance may not be generally available in the future or, if available, insurance premiums may make such insurance commercially unjustifiable.Moreover, even if we are successful in defending a claim, it could be time-consuming and costly to defend.In addition, the frequency and severity of such incidents could affect operating costs, insurability and relationships with customers, employees andregulators. In particular, our customers may elect not to purchase our products or services if they view our safety record as unacceptable, whichcould cause us to lose customers and revenues. In addition, these risks may be greater for us because we may acquire companies that have notallocated significant resources and management focus to quality or safety, requiring rehabilitative efforts during the integration process. We mayincur liabilities for losses associated with these newly acquired companies before we are able to rehabilitate such companies’ quality, safety andenvironmental programs.We may not be able to satisfy technical requirements, testing requirements, code requirements or other specifications under contractsand contract tenders.Many of our products are used in harsh environments and severe service applications. Our contracts with customers and customer requests forbids often set forth detailed specifications or technical requirements (including that they meet certain industrial code requirements, such as API,ASME or similar codes, or that our processes and facilities maintain ISO or similar certifications) for our products and services, which may alsoinclude extensive testing requirements. We anticipate that such code testing requirements will become more common in our contracts. We cannotassure you that our products or facilities will be able to satisfy the specifications or requirements, or that we will be able to perform the full-scaletesting necessary to prove that the product specifications are satisfied in future contract bids or under existing contracts, or that the costs ofmodifications to our products or facilities to satisfy the specifications and testing will not adversely affect our results of operations. If our productsor facilities are unable to satisfy such requirements, or we are unable to perform or satisfy any required full-scale testing, we may sufferreputational harm and our customers may cancel their contracts and/or seek new suppliers, and our business, results of operations or financialposition may be adversely affected.We may be unable to employ a sufficient number of skilled and qualified workers.The delivery of our products and services requires personnel with specialized skills and experience. Our ability to be productive and profitabledepends upon our ability to employ and retain skilled workers. During periods of low activity in our industry, we have reduced the size of our laborforce to match declining revenue levels, and other employees may choose to leave in order to find more stable employment. This may cause us tolose skilled personnel, the absence24Table of Contentsof which could cause us to incur quality, efficiency and deliverability issues in our operations, or delay our response to an upturn in the market.During periods of increasing activity in our industry, our ability to expand our operations depends in part on our ability to increase the size of ourskilled labor force. In addition, during those periods, the demand for skilled workers is high, the supply is limited and the cost to attract and retainqualified personnel increases, especially for skilled workers. For example, we have in the past experienced shortages of engineers, mechanicalassemblers, machinists and welders, which in some instances slowed the productivity of certain of our operations. Furthermore, a significantincrease in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we mustpay, or both. If any of these events were to occur, our ability to respond quickly to customer demands may be inhibited and our growth potentialcould be impaired.Our inability to control the inherent risks of acquiring and integrating businesses could disrupt our business operations and adverselyaffect our operating results going forward.We continuously evaluate acquisitions and may elect to acquire businesses or assets in the future. For example, in 2018, we acquired certainassets of ESP Completion Technologies LLC ("ESPCT"), and 100% of the stock of Houston Global Heat Transfer LLC (“GHT”). These activitiesmay distract management from day-to-day tasks. Acquisitions involve numerous risks, including:•unanticipated costs and exposure to unforeseen liabilities;•difficulty in integrating the operations and assets of the acquired businesses;•potential inability to retain key employees and customers of the acquired company;•potential inability to properly establish and maintain effective internal controls over an acquired company;•risk of entering markets in which we have limited prior experience; and•failure to realize the full range of synergies that were expected when assessing the value to be paid for the acquisition.Achieving the anticipated or desired benefits of our past or future acquisitions will depend, in part, upon whether the integration of the variousbusinesses, products, services, technology and employees is accomplished in an efficient and effective manner. There can be no assurance thatwe will obtain these anticipated or desired benefits of our past or future acquisitions, and if we fail to manage these risks successfully, our resultsof operations could be adversely affected.Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing operations successfully or tominimize any unforeseen operational difficulties could have a material adverse effect on our business. In addition, we may incur liabilities arisingfrom events prior to the acquisition or prior to our establishment of adequate anti-corruption, trade or other compliance oversight. While wegenerally seek to obtain indemnities or insurance for liabilities for events occurring before such acquisitions, these are limited in amount andduration, may be held to be unenforceable, the seller may not be able to indemnify us or the insurer may deny payment. We may also incurindebtedness or issue additional equity securities to finance future acquisitions. Debt service requirements could represent a burden on our resultsof operations and financial condition, and the issuance of additional equity securities could be dilutive to our existing stockholders.Our financial results could be adversely impacted by changes in regulation of oil and natural gas exploration and development activityin response to significant environmental incidents.The U.S. Department of the Interior implemented additional safety and certification requirements applicable to drilling activities in the U.S. Gulf ofMexico, imposed additional requirements with respect to exploration, development and production activities in U.S. waters and imposed amoratorium that delayed the approval of drilling plans and well permits in both deepwater and shallow-water areas due to the Macondo wellincident. Although neither we nor our products were involved in the incident, the delays caused by the new regulations and requirements had anoverall negative effect on drilling activity in U.S. waters, and to a certain extent, our financial results. Another similar environmental incident couldresult in similar drilling moratoria, and could result in increased federal, state, and international regulation of our and our customers’ operations thatcould negatively impact our earnings, prospects and the availability and cost of insurance coverage. Any additional regulation of the explorationand production industry as a whole could result in fewer companies being financially qualified to operate offshore or onshore in the U.S. or in non-U.S. jurisdictions, resulting in higher operating costs for our customers and reduced demand for our products and services.25Table of ContentsClimate change legislation or regulations restricting emissions of greenhouse gases could increase our operating costs or reducedemand for our products.Environmental advocacy groups and regulatory agencies in the U.S. and other countries have focused considerable attention on the emissions ofcarbon dioxide, methane and other greenhouse gases and their potential role in climate change. In response to scientific studies suggesting thatemissions of GHGs, including carbon dioxide and methane, are contributing to the warming of the Earth’s atmosphere and other climaticconditions, the U.S. Congress has considered adopting comprehensive legislation to reduce emissions of GHGs, and almost half of the stateshave already taken legal measures to reduce emissions of GHGs, primarily through measures to promote the use of renewable energy and/orregional GHG cap-and-trade programs. The Environmental Protection Agency (the “EPA”) has already begun to regulate greenhouse gas emissionsunder the federal Clean Air Act. In December 2009, the EPA determined that emissions of carbon dioxide, methane and certain other GHGsendanger public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the Earth’satmosphere and other climatic changes. Accordingly, the EPA has begun adopting rules under the Clean Air Act that, among other things, coverreductions in GHG emissions from motor vehicles, permits for certain large stationary sources of GHGs, and monitoring and annual reporting ofGHG emissions from specified GHG emission sources, including oil and natural gas exploration and production operations. Additionally, in May2016, the EPA issued final new source performance standards governing methane emissions that impose more stringent controls on methane andvolatile organic compounds emissions at new and modified oil and natural gas production, processing, storage and transmission facilities. TheEPA announced its intention to reconsider those standards in April 2017 and has sought to stay those requirements. However, the EPA’s stay ofthese requirements was vacated by the D.C. Circuit in July 2017. Accordingly, they remain in effect. More recently, the EPA finalizedamendments to some requirements in these standards in March 2018 and proposed additional amendments to these standards in October 2018,including rescission of certain requirements and revisions to other requirements such as fugitive emissions monitoring frequency. The EPA alsoannounced that it intends to impose methane emission standards for existing sources and issued information collection requests to companieswith production, gathering and boosting, natural gas processing, storage and transmission facilities in December 2016. The EPA withdrew thoseinformation collection requests in March 2017. The EPA has also adopted rules requiring the reporting of greenhouse gas emissions from specifiedlarge greenhouse gas emission sources in the U.S., including oil and natural gas systems. Similarly, the Department of the Interior’s Bureau ofLand Management (“BLM”) issued final rules in November 2016 relating to the venting, flaring and leaking of natural gas by oil and natural gasproducers who operate on federal and Indian lands. Certain provisions of the BLM rule went into effect in January 2017, while others werescheduled to go into effect in January 2018. In December 2017, BLM published a final rule delaying the 2018 provisions until 2019. BLM proposeda rule in February 2018 that would revise the 2016 rule and rescind some of its requirements. Several states filed judicial challenges to the BLM’sproposed rescission. In April 2018, a federal court stayed the litigation pending finalization or withdrawal of the BLM’s February 2018 proposal. InSeptember 2018, the BLM published a final rule that largely adopted the February 2018 proposal and rescinded several requirements. TheSeptember 2018 rule was challenged in the U.S. District Court for the Northern District of California almost immediately after issuance. Thechallenge is still pending.Finally, efforts have also been made and continue to be made in the international community toward the adoption of international treaties orprotocols that would address global climate change issues. In 2015, the U.S. participated in the United Nations Conference on Climate Change,which led to the creation of the Paris Agreement, which requires member countries to review and “represent a progression” in their nationallydetermined contributions, which set GHG emission reduction goals every five years. In June 2017, President Trump announced that the U.S. willwithdraw from the Paris Agreement unless it is renegotiated. The State Department informed the United Nations of the U.S.’s withdrawal in August2017; however, under the terms of the Paris Agreement the U.S. will not be able to withdraw until 2020.The adoption of additional legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increasedoperating costs to comply with new emissions-reduction or reporting requirements. Any such legislation or regulatory programs could also increasethe cost of consuming, and thereby reduce demand for, hydrocarbons that certain of our customers produce and reduce revenues by other of ourcustomers who provide services to those exploration and production customers. Consequently, legislation and regulatory programs to reduceemissions of greenhouse gases could have an adverse effect on our business, financial condition and results of operations. Finally, somescientists have concluded that increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that havesignificant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.26Table of ContentsAdverse weather conditions adversely affect demand for services and operations.Adverse weather conditions, such as hurricanes, tornadoes, ice or snow may damage or destroy our facilities, interrupt or curtail our operations, orour customers’ operations, cause supply disruptions and result in a loss of revenue, which may or may not be insured. For example, certain of ourfacilities located in Oklahoma and Pennsylvania have experienced suspensions in operations due to tornado activity or extreme cold weatherconditions.A natural disaster, catastrophe or other event could result in severe property damage, which could curtail our operations.Some of our operations involve risks of, among other things, property damage, which could curtail our operations. Disruptions in operations ordamage to a manufacturing plant could reduce our ability to produce products and satisfy customer demand. In particular, we have offices andmanufacturing facilities in Houston, Texas, and in various places throughout the U.S. Gulf Coast region. These offices and facilities are particularlysusceptible to severe tropical storms and hurricanes, which may disrupt our operations. Damage to one or more of our manufacturing facilities bysevere weather or any other disaster, accident, catastrophe or event, could significantly interrupt our operations. Similar interruptions could resultfrom damage to production or other facilities that provide supplies or other raw materials to our plants or other stoppages arising from factorsbeyond our control. These interruptions might involve significant damage to property, among other things, and repairs might take a significantamount of time. For example, in the third quarter 2017, we were impacted by idled facilities and operations directly related to Hurricane Harvey’swidespread damage in Texas and Louisiana. As a result, our financial results were negatively impacted by foregone revenue and under-absorptionof manufacturing costs, and, indirectly, due to supplier and logistical delays.Provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our company, whichcould adversely affect the price of our common stock.The existence of some provisions in our organizational documents and under Delaware law could delay or prevent a change in control of ourcompany that a stockholder may consider favorable, which could adversely affect the price of our common stock. Certain provisions of ouramended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire controlof our company, even if the change of control would be beneficial to our stockholders. These provisions include:•a classified board of directors, so that only approximately one-third of our directors are elected each year;•authority of our board to fill vacancies and determine its size;•the ability of our board of directors to issue preferred stock without stockholder approval;•limitations on the removal of directors; and•limitations on the ability of our stockholders to call special meetings.In addition, our amended and restated bylaws establish advance notice provisions for stockholder proposals and nominations for elections to theboard of directors to be acted upon at meetings of stockholders. Furthermore, if SCF’s ownership is reduced to less than 15%, certain restrictionsunder Delaware law on business combinations with greater than 15% stockholders will begin to apply to us.L.E. Simmons & Associates, Incorporated (“LESA”), through SCF Partners (“SCF”), may significantly influence the outcome ofstockholder voting and may exercise this voting power in a manner adverse to our other stockholders.As of February 22, 2019, SCF held approximately 20.5 million shares of our common stock, equal to approximately 19% of the outstandingcommon stock at that date. LESA is the ultimate general partner of SCF and will exert significant influence over us, including over the outcome ofmost matters requiring a stockholder vote, such as the election of directors, adoption of amendments to our charter and bylaws and approval oftransactions involving a change of control. LESA’s interests may differ from our other stockholders, and SCF may vote its common stock in amanner that may adversely affect those stockholders.SCF is a party to a registration rights agreement with us, which requires us to effect the registration of its shares in certain circumstances. SCFexercised such rights in November 2013, May 2014, December 2016 and October 2017 with respect to 6.0 million, 11.5 million, 3.7 million and20.5 million shares, respectively. Sales of substantial amounts of our common stock by SCF, or the perception that such sales could occur, mayadversely affect prevailing market prices of our common stock.27Table of ContentsCertain of our directors may have conflicts of interest because they are also directors or officers of SCF. The resolution of these conflictsof interest may not be in the best interests of our Company or our other stockholders.Certain of our directors, namely David C. Baldwin and Andrew L. Waite, are currently officers of LESA. In addition, our CEO, directly and through atrust for his children who are primary beneficiaries, holds an ownership interest in various SCF funds. These positions may create conflicts ofinterest because of the ownership interest these directors and Mr. Gaut maintain. Duties as directors or officers of LESA may conflict with suchindividuals’ duties as one of our directors or officers regarding business dealings and other matters between SCF and us. The resolution of theseconflicts may not always be in the best interest of our Company or our other stockholders. Please read “We have renounced any interest inspecified business opportunities, and SCF and its director nominees on our board of directors generally have no obligation to offer us thoseopportunities.”We have renounced any interest in specified business opportunities, and SCF and its director nominees on our board of directorsgenerally have no obligation to offer us those opportunities.Our certificate of incorporation provides that, so long as we have a director or officer who is affiliated with SCF (an “SCF Nominee”) and for acontinuous period of one year thereafter, we renounce any interest or expectancy in any business opportunity in which any member of the SCFgroup participates or desires or seeks to participate in and that involves any aspect of the energy equipment or services business or industry,other than (i) any business opportunity that is brought to the attention of an SCF Nominee solely in such person’s capacity as a director or officerof our Company and with respect to which no other member of the SCF group independently receives notice or otherwise identifies suchopportunity and (ii) any business opportunity that is identified by the SCF group solely through the disclosure of information by or on behalf of ourCompany. We refer to SCF and its other affiliates and its portfolio companies as the SCF group. We are not prohibited from pursuing any businessopportunity with respect to which we have renounced any interest.SCF has investments in other oilfield service companies that may compete with us, and SCF and its affiliates, other than our Company, mayinvest in other such companies in the future. LESA, the ultimate general partner of SCF, has an internal policy that discourages it from investing intwo or more portfolio companies with substantially overlapping industry segments and geographic areas. However, LESA’s internal policy does notrestrict the management or operation of its other individual portfolio companies from competing with us. Pursuant to LESA’s policy, LESA mayallocate any potential opportunities to the existing portfolio company where LESA determines, in its discretion, such opportunities are the mostlogical strategic and operational fit. As a result, LESA or its affiliates may become aware, from time to time, of certain business opportunities,such as acquisition opportunities, and may direct such opportunities to its other portfolio companies, in which case we may not become aware ofor otherwise have the ability to pursue such opportunities. Furthermore, LESA does not have a specific policy with regard to allocation of financialprofessionals and they are under no obligation to provide us with financial professionals.Item 1B. Unresolved Staff CommentsNone.28Table of ContentsItem 2. PropertiesThe following table describes the significant facilities owned or leased by us as of December 31, 2018 for our Drilling and Subsea (“D&S”),Completions (“C”) and Production and Infrastructure (“P&I”) segments:Country Location Number offacilities Description Leased orOwned Segments Canada Alberta 2 Service Leased D&S and C Calgary 2 Service/Distribution Leased Shared with all Edmonton 2 Service/Distribution Leased D&S and CGermany Hamburg 1 Manufacturing Leased D&S and CMexico Monterrey 1 Manufacturing Leased D&S and CSaudi Arabia Dammam 1 Manufacturing Owned P&ISingapore Singapore 1 Manufacturing/Service/Distribution Leased D&S and CUAE Dubai 1 Service/Distribution Leased D&S and CUnited Kingdom Aberdeen 3 Distribution Leased D&S and C Kirkbymoorside 1 Manufacturing Owned D&S Findon 1 Manufacturing Leased D&S and CUnited States Broussard, LA 3 Manufacturing Owned Shared with all Brownsville, PA 1 Manufacturing Leased C Bryan, TX 1 Manufacturing Owned D&S Clearfield, PA 1 Manufacturing/Service/Distribution Owned P&I and C Davis, OK 1 Manufacturing Owned C Dayton, TX 1 Manufacturing Owned C Elmore City, OK 1 Manufacturing Owned P&I Fort Worth, TX 1 Manufacturing Leased C Guthrie, OK 1 Manufacturing Leased P&I Houston, TX 4 Corporate/Distribution/Manufacturing Leased Shared with all Humble, TX 2 Manufacturing Leased C Madison, KS 5 Manufacturing Leased P&I Midland, TX 2 Service/Distribution Leased D&S and C Missouri City, TX 1 Manufacturing Leased C Odessa, TX 1 Service/Distribution Leased C Odessa, TX 1 Distribution/Sales Owned D&S and C Pearland, TX 1 Manufacturing Owned C Pearland, TX 1 Distribution Leased P&I Plantersville, TX 1 Manufacturing Owned D&S and C San Antonio, TX 1 Service/Distribution Owned C Stafford, TX 3 Manufacturing/Distribution Leased P&I Stafford, TX 1 Manufacturing Owned C Tyler, TX 1 Distribution Leased D&S and C Williston, ND 3 Service/Distribution Leased D&S and C29Table of ContentsWe believe our facilities are suitable for their present and intended purposes, and are adequate for our current and anticipated level of operations.We incorporate by reference the information set forth in Item 1 and Item 7 of this Annual Report on Form 10-K and the information set forth in Note6 Property and Equipment and Note 11 Commitments and Contingencies.Item 3. Legal ProceedingsInformation related to Item 3. Legal Proceedings is included in Note 11 Commitments and Contingencies, which is incorporated herein byreference. In addition to these matters, we are involved in various other legal proceedings incidental to the conduct of our business. We do notbelieve that any of these legal proceedings will have a material adverse effect on our financial condition, results of operation or cash flows.Item 4. Mine Safety DisclosuresNot applicable.Executive officers of the registrantThe following table indicates the names, ages and positions of the executive officers of Forum as of February 22, 2019:NameAgePositionC. Christopher Gaut62President, Chief Executive Officer and Chairman of the BoardPablo G. Mercado42Senior Vice President, Chief Financial Officer and TreasurerJohn C. Ivascu41Senior Vice President,General Counsel and SecretaryMichael D. Danford56Senior Vice President - Human ResourcesD. Lyle Williams49Senior Vice President - OperationsC. Christopher Gaut. Mr. Gaut was appointed to serve as President and Chief Executive Officer in November 2018 and has served asChairman of the board of directors since December 2017. Prior to that, from May 2017 to December 2017, he served as Executive Chairman of theBoard, and as Chief Executive Officer from May 2016 to May 2017. From August 2010 to May 2016 he served as President, Chief ExecutiveOfficer and Chairman of the Board, and as one of our directors since December 2006. He served as a consultant to LESA, the ultimate generalpartner of SCF, our largest stockholder, from November 2009 to August 2010 and from April 2018 to November 2018. Mr. Gaut served atHalliburton Company, a leading diversified oilfield services company, as President of the Drilling and Evaluation Division and prior to that as ChiefFinancial Officer, from March 2003 through April 2009. From April 2009 through November 2009, Mr. Gaut was a private investor. Prior to joiningHalliburton Company in 2003, Mr. Gaut was a Co-Chief Operating Officer of Ensco International, a provider of offshore contract drilling services.He also served as Ensco’s Chief Financial Officer from 1988 until 2003. Mr. Gaut is currently a member of the board of directors of Ensco plc, thesuccessor to Ensco International and EOG Resources, an independent crude oil and natural gas company, and previously served as a director ofKey Energy Services Inc., a well services provider. Mr. Gaut holds an A.B. in Engineering Sciences from Dartmouth College and an M.B.A. fromThe Wharton School at University of Pennsylvania.Pablo G. Mercado. Mr. Mercado has served as Chief Financial Officer since March 2018. Prior to that, he served as Senior Vice President -Finance from June 2017 to March 2018; Vice President, Operations Finance from August 2015 to June 2017; Vice President, Corporate Strategyand Treasurer from January 2014 to August 2015; Vice President, Corporate Development & Strategy from February 2013 to January 2014; andVice President, Corporate Development from November 2011 to February 2013. From May 2005 to October 2011, Mr. Mercado was an investmentbanker in the Oil and Gas Group of Credit Suisse Securities (USA) LLC where he worked with oilfield services companies and other companies inthe oil and natural gas industry, most recently as a Director. From 1998 to 2001 and 2003 to May 2005, Mr. Mercado was an investment banker atother firms, primarily working with companies in the oil and natural gas industry. He is currently on the board of directors of Comfort Systems USA,Inc., a national heating, ventilation and cooling company. Mr. Mercado holds a B.B.A. from the Cox School of Business and a B.A. in Economicsfrom the Dedman College, both at Southern Methodist University, and an M.B.A. from The University of Chicago Booth School of Business.John C. Ivascu. Mr. Ivascu has served as Senior Vice President, General Counsel and Secretary since February 2019. Prior to that, he servedas Vice President, Deputy General Counsel and Secretary from February 2018 to February30Table of Contents2019; Vice President, Associate General Counsel and Assistant Secretary from August 2015 to February 2018; and Assistant General Counselfrom June 2011 to August 2015. From 2006 to June 2011, Mr. Ivascu practiced corporate law at Vinson & Elkins L.L.P., representing public andprivate companies and investment banking firms in capital markets offerings, mergers and acquisitions, corporate governance and bankruptcymatters. From 2004 to 2006, Mr. Ivascu served as an attorney for the U.S. Securities & Exchange Commission, Division of Enforcement. Mr.Ivascu holds a B.B.A. from the Stephen M. Ross School of Business at the University of Michigan, and a J.D. from Brooklyn Law School.Michael D. Danford. Mr. Danford has served as Senior Vice President - Human Resources since February 2015. Prior to that, Mr. Danfordserved as Vice President - Human Resources from November 2007 to February 2015. Prior to joining Forum and, from August 2007 throughNovember 2007, he worked at Trico Marine Services Inc., a privately held provider of subsea and marine support vessels and services to the oiland natural gas industry, as Vice President - Human Resources. From 1997 through July 2007, Mr. Danford served as Director of HumanResources and Vice President - Human Resources for Hydril Company, a publicly traded manufacturer of connections used for oil and natural gasdrilling and production. From 1991 to 1997, Mr. Danford served in various human resources roles for Baker Hughes Incorporated, a publicly tradedoilfield services company. Prior to joining Baker Hughes, from 1990 to 1991, Mr. Danford served as a recruiter and as an employee relationsrepresentative in the human resources department for Compaq Computer, a publicly traded developer and manufacturer of computer systems. Mr.Danford holds a B.S. degree in Computer Science from the University of Louisiana at Monroe (formerly Northeast Louisiana University).D. Lyle Williams, Jr. Mr. Williams has served as Senior Vice President - Operations since May 2018. Since January 2007, Mr. Williams hasheld various financial and operations roles, including Vice President - Corporate Development and Treasurer; Vice President - Operations Finance;Vice President - Finance and Accounting, Drilling and Subsea Segment; Senior Vice President - Downhole Technologies; Vice President - SubseaProducts; and Vice President - Capital Equipment. Prior to joining Forum, Mr. Williams held various operations positions with Cooper CameronCorporation, including Director of Operations - Engineering Products. He holds a B.A. in Economics and English from Rice University and anM.B.A. from Harvard University Graduate School of Business Administration.31Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock trades on the NYSE under the trading symbol “FET.” As of February 22, 2019, there were approximately 59 shareholders ofrecord of our common stock. In calculating the number of shareholders, we consider clearing agencies and security position listings as oneshareholder for each agency or listing.No dividends were declared or issued during 2018 or 2017, and we do not currently have any plans to pay cash dividends in the future. Our futuredividend policy is within the discretion of our board of directors and will depend upon various factors, including our results of operations, financialcondition, capital requirements,investment opportunities, and other loan agreements.Performance GraphThe following graph compares total shareholder return on our common stock with the Standard & Poor’s 500 Stock Index and the Philadelphia OilService Sector Index (“OSX”), an index of oil and natural gas related companies that represents an industry composite of our peers. This graphcovers the period from December 31, 2013 through December 31, 2018. This comparison assumes the investment of $100 on December 31, 2013and the reinvestment of all dividends. The shareholder return set forth is not necessarily indicative of future performance.The performance graph above is furnished and not filed for purposes of Section 18 of the Exchange Act and will not be incorporated by referenceinto any registration statement filed under the Securities Act of 1933 (the “Securities Act”) unless specifically identified therein as beingincorporated therein by reference. The performance graph is not soliciting material subject to Regulation 14A.32Table of ContentsPurchase of Equity SecuritiesFollowing is a summary of our repurchases of our common stock during the three months ended December 31, 2018.PeriodTotal number ofshares purchased Average price paidper share Total number of sharespurchased as part ofpublicly announced planor programs (a) Maximum value of shares thatmay yet be purchased under theplan or program (in thousands)(a)October 1, 2018 - October 31, 2018— $— — $49,752November 1, 2018 - November 30, 2018— $— — $49,752December 1, 2018 - December 31, 2018— $— — $49,752Total— $— — (a) In October 2014, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregatepurchase amount of up to $150.0 million. From the inception of this program through December 31, 2018, we have repurchased approximately 4.5million shares of our common stock for aggregate consideration of approximately $100.2 million. Remaining authorization under this programis $49.8 million.Acquisition of Innovative Valve ComponentsOn January 9, 2017, we acquired all of the issued and outstanding partnership interests of Innovative Valve Components. As partial considerationfor the acquisition we issued 196,249 shares of our common stock. Pursuant to the terms of the purchase agreement, we issued 8,400 shares ofour common stock on January 9, 2018 and 82,962 shares of our common stock on January 9, 2019 in connection with the first and secondanniversaries of the closing, respectively. The issuance of our common stock was exempt from registration under the Securities Act pursuant toRule 4(a)(2) thereof and the safe harbor provided by Rule 506 of Regulation D promulgated thereunder.Contingent shares issuanceOn July 3, 2017, the Company acquired Multilift Welltec, LLC and Multilift Wellbore Technology Limited. In connection with the transactions, theCompany entered into a contingent stock agreement with an employee. Pursuant to the contingent stock agreement, we issued 30,582 shares ofour common stock on February 1, 2019. The issuance of our common stock was exempt from registration under the Securities Act pursuant toRule 4(a)(2) thereof and the safe harbor provided by Rule 506 of Regulation D promulgated thereunder. 33Table of ContentsItem 6. Selected Financial DataThe following selected historical consolidated financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and our consolidated financial statements and related notes appearing in Item 8 “FinancialStatements and Supplementary Data” of this Annual Report on Form 10-K to fully understand the factors that may affect the comparability of theinformation presented below.The selected historical financial data as of December 31, 2018 and 2017, and for the years ended December 31, 2018, 2017 and 2016 are derivedfrom our audited consolidated financial statements and related notes thereto that are included herein. The selected historical data as of December31, 2016, 2015 and 2014 and for the years ended December 31, 2015 and 2014 have been derived from our audited consolidated financialstatements, which are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of our results to beexpected in any future period. Year ended December 31,(in thousands, except per share information)2018 2017 2016 2015 2014Income Statement Data: Revenues$1,064,219 $818,620 $587,635 $1,073,652 $1,739,717Total operating expenses1,461,357 961,215 718,411 1,202,199 1,496,843Earnings from equity investment140 1,000 1,824 14,824 25,164Operating income (loss)(396,998) (141,595) (128,952) (113,723) 268,038Total other expense (income)(7,244) (86,316) 9,047 20,600 25,516Income (loss) before income taxes(389,754) (55,279) (137,999) (134,323) 242,522Income tax expense (benefit)(15,674) 4,121 (56,051) (14,939) 68,145Net income (loss)(374,080) (59,400) (81,948) (119,384) 174,377Less: Income (loss) attributable to noncontrolling interest— — 30 (31) 12Net income (loss) attributable to common stockholders(374,080) (59,400) (81,978) (119,353) 174,365 Weighted average shares outstanding Basic108,771 98,689 91,226 89,908 92,628Diluted108,771 98,689 91,226 89,908 95,308Earnings (loss) per share Basic$(3.44) $(0.60) $(0.90) $(1.33) $1.88Diluted$(3.44) $(0.60) $(0.90) $(1.33) $1.83 As of December 31,(in thousands)2018 2017 2016 2015 2014Balance Sheet Data: Cash and cash equivalents$47,241 $115,216 $234,422 $109,249 $76,579Net property, plant and equipment177,358 197,281 152,212 186,667 189,974Total assets1,829,652 2,195,228 1,835,192 1,886,042 2,214,102Long-term debt517,544 506,750 396,747 396,016 420,484Total stockholders’ equity1,030,126 1,409,016 1,235,202 1,257,020 1,395,356 Year ended December 31,(in thousands)2018 2017 2016 2015 2014Other financial data: Net cash provided by (used in) operating activities$2,407 $(40,033) $64,742 $155,913 $269,966Capital expenditures for property and equipment(24,043) (26,709) (16,828) (32,291) (53,792)Proceeds from sale of property and equipment9,258 1,971 9,763 1,821 2,718Acquisition of businesses, net of cash acquired(60,622) (162,189) (4,072) (60,836) (38,289)Net cash used in investing activities(75,407) (187,968) (11,137) (91,306) (70,691)Net cash provided by (used in) financing activities6,522 100,563 86,195 (26,937) (162,018)34Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected historicalconsolidated financial data” included under Item 6 of this Annual Report on Form 10-K and our financial statements and related notes includedunder Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements based on our current expectations,estimates and projections about our operations and the industry in which we operate. Our actual results may differ materially from thoseanticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Risk Factors” and“Cautionary note regarding forward-looking statements” and elsewhere in this Annual Report on Form 10-K. We assume no obligation to update anyof these forward-looking statements.OverviewWe are a global oilfield products company, serving the drilling, subsea, completions, production and infrastructure sectors of the oil and natural gasindustry. We design, manufacture and distribute products and engage in aftermarket services, parts supply and related services that complementour product offering. Our product offering includes a mix of frequently replaced consumable products and highly engineered capital products thatare used in the exploration, development, production and transportation of oil and natural gas. Our consumable products are used in drilling, wellconstruction and completions activities, within the supporting infrastructure, and at processing centers and refineries. Our engineered capitalproducts are directed at: drilling rig equipment for new rigs, upgrades and refurbishment projects; subsea construction and development projects;the placement of production equipment on new producing wells; pressure pumping equipment; and downstream capital projects. In 2018,approximately 80% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derivedfrom capital products with a small amount from rental and other services.We seek to design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, amongothers, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and servicecompanies, and pipeline and refinery operators.We operate three business segments that cover all stages of the well cycle. A summary of the products and services offered by each segment isas follows:•Drilling & Subsea segment. This segment designs and manufactures products and provides related services to the drilling, energy subseaconstruction and services markets, and other markets such as alternative energy, defense and communications. The products and relatedservices consist primarily of: (i) capital equipment and a broad line of expendable drilling products consumed in the drilling process; and (ii)subsea remotely operated vehicles and trenchers, specialty components and tooling, products used in subsea pipeline infrastructure, anda broad suite of complementary subsea technical services and rental items.•Completions segment. This segment designs, manufactures and supplies products and provides related services to the well construction,completion, stimulation and intervention markets. The products and related services consist primarily of: (i) well construction casing andcementing equipment, protectors for artificial lift equipment and cables used in completions, composite plugs used for zonal isolation inhydraulic fracturing; and (ii) capital and consumable products sold to the pressure pumping, hydraulic fracturing and flowback servicesmarkets, including hydraulic fracturing pumps, pump consumables, cooling systems and flow iron as well as coiled tubing, wireline cable,and pressure control equipment used in the well completion and intervention service markets.•Production & Infrastructure segment. This segment designs, manufactures and supplies products and provides related equipment andservices for production and infrastructure markets. The products and related services consist primarily of: (i) engineered process systems,production equipment and related field services, as well as oil and produced water treatment equipment; and (ii) a wide range of industrialvalves focused on serving upstream, midstream, and downstream oil and natural gas customers as well as power and other generalindustries.35Table of ContentsMarket ConditionsThe level of demand for our products is directly related to activity levels and the capital and operating budgets of our customers, which in turn areheavily influenced by energy prices and expectations as to future price trends. In addition, the availability of existing capital equipment adequate toserve exploration and production requirements, or lack thereof, drives demand for our capital equipment products.The probability of any cyclical change in energy prices and the extent and duration of such a change are difficult to predict. Oil prices strengthenedin 2017 and through much of 2018, giving rise to higher drilling and completions activity and spending by our customers, primarily in NorthAmerica. The volume of rigs drilling for oil and natural gas in North America and the level of hydraulic fracturing and other well completion activitiesare drivers for our revenue from this region. The heightened level of activity led to increased revenues and orders in 2017 and 2018, principallyfrom the sale of consumable products. More recently, these favorable results have been tempered due to the decline in oil prices resulting fromslowing growth in global oil demand and a surge in U.S. oil production. In addition, pipeline capacity constraints in the Permian basin have limitedthe ability of operators to transport additional production from this basin, causing a reduction in completion activity in the fourth quarter of 2018.Additional pipeline capacity is projected to come online sometime in 2019.Drilling and completions activity for the U.S. onshore market was strong through much of 2018, before falling off late in the year. Activity in regionswith higher costs for the production of energy, especially offshore and in some international regions, has lagged the U.S. onshore activity recovery.Early signs of an increase in activity in these areas began to emerge in 2018, but the timing and pace of any such recovery has been thrown intodoubt by the recent decrease in oil prices. Higher onshore activity levels drive increased demand for our drilling and completion consumableproducts, and our engineered process systems and production equipment. Demand for the construction of new capital equipment by our customersremains restrained, however, by the oversupply of relatively new or recently upgraded equipment, especially onshore and offshore drillingrigs. Demand for our drilling and completions capital equipment offerings remains far below the level achieved during the last newbuildcycle. Global offshore and subsea activity remain at historically low levels, limiting demand for our product offerings in that market.The revenue of our Valve Solutions product line is also influenced by energy prices, but to a lesser extent than the remainder of our business,resulting in more stable operating and financial results over time. The outlook for an increase in demand for valves from the oil and natural gasindustry worldwide has been positive due to planned investments in global refinery and petrochemical projects, as well as the construction ofadditional pipeline capacity in North America. However, the imposition of steel tariffs on valves imported into the U.S. has clouded this picture tosome extent.The President of the United States has issued proclamations imposing tariffs on imports of selected products, including those sourced from China.In particular, the U.S. government has imposed global tariffs on certain imported steel and aluminum products pursuant to Section 232 of theTrade Expansion Act of 1962, as well as tariffs on $250 billion worth of Chinese imports pursuant to Section 301 of the Trade Act of 1974. Inresponse, China and other countries have imposed retaliatory tariffs on a wide range of U.S. products, including those containing steel andaluminum. These tariffs have caused our cost of raw materials to increase and their ultimate impact on our business and operations is uncertain.However, in response, we are taking actions to mitigate the impact, including through the diversification of our supply chain.The table below shows average crude oil and natural gas prices for West Texas Intermediate crude oil (WTI), United Kingdom Brent crude oil(Brent), and Henry Hub natural gas: 2018 2017 2016Average global oil, $/bbl West Texas Intermediate $65.07 $50.80 $43.29United Kingdom Brent $71.11 $54.12 $43.67 Average North American Natural Gas, $/Mcf Henry Hub $3.16 $2.99 $2.52Average WTI and Brent oil prices were 28% and 31% higher, respectively, for the year ended December 31, 2018 compared to 2017. However, oilprices declined sharply in the fourth quarter of 2018 due to concerns over slowing global oil demand and increases in U.S. oil production. The spotWTI oil price closed at $45.15 per barrel as of December 31, 2018 versus $60.46 as of December 31, 2017. Average natural gas prices were 6%higher in 2018 than 2017.36Table of ContentsThe table below shows the average number of active drilling rigs operating by geographic area and drilling for different purposes based on theweekly rig count information published by Baker Hughes, a GE Company. 2018 2017 2016Active Rigs by Location United States 1,032 877 509Canada 191 206 130International 989 948 955Global Active Rigs 2,212 2,031 1,594 Land vs. Offshore Rigs Land 1,987 1,812 1,348Offshore 225 219 246Global Active Rigs 2,212 2,031 1,594 U.S. Commodity Target, Land Oil/Gas 841 704 408Gas 190 172 100Unclassified 1 1 1Total U.S. Land Rigs 1,032 877 509 U.S. Well Path, Land Horizontal 900 737 400Vertical 63 70 60Directional 69 70 49Total U.S. Active Land Rigs 1,032 877 509As a result of higher oil and natural gas prices, the average U.S. and international rig counts in 2018 increased 18% and 4%, respectively, ascompared to 2017, while the Canadian rig count decreased 7% compared to 2017. The U.S. rig count reached a trough of 404 rigs in the secondquarter of 2016. Since then, the number of working rigs in the U.S. has increased steadily with 1,083 active rigs as of December 31, 2018. Asubstantial portion of our revenue is impacted by the level of rig activity and the number of wells completed.The table below shows the amount of total inbound orders by segment for the years ended December 31, 2018, 2017 and 2016:(in millions of dollars) 2018 2017 2016Orders: Drilling & Subsea $265.4 $219.8 $215.3Completions 480.1 291.8 130.7Production & Infrastructure 370.8 358.3 250.8Total Orders $1,116.3 $869.9 $596.8AcquisitionsOn October 5, 2018, we acquired 100% of the stock of Houston Global Heat Transfer LLC (“GHT”) for total aggregate consideration of $57.3million, net of cash acquired. The aggregate consideration includes the estimated fair value of certain contingent cash payments due to the formerowners of GHT if certain conditions are met in 2019 and 2020. Based in Houston, Texas, GHT designs, engineers, and manufactures premiumindustrial heat exchanger and cooling systems used primarily on hydraulic fracturing equipment. This acquisition is included in the Completionssegment.On July 2, 2018, we acquired certain assets of ESP Completion Technologies LLC, a subsidiary of C&J Energy Services, for cash considerationof $8.0 million. ESPCT consists of a portfolio of early stage technologies that maximize the run life of artificial lift systems, primarily electricsubmersible pumps. This acquisition is included in the Completions segment.On October 2, 2017, we acquired all the remaining membership interests in Global Tubing, LLC (“Global Tubing”) from our joint venture partner andmanagement for total consideration of approximately $290.3 million, including approximately $116.8 million in cash and approximately 11.5 millionshares of our common stock. We originally invested37Table of Contentsin Global Tubing with a joint venture partner in 2013. Prior to acquiring the remaining ownership interest in Global Tubing, we reported thisinvestment using the equity method of accounting. Located in Dayton, Texas, Global Tubing provides coiled tubing, coiled line pipe and relatedservices to customers worldwide. Global Tubing is included in the Completions segment.On July 3, 2017, we acquired Multilift Welltec, LLC and Multilift Wellbore Technology Limited (collectively, “Multilift”) for approximately $39.2million in cash consideration. Based in Houston, Texas, Multilift manufactures the patented SandGuardTM and CycloneTM completion tools. Thisacquisition increased our product offering related to artificial lift to our completions customers. Multilift is included in the Completion Segment.On January 9, 2017, we acquired substantially all of the assets of Cooper Valves, LLC as well as 100% of the general partnership interests ofInnovative Valve Components (collectively, “Cooper”) for total aggregate consideration of $14.0 million. The aggregate consideration includes theissuance of stock valued at $4.5 million and certain contingent stock issuances. These acquisitions are included in the Production & Infrastructuresegment.There are factors related to the businesses we have acquired that may result in lower net profit margins on a go-forward basis, primarily the federalincome tax status of the legal entity and the level of depreciation and amortization charges arising out of the accounting for the purchase.For additional information regarding our acquisitions, refer to Note 4 Acquisitions & Dispositions.Factors affecting the comparability of our future results of operations to our historical results of operationsOur future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the followingreasons:•Since our initial public offering in 2012, we have grown our business both organically and through strategic acquisitions. We have expandedand diversified our product portfolio and business lines with the acquisition of two businesses in 2018 and three businesses in 2017. Thehistorical financial data for periods prior to the acquisitions does not include the results of any of the acquired companies for the periodspresented and, as such, does not provide an accurate indication of our future results.•As we integrate acquired companies and further implement internal controls, processes and infrastructure to operate in compliance with theregulatory requirements applicable to companies with publicly traded shares, it is likely that we will incur incremental selling, general andadministrative expenses relative to historical periods.Our future results will depend on our ability to efficiently manage our combined operations and execute our business strategy.38Table of ContentsResults of operationsYear ended December 31, 2018 compared with year ended December 31, 2017 Year ended December 31, Change(in thousands of dollars, except per share information)2018 2017 $ %Revenue: Drilling & Subsea$229,078 $234,742 $(5,664) (2.4)%Completions477,987 260,191 217,796 83.7 %Production & Infrastructure361,407 327,287 34,120 10.4 %Eliminations(4,253) (3,600) (653) *Total revenue$1,064,219 $818,620 245,599 30.0 %Cost of sales: Drilling & Subsea$185,036 $179,978 $5,058 2.8 %Completions343,391 201,631 141,760 70.3 %Production & Infrastructure283,673 251,823 31,850 12.6 %Eliminations(4,253) (3,600) (653) *Total cost of sales$807,847 $629,832 $178,015 28.3 %Gross profit: Drilling & Subsea$44,042 $54,764 $(10,722) (19.6)%Completions134,596 58,560 76,036 129.8 %Production & Infrastructure77,734 75,464 2,270 3.0 %Total gross profit$256,372 $188,788 $67,584 35.8 %Selling, general and administrative expenses: Drilling & Subsea$77,870 $86,327 $(8,457) (9.8)%Completions102,319 66,306 36,013 54.3 %Production & Infrastructure71,712 67,653 4,059 6.0 %Corporate35,079 33,427 1,652 4.9 %Total selling, general and administrative expenses$286,980 $253,713 $33,267 13.1 %Segment operating income (loss): Drilling & Subsea$(33,688) $(31,563) $(2,125) (6.7)%Operating margin %(14.7)% (13.4)% Completions32,277 (6,746) 39,023 578.5 %Operating margin %6.8 % (2.6)% Production & Infrastructure6,022 7,811 (1,789) (22.9)%Operating margin %1.7 % 2.4 % Corporate(35,079) (33,427) (1,652) (4.9)%Total segment operating loss$(30,468) $(63,925) $33,457 52.3 %Operating margin %(2.9)% (7.8)% Goodwill and intangible asset impairments363,522 69,062 294,460 *Transaction expenses3,446 6,511 (3,065) *Loss (gain) on disposal of assets and other(438) 2,097 (2,535) *Operating loss(396,998) (141,595) (255,403) (180.4)%Interest expense32,532 26,808 5,724 21.4 %Foreign exchange losses (gains) and other, net(6,270) 7,268 (13,538) *Gain on contribution of subsea rentals business(33,506) — (33,506) *Gain realized on previously held equity investment— (120,392) 120,392 *Total other income(7,244) (86,316) 79,072 *Loss before income taxes(389,754) (55,279) (334,475) (605.1)%Income tax expense (benefit)(15,674) 4,121 (19,795) *Net loss(374,080) (59,400) (314,680) (529.8)% Weighted average shares outstanding Basic108,771 98,689 Diluted108,771 98,689 Loss per share Basic$(3.44) $(0.60) Diluted$(3.44) $(0.60) * not meaningful 39Table of ContentsRevenueOur revenue for the year ended December 31, 2018 was $1,064.2 million, an increase of $245.6 million, or 30.0%, compared to the year endedDecember 31, 2017. In general, the increase in revenue is due to higher market activity resulting from higher oil prices. For the year endedDecember 31, 2018, our Drilling & Subsea segment, Completions segment, and Production & Infrastructure segment comprised 21.5%, 44.5% and34.0% of our total revenue, respectively, compared to 28.7%, 31.3% and 40.0%, respectively, for the year ended December 31, 2017. Thechanges in revenue by operating segment consisted of the following:Drilling & Subsea segment — Revenue was $229.1 million for the year ended December 31, 2018, a decrease of $5.7 million, or 2.4%, comparedto the year ended December 31, 2017. Approximately $14.9 million of the decrease relates to lower sales in our subsea product line primarily dueto the contribution of our subsea rentals business to Ashtead in exchange for a 40% interest in the combined business. This decrease was partiallyoffset by a $9.2 million increase in sales of our drilling products primarily due to higher sales of capital equipment to international markets in 2018.Completions segment — Revenue was $478.0 million for the year ended December 31, 2018, an increase of $217.8 million, or 83.7%, compared tothe year ended December 31, 2017. This change includes a $108.8 million increase in revenue from Global Tubing which was acquired and fullyconsolidated in our financial statements beginning in the fourth quarter of 2017. Revenue from sales of our Downhole products increased $29.0million primarily due to incremental revenue from Multilift and ESPCT which were acquired in the second quarter of 2017 and third quarter of 2018,respectively. Refer to Note 4 Acquisitions & Dispositions for additional information. The remaining increase was driven by an $80.0 million increasein sales of our well stimulation and intervention products due to higher sales volumes of pressure pumping products attributable to highercompletions spending by exploration and production companies in the U.S. market and revenue contributed by the acquisition of GHT in the fourthquarter of 2018.Production & Infrastructure segment — Revenue was $361.4 million for the year ended December 31, 2018, an increase of $34.1 million, or 10.4%,compared to the year ended December 31, 2017. The increase in oil and natural gas operators budgets and resulting infrastructure spending haveled to increased sales of our valve products and surface production equipment. Approximately $17.3 million of the increase is due to higher salesvolumes of valve products, particularly sales into the North America oil and natural gas market. The remaining $16.8 million increase is attributableto higher sales volumes of our activity-based surface production equipment to exploration and production operators.Segment operating loss and segment operating margin percentageSegment operating loss for the year ended December 31, 2018 improved $33.5 million to a loss of $30.5 million from a loss of $63.9 million for theyear ended December 31, 2017. The operating margin percentage improved to (2.9)% for the year ended December 31, 2018 from (7.8)% for theyear ended December 31, 2017. The segment operating margin percentage is calculated by dividing segment operating loss by revenue for theperiod. The change in operating margin percentage for each segment is explained as follows:Drilling & Subsea segment — The operating margin percentage was (14.7)% for the year ended December 31, 2018 compared to (13.4)% for theyear ended December 31, 2017. Operating margins were negatively impacted by approximately $12.5 million and $4.0 million of restructuringcharges and inventory write downs for the year ended December 31, 2018 and 2017, respectively. This increase in restructuring charges andinventory write downs was partially offset by a decrease in employee related costs resulting from cost reduction actions.Completions segment — The operating margin percentage improved to 6.8% for the year ended December 31, 2018 from (2.6)% for the year endedDecember 31, 2017. The improvement in operating margin percentage is due to increased operating leverage on higher volumes, especially onhigher sales of our well stimulation and intervention products as discussed above. In addition, operating margin was positively impacted by the late2017 acquisition of the remaining ownership interest of Global Tubing, which was previously reported as an equity method investment for the firstnine months of 2017 and was fully consolidated in our financial statements beginning in the fourth quarter of 2017. The improvement in operatingmargins was partially offset by $16.9 million of charges to write-down inventory for the year ended December 31, 2018 compared to $8.7 million forthe year ended December 31, 2017.Production & Infrastructure segment — The operating margin percentage was 1.7% for the year ended December 31, 2018 compared to 2.4% forthe year ended December 31, 2017. The slight decline in operating margin percentage was driven by $9.9 million of charges to write-downinventory for the year ended December 31, 2018 compared to $4.3 million for the year ended December 31, 2017.Corporate — Selling, general and administrative expenses for Corporate increased $1.7 million, or 4.9%, for the year ended December 31, 2018compared to the year ended December 31, 2017, primarily due to an increase in employee severance and payroll costs, partially offset by adecrease in share based compensation expense. Corporate costs include, among other items, payroll related costs for general management andmanagement of finance and40Table of Contentsadministration, legal, human resources; professional fees for legal, accounting and related services; and marketing costs.Other items not included in segment operating lossSeveral items are not included in segment operating loss, but are included in total operating loss. These items include goodwill and intangibleasset impairments, transaction expenses, and loss (gain) on the disposal of assets. Transaction expenses relate to legal and other advisory costsincurred in acquiring businesses and are not considered to be part of segment operating loss. These costs were $3.4 million and $6.5 million for theyears ended December 31, 2018 and 2017, respectively, with these costs primarily related to the acquisitions of GHT and ESPCT in 2018 andGlobal Tubing and Multilift in 2017.In the fourth quarter of 2018, there was a significant decline in oil prices, lowered industry expectations for U.S. drilling and completions activitiesand a substantial decline in the quoted market prices of our common stock. As a result, we determined that the carrying value of our Drilling andDownhole reporting units exceeded their estimated fair values and recorded non-cash impairment charges of $245.4 million and $53.4 million towrite-off goodwill in our Drilling and Downhole reporting units, respectively. In addition, we determined that certain intangible assets in ourDownhole reporting unit were impaired and recognized $50.2 million of impairment losses on these intangible assets (primarily customerrelationships and trade names) in the fourth quarter of 2018. In the second quarter 2018, impairment losses totaling $14.5 million were recorded oncertain intangible assets (primarily customer relationships) within the Subsea and Downhole reporting units related to management’s decision toabandon specific product lines. See Note 7 Goodwill and Intangible Assets for further information related to these charges.In the second quarter 2017, there was a decline in oil prices and a developing consensus view that production from lower cost oil basins would besufficient to meet anticipated demand for a longer period, delaying the need for production from higher cost basins. With this indication of furtherdelays in the recovery of the offshore market, we performed an impairment test and determined that the carrying value of the goodwill in ourSubsea reporting unit was impaired resulting in a $68.0 million charge in the second quarter 2017. Also in 2017, impairment losses totaling $1.1million were recorded on certain intangible assets within the Subsea and Downhole reporting units related to management’s decision to abandonspecific product lines. See Note 7 Goodwill and Intangible Assets for further information related to these charges.Other income and expenseOther income and expense includes interest expense, foreign exchange losses (gains), a gain recognized on the contribution of our subsea rentalsbusiness and a gain realized on the previously held equity investment in Global Tubing. We incurred $32.5 million of interest expense during theyear ended December 31, 2018, an increase of $5.7 million compared to the year ended December 31, 2017 primarily due to an increase inoutstanding borrowings under our revolving line of credit. The foreign exchange gain was $6.3 million for the year ended December 31, 2018compared to a loss of $7.3 million for the year ended December 31, 2017. The foreign exchange losses (gains) are primarily the result ofmovements in the British pound and the Euro relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains orlosses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollardenominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than theU.S. dollar. In 2018, we recognized a gain of $33.5 million as a result of the deconsolidation of our Forum Subsea Rentals business. In 2017, werecognized a gain of $120.4 million on the previously held equity investment in Global Tubing upon acquiring the remaining interest in the fourthquarter of 2017. Refer to Note 4 Acquisitions & Dispositions for additional information.TaxesThe effective tax rate, calculated by dividing total tax expense (benefit) by income before income taxes, was (4.0)% and 7.5% for the yearsended December 31, 2018 and 2017, respectively. The tax rate for 2018 is significantly different than 2017 primarily due to higher goodwillimpairments, increases in our valuation allowance related to our deferred tax assets, the reduction in the U.S. corporate income tax rate as a resultof U.S. tax reform and the tax effects of tax reform recorded in 2018 as compared to those recorded in 2017. Items impacting the effective tax ratefor the year ended December 31, 2018 include $46.1 million of tax expense associated with the impairment of non-tax deductible goodwill for ourDrilling and Downhole reporting units, $50.0 million of tax expense for a partial valuation allowance in the U.S. and a full valuation allowance in theU.K., Germany and Singapore writing down our deferred tax assets to what is more likely than not realizable, and $15.6 million of tax benefit fromadjusting the provisional impact of U.S. tax reform.41Table of ContentsYear ended December 31, 2017 compared to year ended December 31, 2016 Year ended December 31, Change 2017 2016 $ %(in thousands of dollars, except per share information) Revenue: Drilling & Subsea$234,742 $224,447 $10,295 4.6 %Completions260,191 131,786 128,405 97.4 %Production & Infrastructure327,287 233,754 93,533 40.0 %Eliminations(3,600) (2,352) (1,248) *Total revenue$818,620 $587,635 230,985 39.3 %Cost of sales: Drilling & Subsea$179,978 $186,820 $(6,842) (3.7)%Completions201,631 126,789 74,842 59.0 %Production & Infrastructure251,823 176,643 75,180 42.6 %Eliminations(3,600) (2,352) (1,248) *Total cost of sales$629,832 $487,900 $141,932 29.1 %Gross profit: Drilling & Subsea$54,764 $37,627 $17,137 45.5 %Completions58,560 4,997 53,563 1,071.9 %Production & Infrastructure75,464 57,111 18,353 32.1 %Total gross profit$188,788 $99,735 $89,053 89.3 %Selling, general and administrative expenses: Drilling & Subsea$86,327 $90,682 $(4,355) (4.8)%Completions66,306 52,430 13,876 26.5 %Production & Infrastructure67,653 56,456 11,197 19.8 %Corporate33,427 27,440 5,987 21.8 %Total selling, general and administrative expenses$253,713 $227,008 $26,705 11.8 %Segment operating income (loss): Drilling & Subsea$(31,563) $(53,055) $21,492 40.5 %Operating income margin %(13.4)% (23.6)% Completions(6,746) (45,609) 38,863 85.2 %Operating income margin %(2.6)% (34.6)% Production & Infrastructure7,811 655 7,156 1,092.5 %Operating income margin %2.4 % 0.3 % Corporate(33,427) (27,440) (5,987) (21.8)%Total segment operating loss$(63,925) $(125,449) 61,524 49.0 %Operating income margin %(7.8)% (21.3)% Goodwill and intangible asset impairments69,062 — 69,062 *Transaction expenses6,511 865 5,646 652.7 %Loss on disposal of assets and other2,097 2,638 (541) (20.5)%Operating loss(141,595) (128,952) (12,643) (9.8)%Interest expense26,808 27,410 (602) (2.2)%Foreign exchange losses (gains) and other, net7,268 (21,341) 28,609 134.1 %Gain realized on previously held equity investment(120,392) — (120,392) *Deferred loan costs written off— 2,978 (2,978) (100.0)%Total other (income) expense, net(86,316) 9,047 (95,363) (1,054.1)%Loss before income taxes(55,279) (137,999) 82,720 59.9 %Income tax expense (benefit)4,121 (56,051) 60,172 107.4 %Net loss(59,400) (81,948) 22,548 27.5 %Less: Income attributable to noncontrolling interest— 30 (30) (100.0)%Net loss attributable to common stockholders$(59,400) $(81,978) $22,578 27.5 % Weighted average shares outstanding Basic98,689 91,226 Diluted98,689 91,226 Loss per share Basic$(0.60) $(0.90) Diluted$(0.60) $(0.90) * not meaningful 42Table of ContentsRevenueOur revenue for the year ended December 31, 2017 increased $231.0 million, or 39.3%, to $818.6 million compared to the year endedDecember 31, 2016. In general, the increase in revenue is due to higher market activity resulting from higher commodity prices. In the third quarterof 2017, we were adversely affected by Hurricane Harvey, which temporarily idled facilities and operations, resulting in foregone revenue. For theyear ended December 31, 2017, our Drilling & Subsea segment, Completions segment, and Production & Infrastructure segment comprised 28.7%,31.3% and 40.0% of our total revenue, respectively, compared to 38.2%, 22.0% and 39.8%, respectively, for the year ended December 31, 2016.The revenue changes by operating segment consisted of the following:Drilling & Subsea segment — Revenue increased $10.3 million, or 4.6%, to $234.7 million during the year ended December 31, 2017 compared tothe year ended December 31, 2016. Approximately $33.0 million of the increase relates to improved sales volumes of our drilling products primarilyassociated with the 72% increase in the average U.S. rig count compared to the prior year. The improvement in volumes was particularly strong forconsumable products sold to drilling contractors both for rig mud pump upgrades and rig operations. The increase in drilling products was partiallyoffset by lower sales volumes and demand for our remotely operated subsea vehicles, associated subsea systems and other offshore products,which was largely attributable to reduced investment in global offshore projects.Completions segment — Revenue increased $128.4 million, or 97.4%, to $260.2 million during the year ended December 31, 2017 compared to theyear ended December 31, 2016. The increase in drilling and completions budgets of exploration and production companies has led to an increasein market demand for our completions products. Approximately $76 million of the increase is a result of higher sales volumes for our wellstimulation and intervention products, particularly in North America. In addition, segment revenue includes $35.5 million of revenue from theacquisition of the remaining membership interests of Global Tubing in the fourth quarter of 2017. The remaining increase in segment revenues wasdue to higher sales of our downhole products, including revenue from our acquisition of Multilift in the third quarter of 2017.Production & Infrastructure segment — Revenue increased $93.5 million, or 40.0%, to $327.3 million during the year ended December 31, 2017compared to the year ended December 31, 2016. The increase in drilling and completions budgets of exploration and production companies andresulting infrastructure spending have led to increased sales of our surface production equipment and valve products. Approximately half of theincrease is attributable to higher sales volumes in our activity-based production equipment. The remaining segment revenue increase was due tohigher sales of valves, including revenue from our acquisition of Cooper in the first quarter of 2017.Segment operating income (loss) and segment operating margin percentageSegment operating loss for the year ended December 31, 2017 improved $61.5 million, to a loss of $63.9 million for the year ended December 31,2017 compared to a loss of $125.4 million for the year ended December 31, 2016. In the third quarter of 2017, we were adversely affected byHurricane Harvey, which temporarily idled facilities and operations, resulting in foregone revenue and under-absorption of manufacturing costs. Theoperating margin percentage improved to (7.8)% for the year ended December 31, 2017 from (21.3)% for the year ended December 31, 2016. Thesegment operating margin percentage is calculated by dividing segment operating loss by revenue for the period. The change in operating marginpercentage for each segment is explained as follows:Drilling & Subsea segment — The operating margin percentage improved to (13.4)% for the year ended December 31, 2017 compared to (23.6)%for the year ended December 31, 2016. The year ended December 31, 2017 included $3.6 million of severance and facility closure costs. The yearended December 31, 2016 included $12.6 million of inventory write-downs attributable to lower activity levels and reduced pricing, severance andfacility closure costs. The remaining increase in operating margins was driven by higher activity levels, which caused an improvement inmanufacturing scale efficiencies, as well as a better mix of higher margin product sales. For the segment, the margin improvement for our drillingproducts was partially offset by lower margins for our subsea products.Completions segment — The operating margin percentage improved to (2.6)% for the year ended December 31, 2017 from (34.6)% for the yearended December 31, 2016. The year ended December 31, 2017 included $9.2 million of inventory write-downs attributable to the decision to exitspecific product lines in the fourth quarter 2017. The year ended December 31, 2016 included $21.1 million of charges for inventory write-downsattributable to lower activity levels and reduced pricing, severance and facility closure costs. The remaining increase in operating marginpercentage is due to increased operating leverage on higher revenue and volumes. Operating results were also positively impacted by animprovement in earnings for Global Tubing, LLC which was reported as an equity method investment until our acquisition of the remainingmembership interests in October 2017.Production & Infrastructure segment — The operating margin percentage improved to 2.4% for the year ended December 31, 2017, from 0.3% forthe year ended December 31, 2016. The years ended December 31, 2017 and December 31, 2016 included costs related to inventory write-downs,facility closure costs and severance totaling $4.943Table of Contentsmillion and $3.9 million, respectively. The remaining increase in operating margins was primarily attributable to higher activity levels leading toincreased operating leverage in our activity-based production equipment products.Corporate — Selling, general and administrative expenses for Corporate increased $6.0 million, or 21.8%, for the year ended December 31, 2017compared to the year ended December 31, 2016 due to higher personnel costs, including bonus accruals, and higher professional fees. Corporatecosts include payroll, professional fees and other costs for general management, administration, marketing, finance, legal, information technologyand human resources.Other items not included in segment operating lossSeveral items are not included in segment operating loss, but are included in total operating loss. These items include goodwill and intangibleasset impairments, transaction expenses, and gains/losses from the disposal of assets. Transaction expenses include legal, advisory and othercosts incurred in acquiring businesses which are not considered to be part of segment operating income (loss). These costs were $6.5 million and$0.9 million for the years ended December 31, 2017 and 2016, respectively, with the increase primarily related to the acquisition of Global Tubingin the fourth quarter of 2017.The Company recorded a goodwill impairment charge of $68.0 million in the second quarter of 2017 related to the subsea reporting unit. In addition,the Company also recorded impairment charges totaling $1.1 million in 2017 related to intangible assets in the Subsea and Downhole reportingunits. Refer to Note 8 Goodwill and Intangible Assets for further discussion.Other income and expenseOther income and expense includes interest expense, foreign exchange gains and losses, a gain realized on the previously held equity investmentin Global Tubing, and the write-off of deferred loan costs. We incurred $26.8 million of interest expense during the year ended December 31, 2017,a decrease of $0.6 million compared to the year ended December 31, 2016 primarily due to lower commitment fees on the unused portion of ourrevolving credit line. The foreign exchange loss was $7.3 million for the year ended December 31, 2017 compared to a gain of $21.3 million for theyear ended December 31, 2016. The foreign exchange gains and losses are primarily the result of movements in the British pound and the Eurorelative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets orliabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade accountreceivables and net intercompany receivable balances for our entities using a functional currency other than U.S. dollar. In 2017, we recognized again of $120.4 million on the previously held equity investment in Global Tubing upon acquiring the remaining interest in the fourth quarter of 2017.In year ended December 31, 2016, we wrote off $3.0 million of deferred financing costs as a result of the amendments of our Credit Facility in thefirst and fourth quarters of 2016 which reduced the size of our revolving credit line.TaxesTax expense (benefit) includes current income taxes expected to be due based on taxable income to be reported during the periods in the variousjurisdictions in which we conduct business and deferred income taxes based on changes in the tax effect of temporary differences between thebases of assets and liabilities for financial reporting and tax purposes at the beginning and end of the respective periods. The effective tax rate,calculated by dividing total tax expense (benefit) by income before income taxes, was 7.5% and 40.6% for the years ended December 31, 2017and 2016, respectively. Items reducing the effective tax rate for the year ended December 31, 2017 include $14.7 million associated with the non-tax deductible goodwill impairment for the subsea reporting unit and a net $10.1 million expense associated with U.S. tax reform. Also impactingthe tax rate in 2017 is the change in the proportion of losses generated in the U.S., which are benefited at a higher statutory tax rate, as comparedto losses generated outside the U.S. in jurisdictions subject to lower tax rates. Partially offsetting these items was a $9.2 million reduction in taxexpense associated with the gain on acquisition of the remaining 52% membership interest of Global Tubing.44Table of ContentsLiquidity and capital resourcesSources and uses of liquidityOur internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, ourCredit Facility and Senior Notes described below. Our primary uses of capital have been for acquisitions, ongoing maintenance and growth capitalexpenditures, inventories and sales on credit to our customers. We continually monitor potential capital sources, including equity and debtfinancing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability tocontinue to access outside sources of capital.At December 31, 2018, we had cash and cash equivalents of $47.2 million, availability under our Credit Facility of $167.3 million and total debt of$518.7 million. Capital expenditures for 2018 totaled $24.0 million. We expect capital expenditures to be approximately $20 million to $25 million in2019, which consists of, among other items, investments in certain manufacturing facilities, replacing end of life machinery and equipment, andcontinuing the implementation of our enterprise resource planning solution globally. This budget does not include expenditures for potentialbusiness acquisitions. We believe that cash on hand, cash generated from operations and availability under our Credit Facility will be sufficient tofund operations, working capital needs, and capital expenditure requirements for the foreseeable future.Although we do not budget for acquisitions, pursuing growth through acquisitions has been a significant part of our business strategy. Weexpanded and diversified our product portfolio with the acquisition of three businesses in 2017 for total cash and stock consideration ofapproximately $340.7 million, net of cash acquired. In addition, we completed two acquisitions in 2018 for total cash and contingent considerationof approximately $65.3 million, net of cash acquired. For additional information, see Note 4 Acquisitions & Dispositions. In the future, we may fundadditional acquisitions with cash and/or equity. This may require us to pursue additional equity or debt financing, which we may not be able toobtain on terms acceptable to us or at all.Our cash flows for the years ended December 31, 2018, 2017 and 2016 are presented below (in thousands): Year ended December 31, 2018 2017 2016Net cash provided by (used in) operating activities$2,407 $(40,033) $64,742Net cash used in investing activities(75,407) (187,968) (11,137)Net cash provided by financing activities6,522 100,563 86,195Effect of exchange rate changes on cash(1,497) 8,232 (14,627)Net increase (decrease) in cash, cash equivalents and restricted cash$(67,975) $(119,206) $125,173Free cash flow, a non-GAAP financial measure, is defined as net cash provided by operating activities, less capital expenditures for property andequipment net of proceeds from sales of property and equipment and other. Management believes free cash flow is an important measure becauseit encompasses both profitability and capital management in evaluating results. Free cash flow should not be considered an alternative to net cashprovided by operating activities as a cash flow measurement. A reconciliation of cash flow from operating activities to free cash flow, beforeacquisitions, is as follows (in thousands): Year ended December 31, 2018 2017 2016Net cash provided by (used in) operating activities$2,407 $(40,033) $64,742Capital expenditures for property and equipment(24,043) (26,709) (16,828)Proceeds from sale of business, property and equipment9,258 1,971 9,763Free cash flow, before acquisitions$(12,378) $(64,771) $57,67745Table of ContentsNet cash provided by (used in) operating activities2018 vs. 2017. Net cash provided by operating activities was $2.4 million for the year ended December 31, 2018 compared to $40.0 million of netcash used in operating activities for year ended December 31, 2017. Due to improved operating results, net income adjusted for non-cash itemsprovided $77.7 million of cash for the year ended December 31, 2018 as compared to $1.7 million of cash used for the same period in 2017.However, higher investments in working capital used cash of $75.3 million for the year ended December 31, 2018 compared to $38.4 million for thesame period in 2017. The increase in working capital in 2018 was primarily due to increases in inventory to support revenue growth.2017 vs. 2016. Net cash used in operating activities was $40.0 million for the year ended December 31, 2017 compared to $64.7 million of netcash provided by operating activities for the year ended December 31, 2016. Operating cash flows decreased primarily as a result of increases inworking capital in 2017 which used cash of $38.4 million compared to reductions in working capital in 2016 which provided cash of $56.8 million.The increase in working capital in 2017 is primarily due to increased accounts receivable on higher revenue and investments in inventory, partiallyoffset by an increase in accrued liabilities and $30.9 million of taxes refunded from our election to carry back our 2016 U.S. net operating loss torecover taxes paid in earlier periods.Our operating cash flows are sensitive to a number of variables, the most significant of which is the level of drilling and production activity for oiland natural gas reserves. These activity levels are in turn impacted by the volatility of oil and natural gas prices, regional and worldwide economicactivity and its effect on demand for hydrocarbons, weather, infrastructure capacity to reach markets and other various factors. These factors arebeyond our control and are difficult to predict.Net cash used in investing activities2018 vs. 2017. Net cash used in investing activities was $75.4 million and $188.0 million for the years ended December 31, 2018 and 2017,respectively. The decrease was primarily due to $60.6 million of cash consideration (net of cash acquired) paid for two acquisitions in 2018compared to $162.2 million paid for three acquisitions in 2017. Capital expenditures were $24.0 million and $26.7 million for the years endedDecember 31, 2018 and 2017, respectively.2017 vs. 2016. Net cash used in investing activities was $188.0 million and $11.1 million for the years ended December 31, 2017 and 2016,respectively. The increase was primarily due to $162.2 million of cash consideration (net of cash acquired) paid for three acquisitions in 2017compared $4.1 million paid for one acquisition in 2016. In addition, capital expenditures of $26.7 million in 2017 increased compared to $16.8million during 2016.Net cash provided by financing activities2018 vs. 2017. Net cash provided by financing activities was $6.5 million and $100.6 million for the years ended December 31, 2018 and 2017,respectively. The decrease primarily resulted from net borrowings on our Credit Facility of $10.2 million in 2018 compared to $107.4 million in 2017.2017 vs. 2016. Net cash provided by financing activities was $100.6 million and $86.2 million for the years ended December 31, 2017 and 2016,respectively. The increase was primarily due to $107.4 million of borrowings on our Credit Facility in 2017 compared to $87.7 million of proceedsfrom equity issuances in 2016.Senior Notes Due 2021In October 2013, we issued $300.0 million of 6.25% senior unsecured notes due 2021 at par, and in November 2013, we issued an additional$100.0 million aggregate principal amount of the notes at a price of 103.25% of par, plus accrued interest from October 2, 2013 (the “SeniorNotes”). The Senior Notes bear interest at a rate of 6.25% per annum, payable on April 1 and October 1 of each year, and mature on October 1,2021. Net proceeds from the issuance of approximately $394.0 million, after deducting initial purchasers’ discounts and offering expenses andexcluding accrued interest paid by the purchasers, were used for the repayment of the then-outstanding term loan balance and a portion of theCredit Facility balance.The terms of the Senior Notes are governed by the indenture, dated October 2, 2013 (the “Indenture”), by and among us, the guarantors namedtherein and Wells Fargo Bank, National Association, as trustee. The Senior Notes are senior unsecured obligations, and are guaranteed on asenior unsecured basis by our subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility tothe extent of the value of the collateral securing the Credit Facility. The Senior Notes contain customary covenants including some limitations andrestrictions on our ability to pay dividends on, purchase or redeem our common stock; redeem or prepay our subordinated debt; make certaininvestments; incur or guarantee additional indebtedness or issue certain types of equity securities; create46Table of Contentscertain liens, sell assets, including equity interests in our restricted subsidiaries; restrict dividends or other payments of our restricted subsidiaries;consolidate, merge or transfer all or substantially all of our assets; engage in transactions with affiliates; and create unrestricted subsidiaries.Many of these restrictions will terminate if the Senior Notes become rated investment grade. The Indenture also contains customary events ofdefault, including nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, failure to pay certainjudgments and certain events of bankruptcy and insolvency. We are required to offer to repurchase the Senior Notes in connection with specifiedchange in control events or with excess proceeds of asset sales not applied for permitted purposes.We may redeem the Senior Notes due 2021:•at a redemption price of 101.563% of their principal amount plus accrued and unpaid interest and additional interest, if any, for the twelve-month period beginning October 1, 2018; and then•at a redemption price of 100.000% of their principal amount plus accrued interest and unpaid interest and additional interest, if any,beginning on October 1, 2019.Credit FacilityOn October 30, 2017, we amended and restated our Credit Facility to, among other things, increase revolving credit commitments from $140.0million to $300.0 million (with a sublimit of up to $25.0 million available for the issuance of letters of credit for the account of the Company andcertain of our domestic subsidiaries) (the “U.S. Line”), of which up to $30.0 million is available to certain of our Canadian subsidiaries for loans inU.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 Canadiansubsidiaries) (the “Canadian Line”). Lender commitments under the Credit Facility, subject to certain limitations, may be increased by an additional$100.0 million. The Credit Facility matures in July 2021, but if our outstanding Notes due October 2021 are refinanced or replaced withindebtedness maturing in or after February 2023, the final maturity of the Credit Facility will automatically extend to October 2022.Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada andcertain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Our borrowing capacity under the Credit Facility couldbe reduced or eliminated, depending on future fluctuations in our balances of receivables and inventory. As of December 31, 2018, our totalborrowing base was $299.4 million, of which $119.0 million was drawn and $13.1 million was used for security of outstanding letters of credit,resulting in remaining availability of $167.3 million.Borrowings under the U.S. Line bear interest at a rate equal to, at our option, either (a) the LIBOR rate or (b) a base rate determined by reference tothe highest of (i) the rate of interest per annum determined from time to time by Wells Fargo as its prime rate in effect at its principal office in SanFrancisco, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus anapplicable margin. Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the CDOR rate or (b) abase rate determined by reference to the highest of (i) the prime rate for Canadian dollar commercial loans made in Canada as reported from timeto time by Thomson Reuters and (ii) the CDOR rate plus 1.00%, in each case plus an applicable margin. The applicable margin for LIBOR andCDOR loans will initially range from 1.75% to 2.25%, depending upon average excess availability under the 2017 Credit Facility. After the firstquarter ending on or after March 31, 2018 in which our total net leverage ratio is less than or equal to 4.00:1.00, the applicable margin for LIBORand CDOR loans will range from 1.50% to 2.00%, depending upon average excess availability under the Credit Facility. The weighted averageinterest rate under the Credit Facility was approximately 4.08% during the year ended December 31, 2018.The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% per annum on the unused portion of commitments if averageusage of the Credit Facility is greater than 50% and (b) 0.500% per annum on the unused portion of commitments if average usage of the 2017Credit Facility is less than or equal to 50%. After the first quarter ending on or after March 31, 2018 in which our total net leverage ratio is less thanor equal to 4.00:1.00, the commitment fees will range from 0.25% to 0.375%, depending upon average usage of the Credit Facility.Subject to customary exceptions, all obligations under the Credit Facility are guaranteed, jointly and severally, by each wholly-owned U.S.subsidiary of the Company and, in the case of the Canadian Line, each wholly-owned Canadian subsidiary of the Company, and are secured bysubstantially all assets of each such entity and the Company.The Credit Facility contains various covenants that, among other things, limit our ability (none of which are absolute) to incur additionalindebtedness or issue certain preferred shares, grant certain liens, make certain loans and investments, pay dividends, make distributions or makeother restricted payments, enter into mergers or acquisitions unless certain conditions are satisfied, enter into hedging transactions, change ourlines of business, prepay certain47Table of Contentsindebtedness, enter into certain affiliate transactions, engage in certain asset dispositions or modify the terms of certain debt or organizationalagreements.If excess availability under the Credit Facility falls below the greater of 10.0% of the borrowing base and $20.0 million, we will be required tomaintain 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 Facilityexceeds such thresholds for at least 60 consecutive days.If an event of default exists under the Credit Facility, lenders holding greater than 50% of the aggregate outstanding loans and letter of creditobligations and unfunded commitments have the right to accelerate the maturity of the obligations outstanding under the Credit Facility andexercise other rights and remedies. Obligations outstanding under the Credit Facility, however, will be automatically accelerated upon an event ofdefault arising from a bankruptcy or insolvency event. Each of the following constitutes an event of default under the Credit Facility:•Failure to pay any principal when due or any interest, fees or other amount within certain grace periods;•Representations and warranties in the Credit Facility or other loan documents being incorrect or misleading in any material respect;•Failure to perform or otherwise comply with the covenants in the Credit Facility or other loan documents, subject, in certain instances, tograce periods;•Failure of the loan documents to create a valid and perfected security interest with respect to (a) collateral whose value is included incalculating the borrowing base having a fair market value in excess of $2.2 million or (b) other collateral having a fair market value inexcess of $25 million;•The obligations of any guarantor under any guarantee of the indebtedness under the Credit Facility are materially limited or terminated byoperation of law or any guarantor repudiates or purports to repudiate any such guaranty;•Default by us or our restricted subsidiaries in the payment at final maturity of any other indebtedness with a principal amount in excess of$25 million, or any default in the performance of any obligation or condition with respect to such indebtedness beyond the applicable graceperiod if the effect of the default is to permit or cause the acceleration of the indebtedness;•Bankruptcy or insolvency events involving us or our restricted subsidiaries;•The entry, and failure to pay, of one or more adverse judgments in excess of $25 million (except to the extent fully covered by aninsurance policy pursuant to which the insurer has not denied coverage), upon which enforcement proceedings are commenced or that arenot stayed pending appeal;•The occurrence of a change in control (as defined in the Credit Facility);•The invalidity or unenforceability of any loan document; and•The occurrence of certain ERISA events.Off-balance sheet arrangementsAs of December 31, 2018, we had no off-balance sheet instruments or financial arrangements, other than operating leases and letters of creditentered into in the ordinary course of business.48Table of ContentsContractual obligationsThe following table summarizes our significant contractual obligations and other long- term liabilities as of December 31, 2018 (in thousands): 2019 2020 2021 2022 2023 Thereafter TotalSenior Notes due 2021 (1)$25,000 $25,000 $418,750 $— $— $— $468,750Credit Facility (2)5,200 5,200 121,600 — — — 132,000Other Debt1,167 489 — — — — 1,656Operating Leases17,536 14,826 12,800 11,202 5,701 15,069 77,134Letters of Credit4,118 7,785 516 1,212 — — 13,631Pension340 316 320 361 352 6,343 8,032Total$53,361 $53,616 $553,986 $12,775 $6,053 $21,412 $701,203(1) Includes interest on $400 million of senior notes at 6.25% that are due in October 2021.(2) Includes interest on $119 million of Credit Facility drawn.As discussed in Note 9 Income Taxes, as of December 31, 2018 the Company has approximately $13.3 million of liabilities associated withuncertain tax positions in the various jurisdictions in which the Company conducts business. Due to the uncertain and complex application of thetax regulations, combined with the difficulty in predicting when tax audits throughout the world may be concluded, the Company cannot makeprecise estimates of the timing of cash outflows relating to these liabilities. Accordingly, liabilities associated with uncertain tax positions havebeen excluded from the contractual obligations table above.InflationGlobal inflation has been relatively low in recent years and did not have a material impact on our results of operations during 2018, 2017 or 2016.Although the impact of inflation has been insignificant in recent years, it is still a factor in the global economy and we do experience inflationarypressure on the cost of raw materials and components used in our products.49Table of ContentsCritical accounting policies and estimatesThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which havebeen prepared in accordance with GAAP. In preparing our consolidated financial statements, we make judgments, estimates and assumptionsaffecting the amounts reported. We base our estimates on factors including historical experience and various assumptions that we believe arereasonable under the circumstances. These factors form the basis for making estimates about the carrying values of assets and liabilities that arenot readily apparent from other sources. Certain accounting policies involve judgments and uncertainties to such an extent that there is areasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had beenused. We evaluate our estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used inpreparation of our consolidated financial statements.In order to provide a better understanding of how we make judgments, and develop estimates and assumptions about future events, we havedescribed our most critical accounting policies below. We believe that these accounting policies reflect our more significant estimates andassumptions used in preparation of our consolidated financial statements.Revenue recognitionRevenue is recognized in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic606”) when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to beentitled to in exchange for those goods or services.Contract Identification. We account for a contract when it is approved, both parties are committed, the rights of the parties are identified, paymentterms are defined, the contract has commercial substance and collection of consideration is probable.Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under Topic606. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. Forcontracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price.In accordance with Topic 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in thecontext of the contract with the customer. We have elected to apply the practical expedient to account for shipping and handling costs associatedwith outbound freight after control of a product has transferred to a customer as a fulfillment cost which is included in Cost of Sales. Furthermore,since our customer payment terms are short-term in nature, we have also elected to apply the practical expedient which allows an entity to notadjust for the effects of a significant financing component if it expects that the customer’s payment period will be less than one year in duration.Contract Value. Revenue is measured based on the amount of consideration specified in the contracts with our customers and excludes anyamounts collected on behalf of third parties. We have elected the practical expedient to exclude amounts collected from customers for all sales(and other similar) taxes.The estimation of total revenue from a customer contract is subject to elements of variable consideration. Certain customers may receive rebatesor discounts which are accounted for as variable consideration. We estimate variable consideration as the most likely amount to which we expectto be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulativerevenue will not occur when the uncertainty associated with the variable consideration is resolved. Our estimate of variable consideration anddetermination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performanceand all information (historic, current, forecast) that is reasonably available to us.Timing of Recognition. We recognize revenue when we satisfy a performance obligation by transferring control of a product or service to acustomer. Our performance obligations are satisfied at a point in time or over time as work progresses.Revenue from goods transferred to customers at a point in time accounted for 97% of revenues for the year 2018. The majority of this revenue isproduct sales, which are generally recognized when items are shipped from our facilities and title passes to the customer. The amount of revenuerecognized for products is adjusted for expected returns, which are estimated based on historical data.Revenue from goods transferred to customers over time accounted for 3% of revenues for the year 2018, which is related to certain contracts inour Subsea and Production Equipment product lines. Recognition over time for these contracts is supported by our assessment of the productssupplied as having no alternative use to us and by clauses in the contracts that provide us with an enforceable right to payment for performancecompleted to date. We use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of assets to the50Table of Contentscustomer which occurs as costs are incurred on the contract. The amount of revenue recognized is calculated based on the ratio of costs incurredto-date compared to total estimated costs which requires management to calculate reasonably dependable estimates of total contract costs.Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creatinga loss, a provision for the total estimated loss is recorded in that period. We recognize revenue and cost of sales each period based upon theadvancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of profit to beestablished. In such cases, no profit is recognized during the period.Accounting estimates during the course of projects may change, primarily related to our remotely operated vehicles (“ROVs”) which may takelonger to manufacture. The effect of such a change, which can be upward as well as downward, is accounted for in the period of change, and thecumulative income recognized to date is adjusted to reflect the latest estimates. These revisions to estimates are accounted for on a prospectivebasis.Contracts are sometimes modified to account for changes in product specifications or requirements. Most of our contract modifications are forgoods and services that are not distinct from the existing contract. As such, these modifications are accounted for as if they were part of theexisting contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance obligationto which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis. No adjustment to any one contract was material toour consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.We sell our products through a number of channels including a direct sales force, marketing representatives, and distributors. We have elected toexpense sales commissions when incurred as the amortization period would be less than one year. These costs are recorded within cost of sales.Portfolio Approach. We have elected to apply the new revenue standard to a portfolio of contracts with similar characteristics as we reasonablyexpect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidanceto the individual contracts within that portfolio.Disaggregated Revenue. Refer to Note 16 Business Segments for disaggregated revenue by product line and geography.Contract Balances. Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goodsand services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, when we receiveconsideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under theterms of a sales contract, we record a contract liability. Such contract liabilities typically result from billings in excess of costs incurred onconstruction contracts and advance payments received on product sales.Stock based compensationWe account for awards of stock based compensation at fair value on the date granted to employees and recognize the compensation expense inour consolidated financial statements over the requisite service period. The fair value of stock based compensation was measured using the fairvalue of the common stock for restricted stock and restricted stock units, the Black-Scholes model for options, and a Monte Carlo Simulationmodel for performance share units. These models require assumptions and estimates for inputs, especially the estimate of the volatility in thevalue of the underlying share price, that affect the resultant values and hence the amount of compensation expense recognized.InventoriesInventory, consisting of finished goods and materials and supplies held for resale, is carried at the lower of cost or net realizable value. Weevaluate our inventories, based on an analysis of stocking levels, historical sales levels and future sales forecasts, to determine obsolete, slow-moving and excess inventory. While we have policies for calculating and recording reserves against inventory carrying values, we exercisejudgment in establishing and applying these policies.51Table of ContentsBusiness combinations, goodwill and other intangible assetsBusiness combinationsGoodwill acquired in connection with business combinations represents the excess of consideration over the fair value of net assets acquired.Certain assumptions and estimates are employed in evaluating the fair value of assets acquired and liabilities assumed. These estimates may beaffected by factors such as changing market conditions, technological advances in the oil and natural gas industry or changes in regulationsgoverning that industry. The most significant assumptions requiring judgment involve identifying and estimating the fair value of intangible assetsand the associated useful lives for establishing amortization periods. To finalize purchase accounting for significant acquisitions, we utilize theservices of independent valuation specialists to assist in the determination of the fair value of acquired intangible assets.Goodwill and intangible assets with indefinite livesFor goodwill and intangible assets with indefinite lives, an assessment for impairment is performed annually or when there is an indication animpairment may have occurred. We complete our annual impairment test for goodwill and other indefinite-lived intangibles using an assessmentdate of October 1. Goodwill is reviewed for impairment by comparing the carrying value of each of our seven reporting units’ net assets, includingallocated goodwill, to the estimated fair value of the reporting unit. We determine the fair value of our reporting units using a discounted cash flowapproach. We selected this valuation approach because we believe it, combined with our best judgment regarding underlying assumptions andestimates, provides the best estimate of fair value for each of our reporting units. Determining the fair value of a reporting unit requires the use ofestimates and assumptions. Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average costof capital, a terminal growth value, and future market conditions, among others. We believe that the estimates and assumptions used in ourimpairment assessments are reasonable. If the reporting unit’s carrying value is greater than its calculated fair value, we recognize a goodwillimpairment charge for the amount by which the carrying value of goodwill exceeds its fair value.For the years ended December 31, 2018 and 2017, we recognized goodwill impairment charges totaling $298.8 million and $68.0 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statement of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges.There was no goodwill impairment recorded during the year ended December 31, 2016.There are significant inherent uncertainties and management judgment in estimating the fair value of each reporting unit. While we believe we havemade reasonable estimates and assumptions to estimate the fair value of our reporting units, it is possible that a material change could occur. Ifactual results are not consistent with our current estimates and assumptions, or if changes in macroeconomic conditions outside the control ofmanagement change such that it results in a significant negative impact to our estimated fair values, the fair value of these reporting units maydecrease below their net carrying value, which could result in a material impairment of our goodwill and intangible assets with indefinite lives.Intangible assets with definite livesIntangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amountmay not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset are estimated. Ifthe undiscounted future cash flows are less than the carrying amount of the assets, there is an indication that the asset may be impaired. Theamount of the impairment is measured as the difference between the carrying value and the estimated fair value of the asset. The fair value isdetermined either through the use of an external valuation, or by means of an analysis of discounted future cash flows.For the years ended December 31, 2018 and 2017, we recognized intangible asset impairment charges totaling $64.7 million and $1.1 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statements of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges. There were no impairments of intangible assets during the yearended December 31, 2016.52Table of ContentsIncome taxesWe follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined basedupon temporary differences between the carrying amounts and tax bases of our assets and liabilities at the balance sheet date, and are measuredusing enacted tax rates and laws that will be in effect when the differences are expected to reverse. We recognize deferred tax assets to theextent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive andnegative evidence, including future reversals of existing temporary differences, projected future taxable income, including the effect of U.S. taxreform, tax-planning and recent operating results. Any changes in our judgment as to the realizability of our deferred tax assets are recorded as anadjustment to the deferred tax asset valuation allowance in the period the change occurs.The accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining thatthe relevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than not”recognition criteria, the accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of beingrealized upon ultimate settlement. If management determines that likelihood of sustaining the realization of the tax benefit is less than or equal to50%, then the tax benefit is not recognized in the consolidated financial statements.We have operations in countries other than the U.S. Consequently, we are subject to the jurisdiction of a number of taxing authorities. The finaldetermination of tax liabilities involves the interpretation of local tax laws, tax treaties, and related authorities in each jurisdiction. Changes in theoperating environment, including changes in tax law or interpretation of tax law and currency repatriation controls, could impact the determinationof our tax liabilities for a given tax year.During 2018, we completed our analysis of the impact of U.S. tax reform enacted in December 2017 based on further guidance provided on thenew tax law by the U.S. Treasury Department and Internal Revenue Service. As allowed under U.S. GAAP, we recorded a provisional net chargeof $10.1 million during the fourth quarter of 2017 for the effects of U.S. tax reform. We finalized our accounting for the effects of U.S. tax reformduring 2018 based on the additional guidance issued and recognized an income tax benefit of $15.6 million resulting in an overall net tax benefitrelated to U.S. tax reform of $5.5 million.For the years ended December 31, 2018 and 2017, we recognized tax expense for valuation allowances totaling $50.0 million and $4.5 million,respectively. See Note 9 Income Taxes for further information related to these charges.Property and equipmentProperty and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on theestimated useful lives of assets, generally 3 to 30 years. We have established standard useful lives for certain classes of assets.We review long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset and itseventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication thatthe asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair valueof the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cashflows based on expected utilization. The impairment loss recognized represents the excess of an assets’ carrying value as compared to itsestimated fair value.Recognition of provisions for contingenciesIn the ordinary course of business, we are subject to various claims, suits and complaints. We, in consultation with internal and external legaladvisors, will provide for a contingent loss in the consolidated financial statements if, at the date of the consolidated financial statements, it isprobable that a liability has been incurred and the amount can be reasonably estimated. If it is determined that the reasonable estimate of the lossis a range and that there is no best estimate within that range, a provision will be made for the lower amount of the range. Legal costs areexpensed as incurred.An assessment is made of the areas where potential claims may arise under contract warranty clauses. Where a specific risk is identified, and thepotential for a claim is assessed as probable and can be reasonably estimated, an appropriate warranty provision is recorded. Warranty provisionsare eliminated at the end of the warranty period except53Table of Contentswhere warranty claims are still outstanding. The liability for product warranty is included in other accrued liabilities in the consolidated balancesheets.Recent accounting pronouncementsFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of thespecified effective date. Refer to Note 2 Summary of Significant Accounting Policies for information related to recent accounting pronouncements.54Table of ContentsCautionary note regarding forward-looking statementsThis Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’scontrol. All statements, other than statements of historical fact, included in this Annual Report on Form 10-K regarding our strategy, futureoperations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-lookingstatements. When used in this Annual Report on Form 10-K, 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.Forward-looking statements may include, but are not limited to, statements about the following subjects:•business strategy;•cash flows and liquidity;•the volatility and impact of changes in oil and natural gas prices;•the availability of raw materials and specialized equipment;•the time to complete infrastructure to support our and our customers’ operations, such as the construction of additional pipeline capacity inthe Permian;•our ability to accurately predict customer demand;•customer order cancellations or deferrals;•competition in the oil and natural gas industry;•governmental regulation and taxation of the oil and natural gas industry;•environmental liabilities;•political, social and economic issues affecting the countries in which we do business;•our ability to deliver our backlog in a timely fashion;•our ability to implement new technologies and services;•availability and terms of capital;•general economic conditions;•our ability to successfully manage our growth, including risks and uncertainties associated with integrating and retaining key employees ofthe businesses we acquire;•benefits of our acquisitions;•availability of key management personnel;•availability of skilled and qualified labor;•operating hazards inherent in our industry;•the continued influence of our largest shareholder;•the ability to establish and maintain effective internal control over financial reporting;•financial strategy, budget, projections and operating results;•uncertainty regarding our future operating results; and•plans, objectives, expectations and intentions contained in this report that are not historical.All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We disclaim any obligation to update or revise thesestatements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that ourplans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on Form 10-K arereasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that couldcause our actual results to differ materially from our expectations in “Risk Factors” and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and elsewhere in this Annual Report on Form 10-K. These cautionary statements qualify all forward-lookingstatements attributable to us or persons acting on our behalf.55Table of ContentsItem 7A. Quantitative and qualitative disclosures about market riskWe are currently exposed to market risk from changes in foreign currency and interest rates. From time to time, we may enter into derivativefinancial instrument transactions to manage or reduce our market risk, but we do not enter into derivative transactions for speculative purposes. Adiscussion of our market risk exposure in financial instruments follows.Non-U.S. currency exchange ratesIn certain regions, we conduct our business in currencies other than the U.S. dollar and for the majority of our non-U.S. operations, the functionalcurrency is the applicable local currency. We operate primarily in the U.S., Canadian, U.K., and European markets, and as a result, our primaryexposure to fluctuations in currency exchange rates relates to fluctuations between the U.S. dollar and the Canadian dollar, the British poundsterling, the Euro, and, to a lesser degree, the Mexican Peso and the Singapore dollar. In countries in which we operate in the local currency, theeffects of currency fluctuations are largely mitigated because local expenses of such operations are also generally denominated in the localcurrency. There may be instances, however, in which costs and revenue will not be matched with respect to currency denomination. As a result,we may experience economic losses and a negative impact on earnings or net assets solely as a result of foreign currency exchange ratefluctuations.Realized and unrealized gains and losses resulting from re-measurements of monetary assets and liabilities denominated in a currency other thanthe local entity’s functional currency are included in the consolidated statements of comprehensive loss as incurred. Our consolidated statementsof comprehensive loss include foreign exchange gains of $5.4 million and losses of $7.9 million for the years ended December 31, 2018 and 2017,respectively.Assets and liabilities for which the functional currency is not the U.S. dollar are translated using the exchange rates in effect at the balance sheetdate, resulting in translation adjustments included in accumulated other comprehensive loss in the stockholders’ equity section of our consolidatedbalance sheets. For the year ended December 31, 2018, net foreign currency translation losses of $24.8 million are included in othercomprehensive loss for the year ended December 31, 2018 to reflect the net impact of the general weakening of other applicable currenciesagainst the U.S. dollar. This translation loss was caused primarily by the relative weakening of the British pound sterling and the Euro, as theydepreciated 6% and 4%, respectively, relative to the U.S. dollar from December 31, 2017 to December 31, 2018.Interest ratesAt December 31, 2018, our principal amount of debt outstanding included $400.0 million of Senior Notes which bear interest at a fixed rate of6.25%, and $119.0 million of borrowings outstanding under our Credit Facility which are subject to a variable interest rate as determined by thecredit agreement. Borrowings on our Credit Facility are exposed to interest rate risk associated with changes in market interest rates.56 Item 8. Consolidated Financial Statements and Supplementary Data PageReport of independent registered public accounting firm58Consolidated statements of comprehensive loss for the years ended December 31, 2018, 2017 and 201660Consolidated balance sheets as of December 31, 2018 and 201761Consolidated statements of cash flows for the years ended December 31, 2018, 2017 and 201662Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2018, 2017 and 201663Notes to consolidated financial statements6457Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Forum Energy Technologies, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Forum Energy Technologies, Inc. and its subsidiaries (the “Company”) as ofDecember 31, 2018 and 2017, and the related consolidated statements of comprehensive loss, of changes in stockholders’ equity and of cashflows for each of the three years in the period ended December 31, 2018,including the related notes (collectively referred to as the “consolidatedfinancial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018,based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Companyas of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Companymaintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established inInternal Control - Integrated Framework (2013) issued by the COSO.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financialreporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on InternalControl over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financialstatements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with thePublic Company Accounting Oversight Board (United States) (the”PCAOB”) and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and thePCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, andwhether effective internal control over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of theconsolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directorsof the company; and (iii) provide reasonable assurance regarding58prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPHouston, TexasFebruary 28, 2019We have served as the Company’s auditor since 2005.59 Forum Energy Technologies, Inc. and subsidiariesConsolidated statements of comprehensive loss Year ended December 31,(in thousands, except per share information)2018 2017 2016Revenues$1,064,219 $818,620 $587,635Cost of sales807,847 629,832 487,900Gross profit256,372 188,788 99,735Operating expenses Selling, general and administrative expenses286,980 253,713 227,008Goodwill and intangible asset impairments363,522 69,062 —Transaction expenses3,446 6,511 865Loss (gain) on disposal of assets and other(438) 2,097 2,638Total operating expenses653,510 331,383 230,511Earnings from equity investment140 1,000 1,824Operating loss(396,998) (141,595) (128,952)Other expense (income) Interest expense32,532 26,808 27,410Foreign exchange losses (gains) and other, net(6,270) 7,268 (21,341)Gain on contribution of subsea rentals business(33,506) — —Gain realized on previously held equity investment— (120,392) —Deferred loan costs written off— — 2,978Total other expense (income), net(7,244) (86,316) 9,047Loss before income taxes(389,754) (55,279) (137,999)Income tax expense (benefit)(15,674) 4,121 (56,051)Net loss(374,080) (59,400) (81,948)Less: Income attributable to noncontrolling interest— — 30Net loss attributable to common stockholders(374,080) (59,400) (81,978) Weighted average shares outstanding Basic108,771 98,689 91,226Diluted108,771 98,689 91,226Loss per share Basic$(3.44) $(0.60) $(0.90)Diluted$(3.44) $(0.60) $(0.90) Other comprehensive income (loss), net of tax: Net loss(374,080) (59,400) (81,948)Change in foreign currency translation, net of tax of $0(24,752) 36,163 (45,722)Gain (loss) on pension liability1,489 107 (335)Comprehensive loss(397,343) (23,130) (128,005)Less: comprehensive loss attributable to noncontrolling interests— — (162)Comprehensive loss attributable to common stockholders$(397,343) $(23,130) $(128,167)The accompanying notes are an integral part of these consolidated financial statements.60 Forum Energy Technologies, Inc. and subsidiariesConsolidated balance sheets(in thousands, except share information)December 31, 2018 December 31, 2017Assets Current assets Cash and cash equivalents$47,241 $115,216Accounts receivable—trade, net206,055 202,914Inventories, net479,023 443,177Prepaid expenses and other current assets23,677 19,490Costs and estimated profits in excess of billings9,159 9,584Accrued revenue862 —Total current assets766,017 790,381Property and equipment, net of accumulated depreciation177,358 197,281Deferred financing costs, net2,071 2,900Intangibles, net359,048 443,064Goodwill469,647 755,245Investment in unconsolidated subsidiary44,982 —Deferred income taxes, net1,234 3,344Other long-term assets9,295 3,013Total assets$1,829,652 $2,195,228Liabilities and Equity Current liabilities Current portion of long-term debt$1,167 $1,156Accounts payable—trade143,186 137,684Accrued liabilities81,032 66,765Deferred revenue8,335 8,819Billings in excess of costs and profits recognized3,210 1,881Total current liabilities236,930 216,305Long-term debt, net of current portion517,544 506,750Deferred income taxes, net15,299 31,232Other long-term liabilities29,753 31,925Total liabilities799,526 786,212Commitments and contingencies Equity Common stock, $0.01 par value, 296,000,000 shares authorized, 117,411,158 and 116,343,656shares issued1,174 1,163Additional paid-in capital1,214,928 1,195,339Treasury stock at cost, 8,200,477 and 8,190,362 shares(134,434) (134,293)Retained earnings63,688 438,774Accumulated other comprehensive loss(115,230) (91,967)Total stockholders’ equity1,030,126 1,409,016Total liabilities and equity$1,829,652 $2,195,228The accompanying notes are an integral part of these consolidated financial statements.61 Forum Energy Technologies, Inc. and subsidiariesConsolidated statements of cash flows Year ended December 31,(in thousands, except share information)2018 2017 2016Cash flows from operating activities Net loss$(374,080) $(59,400) $(81,948)Adjustments to reconcile net loss to net cash provided by (used in) investing activities: Depreciation expense33,148 34,401 35,636Amortization of intangible assets41,360 30,728 26,124Goodwill and intangible asset impairments363,522 69,062 —Inventory write downs36,606 14,620 25,537Stock-based compensation expense19,927 20,310 20,535(Earnings) loss from unconsolidated subsidiaries, net of distributions(140) 2,073 (1,421)Gain on contribution of subsea rentals business(33,506) — —Gain realized on previously held equity investment— (120,392) —Deferred income taxes(13,552) 149 (24,418)Deferred loan costs written off— — 2,978Provision for doubtful accounts3,342 2,903 485Other1,086 3,886 4,389Changes in operating assets and liabilities Accounts receivable—trade(4,833) (64,844) 29,450Inventories(60,903) (66,646) 57,294Prepaid expenses and other current assets(7,980) 12,462 1,071Income tax receivable— 30,929 (32,801)Cost and estimated profits in excess of billings1,273 (171) 1,897Accounts payable, deferred revenue and other accrued liabilities(4,192) 52,142 3,799Billings in excess of costs and estimated profits earned1,329 (2,245) (3,865)Net cash provided by (used in) operating activities$2,407 $(40,033) $64,742Cash flows from investing activities Capital expenditures for property and equipment(24,043) (26,709) (16,828)Acquisition of businesses, net of cash acquired(60,622) (162,189) (4,072)Investment in unconsolidated subsidiary— (1,041) —Proceeds from sale of business, property and equipment9,258 1,971 9,763Net cash used in investing activities$(75,407) $(187,968) $(11,137)Cash flows from financing activities Borrowings of debt221,980 107,431 —Repayments of debt(211,783) — —Repurchases of stock(2,777) (4,742) (623)Proceeds from stock issuance249 1,491 87,676Payment of capital lease obligations(1,147) (1,187) (92)Deferred financing costs— (2,430) (766)Net cash provided by financing activities$6,522 $100,563 $86,195 Effect of exchange rate changes on cash(1,497) 8,232 (14,627) Net increase (decrease) in cash, cash equivalents and restricted cash(67,975) (119,206) 125,173Cash, cash equivalents and restricted cash at beginning of period115,216 234,422 109,249Cash, cash equivalents and restricted cash at end of period$47,241 $115,216 $234,422Supplemental cash flow disclosures Cash paid for interest30,269 25,986 26,331Cash paid (refunded) for income taxes5,560 (29,094) (6,273)Noncash investing and financing activities Acquisition via issuance of stock— 177,972 —Assets contributed for equity method investment18,070 — —Note receivable related to equity method investment transaction4,067 — —Accrued purchases of property and equipment1,708 1,398 797Accrued consideration for acquisition4,650 — —The accompanying notes are an integral part of these consolidated financial statements.62 Forum Energy Technologies, Inc. and subsidiariesConsolidated statements of changes in stockholders’ equity Common stock Additionalpaid incapital Treasury shares Retainedearnings Accumulatedothercomprehensiveincome / (loss) Totalcommonstockholders’equity NoncontrollingInterest Totalequity Shares Amount Shares Amount (in thousands of dollars, except share information)Balance at December 31,2015 98,605,902 $986 $891,248 (8,145,802) $(133,318) $580,152 $(82,048) $1,257,020 $397 $1,257,417Restricted stock issuance, netof forfeitures 670,769 6 (1,051) — — — — (1,045) — (1,045)Stock-based compensationexpense — — 20,535 — — — — 20,535 — 20,535Exercised stock options 151,335 2 1,710 — — — — 1,712 — 1,712Issuance of performanceshares 42,443 1 (48) — — — — (47) — (47)Shares issued in employeestock purchase plan 186,679 2 1,976 — — — — 1,978 — 1,978Equity offering 4,025,000 40 85,038 — — — — 85,078 — 85,078Treasury stock — — — (29,161) (623) — — (623) — (623)Excess tax benefits — — (1,239) — — — — (1,239) — (1,239)Change in pension liability — — — — — — (335) (335) — (335)Currency translation adjustment — — — — — — (45,854) (45,854) 132 (45,722)Net Loss — — — — — (81,978) — (81,978) 30 (81,948)Balance at December 31,2016 103,682,128 $1,037 $998,169 (8,174,963) $(133,941) $498,174 $(128,237) $1,235,202 $559 $1,235,761Restricted stock issuance, netof forfeitures 429,321 3 (3,152) — — — — (3,149) — (3,149)Stock-based compensationexpense — — 20,310 — — — — 20,310 — 20,310Exercised stock options 161,233 2 1,489 — — — — 1,491 — 1,491Issuance of performanceshares 250,643 3 (1,244) — — — — (1,241) — (1,241)Shares issued in employeestock purchase plan 135,882 1 1,912 — — — — 1,913 — 1,913Shares issued for acquisition 11,684,449 117 177,855 177,972 177,972Sale of non-controlling interest — — — — — — — — (559) (559)Treasury stock — — — (15,399) (352) — — (352) — (352)Change in pension liability — — — — — — 107 107 — 107Currency translation adjustment — — — — — — 36,163 36,163 — 36,163Net Loss — — — — — (59,400) — (59,400) — (59,400)Balance at December 31,2017 116,343,656 $1,163 $1,195,339 (8,190,362) $(134,293) $438,774 $(91,967) $1,409,016 $— $1,409,016Restricted stock issuance, netof forfeitures 702,145 7 (2,370) — — — — (2,363) — (2,363)Stock-based compensationexpense — — 19,927 — — — — 19,927 — 19,927Exercised stock options 35,261 — 249 — — — — 249 — 249Issuance of performanceshares 156,953 2 (275) — — — — (273) — (273)Shares issued in employeestock purchase plan 164,743 2 1,933 — — — — 1,935 — 1,935Contingent shares issued foracquisition of Cooper 8,400 — 125 — — — — 125 — 125Treasury stock — — — (10,115) (141) — — (141) — (141) Adjustment for adoption ofASU 2016-16 (Intra-entity assettransfers) — — — — — (1,006) — (1,006) — (1,006)Change in pension liability — — — — — — 1,489 1,489 — 1,489Currency translation adjustment — — — — — — (24,752) (24,752) — (24,752)Net Loss — — — — — (374,080) — (374,080) — (374,080)Balance at December 31,2018 117,411,158 $1,174 $1,214,928 (8,200,477) $(134,434) $63,688 $(115,230) $1,030,126 $— $1,030,126The accompanying notes are an integral part of these consolidated financial statements.63Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements1. Nature of OperationsForum 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 distributesproducts, and engages in aftermarket services, parts supply and related services that complement the Company’s product offering.2. Summary of Significant Accounting PoliciesBasis of presentationThe accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“GAAP”).Principles of consolidationThe consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries after elimination ofintercompany balances and transactions. Noncontrolling interest principally represents ownership by others of the equity in our consolidatedmajority owned South African subsidiary. In the first quarter of 2017, we sold our South African subsidiary.Our investments in operating entities where we have the ability to exert significant influence, but do not control operating and financial policies, areaccounted for using the equity method of accounting with our share of the net income reported in “Earnings from equity investment” in theconsolidated statements of comprehensive loss and the investments reported in “Investment in unconsolidated subsidiary” in the consolidatedbalance sheets. The Company’s share of equity earnings are reported within operating loss as the operations of investees are integral to theoperations of the Company.Prior to acquiring the remaining membership interest of Global Tubing, LLC (“Global Tubing”) on October 2, 2017, the Company’s investment wasaccounted for using the equity method of accounting. Refer to Note 4 Acquisitions & Dispositions for further discussion on the acquisition of theremaining shares of Global Tubing, LLC.On January 3, 2018, the Company contributed Forum Subsea Rentals (“FSR”) into Ashtead Technology, a competing business, in exchange for a40% interest in the combined business. After the merger, our interest in the combined business is accounted for using the equity method ofaccounting. Refer to Note 4 Acquisitions & Dispositions for further discussion.Use of estimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and thereported amounts of revenues and expenses during the reporting period.In the preparation of these consolidated financial statements, estimates and assumptions have been made by management including, amongothers, costs to complete contracts, an assessment of percentage of completion of projects, the selection of useful lives of tangible and intangibleassets, fair value of reporting units used for goodwill impairment testing, fair value associated with business combinations, expected future cashflows from long lived assets to support impairment tests, provisions necessary for trade receivables, amounts of deferred taxes and income taxcontingencies. Actual results could differ from these estimates.The financial reporting of contracts depends on estimates, which are assessed continually during the term of those contracts. Recognizedrevenues and income are subject to revisions as the contract progresses to completion and changes in estimates are reflected in the period inwhich the facts that give rise to the revisions become known. Additional information that enhances and refines the estimating process that isobtained after the balance sheet date, but before issuance of the consolidated financial statements is reflected in the consolidated financialstatements.Cash and cash equivalentsCash and cash equivalents consist of cash on deposit and high quality, short term money market instruments with an original maturity of threemonths or less. Cash equivalents are based on quoted market prices, a Level 1 fair value measure.64Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Accounts receivable-tradeTrade accounts receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thusreceivables do not bear interest, although a finance charge may be applied to amounts past due. We maintain an allowance for doubtful accountsfor estimated losses that may result from the inability of our customers to make required payments. Such allowances are based upon severalfactors including, but not limited to, credit approval practices, industry and customer historical experience as well as the current and projectedfinancial condition of the specific customer. Accounts receivable outstanding longer than contractual terms are considered past due. We write offaccounts receivable to the allowance for doubtful accounts when they become uncollectible. Any payments subsequently received on receivablespreviously written off are credited to bad debt expense.The change in amounts of the allowance for doubtful accounts during the three year period ended December 31, 2018 is as follows (in thousands):Period ended Balance at beginningof period Charged to expense Deductions orother Balance at end ofperiodDecember 31, 2016 $8,119 $485 $(5,273) $3,331December 31, 2017 3,331 2,903 (439) 5,795December 31, 2018 5,795 3,342 (1,705) 7,432InventoriesInventory consisting of finished goods and materials and supplies held for resale is carried at the lower of cost or net realizable value. For certainoperations, cost, which includes the cost of raw materials and labor for finished goods, is determined using standard cost which approximates afirst-in first-out basis. For other operations, this cost is determined on an average cost, first-in first-out or specific identification basis. Netrealizable value means estimated selling price in the ordinary business, less reasonably predictable cost of completion, disposal, andtransportation. We continuously evaluate inventories based on an analysis of inventory levels, historical sales experience and future salesforecasts, to determine obsolete, slow-moving and excess inventory. Adjustments to reduce such inventory to its net realizable value have beenrecorded.Property and equipmentProperty and equipment are stated at cost less accumulated depreciation. Capital leases of property and equipment are stated at the present valueof minimum lease payments. Expenditures for property and equipment and for items which substantially increase the useful lives of existingassets are capitalized at cost and depreciated over their estimated useful life utilizing the straight-line method. Routine expenditures for repairsand maintenance are expensed as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives ofassets, generally 3 to 30 years. Property and equipment held under capital leases are amortized straight-line over the shorter of the lease term orestimated useful life of the asset. Gains or losses resulting from the disposition of assets are recognized in income with the related asset cost andaccumulated depreciation removed from the balance sheet. Assets acquired in connection with business combinations are recorded at fair value.Rental equipment consists of equipment rented to customers under short-term rental agreements. Rental equipment is recorded at cost anddepreciated using the straight-line method over the estimated useful life of three to ten years.We review long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. In performing the review for impairment, future cash flows expected to result from the use of the asset and itseventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication thatthe asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair valueof the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cashflows based on expected utilization. For the year ended December 31, 2016, the Company recorded an impairment loss of $4.3 million related toan operation in South Africa and one of the Company’s Texas facilities. For the years ended December 31, 2018 and 2017, no significantimpairments were recorded.We record the fair value of asset retirement obligations as a liability in the period in which the associated legal obligation is incurred. The fair valueof the obligation is recorded as a liability and capitalized as part of the related asset. Over time, the liability is accreted to its future value and thecapitalized cost is depreciated over the estimated useful life of65Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)the related asset. The current portion of the liability is included in other accrued liabilities and non-current portion is included in other long-termliabilities on the consolidated balance sheets.Goodwill and intangible assetsFor goodwill and intangible assets with indefinite lives, an assessment for impairment is performed annually or when there is an indication animpairment may have occurred. We complete our annual impairment test for goodwill and other indefinite-lived intangibles using an assessmentdate of October 1. Goodwill is reviewed for impairment by comparing the carrying value of each of our seven reporting units’ net assets, includingallocated goodwill, to the estimated fair value of the reporting unit. We determine the fair value of our reporting units using a discounted cash flowapproach. We selected this valuation approach because we believe it, combined with our best judgment regarding underlying assumptions andestimates, provides the best estimate of fair value for each of our reporting units. Determining the fair value of a reporting unit requires the use ofestimates and assumptions. Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average costof capital, a terminal growth value, and future market conditions, among others. We believe that the estimates and assumptions used in ourimpairment assessments are reasonable. If the reporting unit’s carrying value is greater than its calculated fair value, we recognize a goodwillimpairment charge for the amount by which the carrying value of goodwill exceeds its fair value.For the years ended December 31, 2018 and 2017, we recognized goodwill impairment charges totaling $298.8 million and $68.0 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statements of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges. There were no impairments of goodwill during the year endedDecember 31, 2016.Intangible assets with definite lives are comprised of customer and distributor relationships, patents and technology, trade names, trademarks andnon-compete agreements which are amortized on a straight-line basis over the life of the intangible asset, generally three to seventeen years.These assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.In performing the review for impairment, future cash flows expected to result from the use of the asset are estimated. Such estimates andassumptions include revenue growth rates, future operating margins, the weighted average cost of capital, a terminal growth value, and futuremarket conditions, among others. If the undiscounted future cash flows are less than the carrying amount of the assets, there is an indication thatthe asset may be impaired. The amount of the impairment is measured as the difference between the carrying value and the estimated fair valueof the asset. The fair value is determined either through the use of an external valuation, or by means of an analysis of discounted future cashflows.For the years ended December 31, 2018 and 2017, we recognized intangible asset impairment charges totaling $64.7 million and $1.1 million,respectively, which are included in “Goodwill and intangible asset impairments” in the consolidated statements of comprehensive loss. See Note 7Goodwill and Intangible Assets for further information related to these charges. There were no impairments of intangible assets during the yearended December 31, 2016.Recognition of provisions for contingenciesIn the ordinary course of business, we are subject to various claims, suits and complaints. We, in consultation with internal and external legaladvisors, will provide for a contingent loss in the consolidated financial statements if, at the date of the consolidated financial statements, it isprobable that a liability has been incurred and the amount can be reasonably estimated. If it is determined that the reasonable estimate of the lossis a range and that there is no best estimate within that range, a provision will be made for the lower amount of the range. Legal costs areexpensed as incurred.An assessment is made of the areas where potential claims may arise under contract warranty clauses. Where a specific risk is identified, and thepotential for a claim is assessed as probable and can be reasonably estimated, an appropriate warranty provision is recorded. Warranty provisionsare eliminated at the end of the warranty period except where warranty claims are still outstanding. The liability for product warranty is included inother accrued liabilities in the consolidated balance sheets.66Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Changes in the Company’s warranty liability were as follows (in thousands):Period ended Balance at beginningof period Charged toexpense Deductions orother Balance at end ofperiodDecember 31, 2016 $5,697 $4,031 $(6,504) $3,224December 31, 2017 3,224 3,172 (2,776) 3,620December 31, 2018 3,620 1,487 (2,237) 2,870Revenue recognition and deferred revenueRevenue is recognized in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic606”) when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to beentitled to in exchange for those goods or services.Contract Identification. We account for a contract when it is approved, both parties are committed, the rights of the parties are identified, paymentterms are defined, the contract has commercial substance and collection of consideration is probable.Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under Topic606. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. Forcontracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price.In accordance with Topic 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in thecontext of the contract with the customer. We have elected to apply the practical expedient to account for shipping and handling costs associatedwith outbound freight after control of a product has transferred to a customer as a fulfillment cost which is included in Cost of Sales. Furthermore,since our customer payment terms are short-term in nature, we have also elected to apply the practical expedient which allows an entity to notadjust for the effects of a significant financing component if it expects that the customer’s payment period will be less than one year in duration.Contract Value. Revenue is measured based on the amount of consideration specified in the contracts with our customers and excludes anyamounts collected on behalf of third parties. We have elected the practical expedient to exclude amounts collected from customers for all sales(and other similar) taxes.The estimation of total revenue from a customer contract is subject to elements of variable consideration. Certain customers may receive rebatesor discounts which are accounted for as variable consideration. We estimate variable consideration as the most likely amount to which we expectto be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulativerevenue will not occur when the uncertainty associated with the variable consideration is resolved. Our estimate of variable consideration anddetermination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performanceand all information (historic, current, forecast) that is reasonably available to us.Timing of Recognition. We recognize revenue when we satisfy a performance obligation by transferring control of a product or service to acustomer. Our performance obligations are satisfied at a point in time or over time as work progresses.Revenue from goods transferred to customers at a point in time accounted for 97% of revenues for the year 2018. The majority of this revenue isproduct sales, which are generally recognized when items are shipped from our facilities and title passes to the customer. The amount of revenuerecognized for products is adjusted for expected returns, which are estimated based on historical data.Revenue from goods transferred to customers over time accounted for 3% of revenues for the year 2018, which is related to certain contracts inour Subsea and Production Equipment product lines. Recognition over time for these contracts is supported by our assessment of the productssupplied as having no alternative use to us and by clauses in the contracts that provide us with an enforceable right to payment for performancecompleted to date. We use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of assets to thecustomer which occurs as costs are incurred on the contract. The amount of revenue recognized is calculated based on the ratio of costs incurredto-date compared to total estimated costs which requires management to calculate reasonably dependable estimates of total contract costs.Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creatinga loss, a provision for the total67Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)estimated loss is recorded in that period. We recognize revenue and cost of sales each period based upon the advancement of the work-in-progress unless the stage of completion is insufficient to enable a reasonably certain forecast of profit to be established. In such cases, no profitis recognized during the period.Accounting estimates during the course of projects may change, primarily related to our remotely operated vehicles (“ROVs”) which may takelonger to manufacture. The effect of such a change, which can be upward as well as downward, is accounted for in the period of change, and thecumulative income recognized to date is adjusted to reflect the latest estimates. These revisions to estimates are accounted for on a prospectivebasis.Contracts are sometimes modified to account for changes in product specifications or requirements. Most of our contract modifications are forgoods and services that are not distinct from the existing contract. As such, these modifications are accounted for as if they were part of theexisting contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance obligationto which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis. No adjustment to any one contract was material toour consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.We sell our products through a number of channels including a direct sales force, marketing representatives, and distributors. We have elected toexpense sales commissions when incurred as the amortization period would be less than one year. These costs are recorded within cost of sales.Portfolio Approach. We have elected to apply the new revenue standard to a portfolio of contracts with similar characteristics as we reasonablyexpect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidanceto the individual contracts within that portfolio.Disaggregated Revenue. Refer to Note 16 Business Segments for disaggregated revenue by product line and geography.Contract Balances. Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goodsand services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, when we receiveconsideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under theterms of a sales contract, we record a contract liability. Such contract liabilities typically result from billings in excess of costs incurred onconstruction contracts and advance payments received on product sales.Concentration of credit riskFinancial instruments which potentially subject the Company to credit risk include trade accounts receivable. Trade accounts receivable consist ofuncollateralized receivables from domestic and international customers. For the years ended December 31, 2018, 2017 and 2016, no one customeraccounted for 10% or more of the total revenue or 10% or more of the total accounts receivable balance at the end of the respective period.Stock based compensationWe measure all stock based compensation awards at fair value on the date they are granted to employees and directors, and recognizecompensation cost over the requisite service period for awards with only a service condition, and over a graded vesting period for awards withservice and performance or market conditions.The fair value of stock based compensation awards with market conditions is measured using a Monte Carlo Simulation model and, in accordancewith Accounting Standards Codification (“ASC”) 718, is not adjusted based on actual achievement of the performance goals. The Black-Scholesoption pricing model is used to measure the fair value of options. The following sections address the assumptions used related to the Black-Scholes option pricing model:Expected lifeThe expected term of stock options represents the period the stock options are expected to remain outstanding and is based on the simplifiedmethod, which is the weighted average vesting term plus the original contractual term divided by two. We use the simplified method due to a lackof sufficient historical share option exercise experience upon which to estimate an expected term.Expected volatilityExpected volatility measures the amount that a stock price has fluctuated or is expected to fluctuate during a period and is estimated based on aweighted average of the Company’s historical stock price.68Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Dividend yieldWe have never declared or paid any cash dividends and do not plan to pay cash dividends for the foreseeable future. Therefore, a zero expecteddividend yield was used in the valuation model.Risk-free interest rateThe risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected life of the options.ForfeituresForfeitures are accounted for as they occur.Income taxesWe follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined basedupon temporary differences between the carrying amounts and tax bases of our assets and liabilities at the balance sheet date, and are measuredusing enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets andliabilities of a change in the tax rates is recognized in income in the period in which the change occurs. We record a valuation allowance in eachreporting period when management believes that it is more likely than not that any deferred tax asset created will not be realized. See Note 9Income Taxes for more information on the valuation allowances recognized in 2018.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. tax reform”) which significantly changed U.S. corporate income taxlaws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. As a result of the enactment of U.S. tax reform, we recognized$10.1 million of tax expense in the fourth quarter of 2017 and $15.6 million of tax benefit in 2018. Refer to Note 9 Income Taxes for furtherdiscussion.Accounting guidance for income taxes requires that we recognize the financial statement benefit of a tax position only after determining that therelevant tax authority would more likely than not sustain the position following an audit. If a tax position meets the “more likely than not”recognition criteria, accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of beingrealized upon ultimate settlement.Non-U.S. local currency translationWe have global operations and the majority of our non-U.S. operations have designated the local currency as the functional currency. Financialstatements of these non-U.S. operations where the functional currency is not the U.S. dollar are translated into U.S. dollars using the current ratemethod whereby assets and liabilities are translated at the balance sheet rate and income and expenses are translated into U.S. dollars at theaverage exchange rates in effect during the period. The resultant translation adjustments are reported as a component of accumulated othercomprehensive loss within stockholders’ equity. Realized and unrealized gains and losses resulting from remeasurements of monetary assets andliabilities denominated in a currency other than the local entity’s functional currency are included in the consolidated statements of comprehensiveloss as incurred.Fair valueThe carrying amounts for financial instruments classified as current assets and current liabilities approximate fair value, due to the short maturityof such instruments. The book values of other financial instruments, such as our debt related to the Credit Facility, approximates fair valuebecause interest rates charged are similar to other financial instruments with similar terms and maturities and the rates vary in accordance with amarket index.For the financial assets and liabilities disclosed at fair value, fair value is determined as the exit price, or the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The established fair valuehierarchy divides fair value measurement into three broad levels:•Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability toaccess at the measurement date;•Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly;and•Level 3 - inputs are unobservable for the asset or liability, which reflect the best judgment of management.69Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The financial assets and liabilities that are disclosed at fair value for disclosure purposes are categorized in one of the above three levels based onthe lowest level input that is significant to the fair value measurement in its entirety. Level 1 provides the most reliable measure of fair value,whereas Level 3 generally requires significant management judgment.Recent accounting pronouncementsFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of thespecified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yeteffective, will not have a material impact on our consolidated financial statements upon adoption.Accounting Standards Adopted in 2018Revenue Recognition. In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts withCustomers (“Topic 606”). Topic 606 supersedes existing revenue recognition guidance and requires revenue to be recognized when promisedgoods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchangefor those goods or services. We adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method applied to contractsthat were not completed as of that date. As such, the comparative information has not been restated and continues to be reported under theaccounting standards in effect for those periods. The adoption of Topic 606 did not have a material impact on the timing or amounts of revenuerecognized in our consolidated financial statements. We did not recognize any cumulative-effect adjustment to retained earnings upon adoption asthe impact was immaterial. Refer to Note 2 Summary of Significant Accounting Policies for additional information related to our revenue recognitionpolicies and Note 3 Revenues for incremental disclosures following the adoption of Topic 606.Modification Accounting for Stock Compensation. 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 paymentaward as a modification. Under the new ASU, an entity should apply modification accounting unless the fair value, the vesting conditions, and theclassification as equity or liability of the modified award all remain the same as the original award. We applied the update prospectively beginningJanuary 1, 2018. The adoption of this new guidance had no material impact on our consolidated financial statements.Clarifying the Definition of a Business. In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805) - Clarifying theDefinition of a Business, in an effort to clarify the definition of a business, with the objective of adding guidance to assist entities with evaluatingwhether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. We applied the update prospectivelybeginning January 1, 2018. The adoption of this new guidance had no material impact on our consolidated financial statements.Deferred Taxes on Intra-Entity Asset Transfers. In October 2016, the FASB issued ASU No. 2016-16 Income Tax (Topic 740) - Intra-EntityTransfers of Assets Other Than Inventory. Previous GAAP prohibited the recognition of current and deferred income taxes for an intra-entity assettransfer until the asset was sold to an outside party. This new guidance eliminated this exception and requires the income tax consequences of anintra-entity transfer of an asset other than inventory to be recognized when the transfer occurs. As required, we applied this update on a modifiedretrospective basis resulting in a $1.0 million direct cumulative-effect adjustment to retained earnings as of January 1, 2018.Statement of Cash Flows. In August 2016, the FASB issued ASU No. 2016-15 Cash Flow Statement (Topic 230) - Classification of Certain CashReceipts and Cash Payments. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity inpractice, 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 thesettlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitizationtransactions, and separately identifiable cash flows and application of the predominance principle. We adopted this new guidance in the firstquarter of 2018. The only issue currently relevant to the Company is distributions received from equity method investees, where the new guidanceallows an accounting policy election between the cumulative earnings approach and the nature of the distribution approach. We will continue to usethe cumulative earnings approach. Therefore, the adoption of this guidance did not have a material impact on our consolidated financialstatements.Restricted Cash Presentation. In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230) - Restricted Cash, aconsensus of the FASB Emerging Issues Task Force. This new guidance requires70Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described asrestricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents shouldbe included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement ofcash flows. We applied the update prospectively beginning January 1, 2018. The adoption of this new guidance did not have a material impact onour consolidated financial statements.Accounting Standards Issued But Not Yet AdoptedAccounting for Implementation Costs Related to a Cloud Computing Arrangement. In August 2018, the FASB issued ASU No. 2018-15Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This new guidance alignsthe requirements for capitalizing implementation costs incurred by an entity related to a cloud computing arrangement with the requirements forcapitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, this guidance requires an entity to capitalizecertain implementation costs incurred and then amortize them over the term of the cloud hosting arrangement. Furthermore, this guidance alsorequires an entity to present the expense, cash flows, and capitalized implementation costs in the same financial statement line items as theassociated hosting service. This new guidance will take effect for public companies with fiscal years, and interim periods within those fiscal years,beginning after December 15, 2019, and early adoption is permitted. The amendments in this update should be applied either retrospectively orprospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact of adopting this guidance.Fair Value Measurement Disclosure. In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (topic 820) - DisclosureFramework - Changes to the Disclosure Requirement for Fair Value Measurement. This new guidance eliminated, modified and added certaindisclosure requirements related to fair value measurements. The amended disclosure requirements are effective for all entities for fiscal years, andfor interim periods within those fiscal years, beginning after December 15, 2019. We are evaluating the impact of adopting this guidance. However,we currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements.Stranded Tax Effects from the Tax Cuts and Jobs Act. In February 2018, the FASB issued ASU No. 2018-02 Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income. U.S. GAAP requires deferred tax liabilities and assets to be adjusted for the effect of achange in tax laws or rates, with the effect included in income from continuing operations in the reporting period that includes the enactment date,even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in othercomprehensive income (referred to as “stranded tax effects”). The amendments in this ASU allow a specific exception for reclassification fromaccumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The underlyingguidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. In addition,the amendments in this update also require certain disclosures about stranded tax effects. The standard will take effect for public companies withfiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We currently expect that the adoption of thisguidance will not have a material impact on our consolidated financial statements.Financial Instruments—Credit Losses. In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326),which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. It requires anentity to estimate credit losses expected over the life of an exposure based on historical information, current information, and reasonable andsupportable forecasts, including estimates of prepayments. The amendments affect loans, debt securities, trade receivables, net investments inleases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have thecontractual right to receive cash. This guidance will take effect for public companies with fiscal years, and interim periods within those fiscalyears, beginning after December 15, 2019. We are currently evaluating the impact of adopting this guidance.Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases. Under this new guidance, lessees will be required to recognize assets andliabilities on the balance sheet for the rights and obligations created by all leases (financing and operating). The classification as either a financingor operating lease will determine whether lease expense is recognized on an effective interest method basis or on a straight-line basis over theterm of the lease, respectively.To prepare for the adoption of this new guidance, our implementation team has:71Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)•reviewed existing lease contracts and identified the relevant accounting impacts of the new standard;•provided internal training and awareness related to the new lease standard to key stakeholders throughout our organization;•implemented new processes and controls in anticipation of adopting the new guidance; and•implemented a new cloud based lease software management system.We will adopt this new standard during the first quarter of 2019 using the modified retrospective transition method. We will take advantage ofvarious practical expedients provided by the new standard, including:•use of the transition package of practical expedients which, among other things, allows us to carry forward the historical leaseclassification for existing leases;•making an accounting policy election that will keep leases with an initial term of 12 months or less off of the balance sheet; and•electing to not separate non-lease components from lease components for all classes of underlying lease assetsBased on our current lease portfolio, we anticipate the new guidance will have a material impact on our consolidated balance sheets as it willrequire us to recognize additional assets and liabilities for our operating leases. Our operating leases are primarily related to real estate. While weare continuing to assess all potential impacts of the standard, we expect that total right of use assets and lease liabilities in our consolidatedbalance sheets to increase by a range of $60 million - $70 million upon adoption. We do not believe the new standard will materially affect ourconsolidated net earnings. These estimates are based on our current lease portfolio as of December 31, 2018, and the actual amounts may bedifferent as a result of changes in our overall lease portfolio. While substantially complete, we are still in the process of finalizing our evaluation ofthe new standard and the overall impact of the new guidance on our consolidated financial statements and related disclosures.3. RevenuesAdoption of ASC Topic 606, “Revenue from Contracts with Customers”On January 1, 2018, we adopted Topic 606 using the modified retrospective transition method applied to contracts that were not completed as ofthat date. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjustedand continue to be reported in accordance with historic revenue recognition guidance.The adoption of Topic 606 did not have a material impact on our consolidated financial position, results of operations, equity or cash flows as ofthe adoption date or for the year ended December 31, 2018. Furthermore, we expect the impact of the adoption of the new standard to beimmaterial to our revenue and gross profit on an ongoing basis.The following table summarizes the impacts of adopting Topic 606 on our consolidated financial statements as of January 1, 2018: As Reported Adjustments due to As Adjusted(in thousands, unaudited)Dec. 31, 2017 ASC 606 Jan. 1, 2018Accounts receivable—trade, net$202,914 $(3,235) $199,679Accrued revenue— 3,235 3,23572As of December 31, 2018, there were no contracts in progress that were impacted by the change in timing of revenue recognition required by theadoption of ASC 606. As such, there was no impact to the consolidated statements of comprehensive loss for the year ended December 31, 2018.The following table shows the change in the presentation of our consolidated balance sheets as of December 31, 2018: December 31, 2018(in thousands, unaudited)As Reported Amount Without Adoptionof ASC 606 Effect of ChangeHigher/(Lower)Accounts receivable—trade, net$206,055 $206,917 $(862)Accrued revenue862 — 862Disaggregated RevenueRefer to Note 16 Business Segments for disaggregated revenue by product line and geography.Contract BalancesThe following table reflects the changes in our contract assets and contract liabilities balances for the year ended December 31, 2018: December 31, 2018 January 1, 2018 Increase / (Decrease) $ %Accrued revenue$862 $3,235 Costs and estimated profits in excess of billings9,159 9,584 Contract assets$10,021 $12,819 $(2,798) (22)% Deferred revenue$8,335 $8,819 Billings in excess of costs and profits recognized3,210 1,881 Contract liabilities$11,545 $10,700 $845 8 %During the year ended December 31, 2018, our contract assets decreased by $2.8 million primarily due to the timing of billings in our ProductionEquipment product line and our contract liabilities increased by $0.8 million primarily due to a down payment received for a customer order in oursubsea product line.During the year ended December 31, 2018, we recognized revenue of $7.7 million that was included in the contract liability balance at thebeginning of the period.During the year ended December 31, 2018, our Subsea Technologies product line received an order to supply a submarine rescue vehicle andrelated equipment which we expect to deliver in 2020. We use the cost-to-cost method to measure progress on this contract to recognize revenueover time. Other than this contract, all of our other contracts are less than one year in duration. As such, we have elected to apply the practicalexpedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of acontract that has an original expected duration of one year or less.4. Acquisitions & Dispositions2018 Acquisition of Houston Global Heat Transfer LLCOn October 5, 2018, we acquired 100% of the stock of Houston Global Heat Transfer LLC (“GHT”) for total aggregate consideration of $57.3million, net of cash acquired. The aggregate consideration includes the estimated fair value of certain contingent cash payments due to the formerowners of GHT if certain conditions are met in 2019 and 2020. Based in Houston, Texas, GHT designs, engineers, and manufactures premiumindustrial heat exchanger and cooling systems used primarily on hydraulic fracturing equipment. GHT’s flagship product, the Jumbotron, is aninnovative cube-style radiator that substantially reduces customer maintenance expense. This acquisition is included in the Completions segment.73Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):Current assets, net of cash acquired $18,655Non-current assets 238Property and equipment 2,408Intangible assets (primarily customer relationships) 30,400Tax-deductible goodwill 20,559Current liabilities (12,633)Long-term liabilities $(2,355)Net assets acquired, net of cash acquired $57,272As the value of certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about thefacts 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. Revenue and net income for this acquisition were not significant for the year ended December 31, 2018. Pro forma results of operations for thisacquisition have not been presented because the effects were not material to the consolidated financial statements.2018 Acquisition of ESP Completion Technologies LLCOn July 2, 2018, we acquired certain assets of ESP Completion Technologies LLC ("ESPCT"), a subsidiary of C&J Energy Services, for cashconsideration of $8.0 million. ESPCT consists of a portfolio of early stage technologies that maximize the run life of artificial lift systems, primarilyelectric submersible pumps. This acquisition is included in the Completions segment. The fair values of the assets acquired and liabilitiesassumed as well as the pro forma results of operations for this acquisition have not been presented because they are not material to theconsolidated financial statements.2018 Disposition of Forum Subsea RentalsOn January 3, 2018, we contributed our subsea rentals business to Ashtead Technology to create a leading independent provider of subsea surveyand equipment rental services. In exchange, we received a 40% interest in the combined business (“Ashtead”), a cash payment of £2.7 millionBritish Pounds and a note receivable from Ashtead of £3.0 million British Pounds. Our 40% interest in Ashtead is accounted for as an equitymethod investment and reported as “Investment in unconsolidated subsidiary” in our consolidated balance sheets. In the first quarter of 2018, werecognized a gain of $33.5 million as a result of the deconsolidation of our Forum Subsea Rentals business, which is classified as “Gain oncontribution of subsea rentals business” in the consolidated statements of comprehensive loss. This gain is equal to the sum of the considerationreceived, which includes the fair value of our 40% interest in Ashtead, £2.7 million British Pounds in cash, and the £3.0 million British Pounds notereceivable from Ashtead, less the $18.1 million carrying value of the Forum subsea rentals assets at the time of closing. The fair value of our 40%interest in Ashtead was determined based on the present value of estimated future cash flows of the combined entity as of January 3, 2018. Thedifference between the fair value of our 40% interest in Ashtead of $43.8 million and the book value of the underlying net assets resulted in a basisdifference, which was allocated to fixed assets, intangible assets and goodwill based on their respective fair values as of January 3, 2018. Thebasis difference allocated to fixed assets and intangible assets will be amortized through equity earnings (loss) over the estimated life of therespective assets.Pro forma results of operations for this transaction have not been presented because the effects were not material to the consolidated financialstatements.2017 Acquisitions of Global TubingOn October 2, 2017, we acquired all of the remaining ownership interests of Global Tubing, LLC (“Global Tubing”) from our joint venture partner andmanagement for total consideration of approximately $290.3 million. We originally invested in Global Tubing with a joint venture partner in 2013.Prior to acquiring the remaining ownership interest in Global Tubing, we reported this investment using the equity method of accounting. Thefinancial results for Global Tubing are reported in the Completions segment. Located in Dayton, Texas, Global Tubing provides coiled tubing, coiledline pipe74Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)and related services to customers worldwide. We believe that this strategic acquisition will further enhance our focus and strategy of expansion inthe North American completions market.The acquisition of Global Tubing contributed revenues of $35.5 million and net income of $3.8 million to our consolidated statement ofcomprehensive loss from the time of acquisition to December 31, 2017. The following unaudited pro forma summary presents consolidatedinformation as if the Global Tubing acquisition had occurred on January 1, 2016: Pro Forma Year Ended December 31, 2017 2016Net sales$901,856 $659,108Net loss attributable to common stockholders(125,204) (101,173)The pro forma consolidated results of operations amounts have been calculated after applying our accounting policies, and include the followingadjustments:•An increase in depreciation and amortization expense resulting from the fair value adjustments of property, plant and equipment andintangible assets recognized as part of the Global Tubing Acquisition;•Removal of earnings from equity investment;•In 2017, we incurred $4.5 million of acquisition-related costs in connection with this transaction. These expenses are included intransaction expenses on our consolidated statements of comprehensive income (loss) for the year ended December 31, 2017 and arereflected in pro forma earnings for the year ended December 31, 2016 in the table above;•An increase in stock based compensation costs as a result of the full vesting of pre-acquisition management incentive units and grantingof additional restricted stock units to Global Tubing management;•Adjusted interest expense to remove the historical interest expense from Global Tubing’s historical debt and include interest expense fromthe amount borrowed on our Credit Facility to finance the acquisition; and•As a result of acquiring the remaining equity interest of Global Tubing, the Company’s previously held equity interest was remeasured tofair value, resulting in a gain of approximately $120.4 million. This gain has been recognized in the consolidated statement ofcomprehensive loss for the year ended December 31, 2017 and is excluded from the pro forma results above; and•Estimated tax benefits of approximately $45 million and $12 million in 2017 and 2016, respectively, to tax-effect the aforementioned proforma adjustments using an estimated U.S. federal income tax rate of 35%.The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the acquisition, and are presented forillustrative purposes only and are not necessarily indicative of results that would have been achieved if the acquisition had occurred as ofJanuary 1, 2016 or of future operating performance.The following table summarizes the consideration transferred to acquire the remaining ownership interests of Global Tubing (in thousands otherthan stock price and shares issued): PurchaseConsiderationForum Energy Technologies' closing stock price on October 2, 2017 $15.10Multiplied by number of shares issued for acquisition 11,488,208Common shares $173,472Cash 31,764Repayment of Global Tubing debt at acquisition 85,084Total Consideration paid for the acquisition $290,32075Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):Accounts Receivable $28,044Inventory 40,005Other current assets 3,141Property and equipment 51,585Intangible assets (primarily developed technologies and customer relationships) 228,190Tax-deductible goodwill 69,423Non-tax deductible goodwill 64,491Current liabilities (16,005)Long term liabilities $(54)Total net assets $468,820Fair value of equity method investment previously held (178,500)Net assets acquired $290,320The goodwill is attributable to the workforce of the acquired business and synergies expected to arise following the acquisition of the remainingownership interests of Global Tubing. The goodwill associated with the previously owned equity interests is not deductible for tax purposes. All ofthe goodwill was assigned to the Company’s Completions segment.2017 Acquisition of MultiliftOn July 3, 2017, the Company acquired Multilift Welltec, LLC and Multilift Wellbore Technology Limited (collectively, “Multilift”) for approximately$39.2 million in cash consideration. These acquisitions are included in the Completions segment. Based in Houston, Texas, Multilift manufacturesthe patented SandGuardTM and the CycloneTM completion tools. This acquisition increases our product offering related to artificial lift for ourcompletions customers. Through this acquisition, we intend to utilize our distribution system to increase Multilift’s sales with additional customersand through geographic expansion. Pro forma results of operations for this acquisition have not been presented because the effects were notmaterial to the consolidated financial statements. The following table summarizes the fair values of the assets acquired and liabilities assumed atthe date of the acquisition (in thousands):Current assets, net of cash acquired $3,763Property and equipment 96Intangible assets (primarily developed technologies and customer relationships) 17,090Tax-deductible goodwill 16,472Non-tax deductible goodwill 3,099Current liabilities (1,329)Net assets acquired $39,1912017 Acquisition of Cooper ValvesOn January 9, 2017, the Company acquired substantially all of the assets of Cooper Valves, LLC as well as 100% of the general partnershipinterests of Innovative Valve Components (collectively, “Cooper”) for total aggregate consideration of $14.0 million, after settlement of workingcapital adjustments. The aggregate consideration includes the issuance of stock valued at $4.5 million and certain contingent stock issuances.These acquisitions are included in the Production & Infrastructure segment. The acquired Cooper brands include the Accuseal® metal seated ballvalves engineered to meet Class VI shut off standards for use in severe service applications, as well as a full line of Cooper AlloyTM cast andforged gate, globe, and check valves. Innovative Valve Components, in partnership with Cooper Valves, commercialized critical service valvesand components for the power generation, mining and oil and natural gas industries. The fair values of the assets acquired and liabilities assumedand pro forma results of operations have not been presented because they are not material to the consolidated financial statements.76Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)5. InventoriesThe Company’s significant components of inventory at December 31, 2018 and 2017 were as follows (in thousands): December 31, 2018 December 31, 2017Raw materials and parts$212,526 $160,093Work in process39,494 51,941Finished goods302,590 305,461Gross inventories554,610 517,495Inventory reserve(75,587) (74,318)Inventories$479,023 $443,177The change in the amounts of the inventory reserve during the three year period ended December 31, 2018 is as follows (in thousands):Period endedBalance at beginningof period Charged to expense Deductions or other Balance at end ofperiodDecember 31, 2016$77,888 $25,537 $(35,073) $68,352December 31, 201768,352 14,620 (8,654) $74,318December 31, 201874,318 36,606 (35,337) $75,5876. Property and EquipmentProperty and equipment consists of the following (in thousands): Estimated usefullives December 31, 2018 2017Land $9,755 $12,408Buildings and leasehold improvements 5-30 103,761 90,909Computer equipment 3-5 54,721 42,074Machinery & equipment 5-10 162,110 169,203Furniture & fixtures 3-10 6,631 6,338Vehicles 3-5 6,160 8,048Construction in progress 9,155 14,589 352,293 343,569Less: accumulated depreciation (180,717) (160,787)Property & equipment, net 171,576 182,782 Rental equipment 3-10 9,535 70,679Less: accumulated depreciation (3,753) (56,180)Rental equipment, net 5,782 14,499 Total property & equipment, net $177,358 $197,281Depreciation expense was $33.1 million, $34.4 million and $35.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.77Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)7. Goodwill and Intangible AssetsGoodwillThe changes in the carrying amount of goodwill were as follows (in thousands): Drilling & SubseaCompletionsProduction &InfrastructureTotalGoodwill balance at December 31, 2016$307,806$327,293$17,644$652,743Acquisitions, net of dispositions—153,4851,595155,080Impairment(68,004)——(68,004)Impact of non-U.S. local currency translation11,6523,56720715,426Goodwill balance at December 31, 2017251,454484,34519,446755,245Acquisitions, net of dispositions—22,312—22,312Impairment(245,412)(53,377)—(298,789)Impact of non-U.S. local currency translation(6,042)(2,849)(230)$(9,121)Goodwill balance at December 31, 2018$—$450,431$19,216$469,647We perform our annual impairment tests of goodwill as of October 1 or when there is an indication an impairment may have occurred. Relevantevents and circumstances which could have a negative impact on goodwill include: macroeconomic conditions; industry and market conditions,such as commodity prices; operating cost factors; overall financial performance; the impact of dispositions and acquisitions; and other entity-specific events. Declines in commodity prices or a sustained decrease in valuation of the Company’s common stock could indicate a reduction inthe estimate of reporting unit fair value which, in turn, could lead to an impairment of reporting unit goodwill.The fair values used in the impairment analysis were determined using the net present value of the expected future cash flows for each reportingunit. We determine the fair value of each reporting unit using a discounted cash flow analysis, which requires significant assumptions andestimates about the future operations of each reporting unit. The assumptions about future cash flows and growth rates are based on our currentbudget, strategic plans and management’s estimates for future activity levels. Forecasted cash flows in future periods were estimated using aterminal value calculation, which considered long-term earnings growth rates. The discount rate we used could change substantially in futureperiods if the cost of debt or equity were to significantly increase or decrease, or if we were to choose different comparable companies indetermining the appropriate discount rate for our reporting units.As of October 1, 2018, our annual testing date, we completed the annual evaluation of goodwill related to all of our reporting units. We determinedthat the carrying value of our Drilling reporting unit exceeded its estimated fair value. As a result, we recorded a non-cash impairment charge of$245.4 million to write-off the goodwill in our Drilling reporting unit. Additionally, during the fourth quarter 2018, there was a significant decline in oilprices, lowered industry expectations for U.S. drilling and completions activities and a substantial decline in the quoted market prices of ourcommon stock, which led us to evaluate all of our reporting units for a triggering event as of December 31, 2018. Upon evaluation, we consideredthese developments to be a triggering event for our Downhole reporting unit that required us to update our goodwill impairment evaluation as ofDecember 31, 2018 based on our current forecast and expectations for market conditions. As a result, we determined that the carrying value of ourDownhole reporting unit exceeded its estimated fair value and we recorded a non-cash impairment charge of $53.4 million to write-off goodwill inour Downhole reporting unit. These charges are included in “Goodwill and intangible asset impairments” in the consolidated statements ofcomprehensive loss. Following these impairment charges, there is zero and $191.1 million of remaining goodwill for our Drilling and Downholereporting units, respectively. In completing our evaluation, we concluded that the remaining reporting units with a goodwill balance were notimpaired.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 wouldbe sufficient to meet anticipated demand for a longer period, delaying the need for production from higher cost basins. With this indication offurther delays in the recovery of the offshore market, we performed an impairment test and determined that the carrying value of the goodwill in ourSubsea reporting unit was impaired. We recorded an impairment charge of $68.0 million in the second quarter of 2017. Following the impairmentcharge, there is no remaining goodwill for our Subsea reporting unit.There was no goodwill impairment recorded during the year ended December 31, 2016.Accumulated impairment losses on goodwill were $535.6 million, $236.8 million and $168.8 million as of December 31, 2018, 2017, and 2016,respectively.78Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)There are significant inherent uncertainties and management judgment in estimating the fair value of each reporting unit. While we believe we havemade reasonable estimates and assumptions to estimate the fair value of our reporting units, it is possible that a material change could occur. Ifactual results are not consistent with our current estimates and assumptions, or if changes in macroeconomic conditions outside the control ofmanagement change such that it results in a significant negative impact to our estimated fair values, the fair value of our reporting units maydecrease below their net carrying value, which could result in a material impairment of our goodwill. Based on our goodwill impairment evaluationsin the fourth quarter of 2018, the estimated fair values of our Downhole, Stimulation & Intervention and Coiled Tubing reporting units were eachless than 30% above their respective carrying values.Intangible assetsAt December 31, 2018 and 2017, intangible assets consisted of the following, respectively (in thousands): December 31, 2018 Gross carryingamount Accumulatedamortization Net intangibles Amortizationperiod (in years)Customer relationships$337,546 $(110,228) $227,318 4 - 15Patents and technology104,394 (17,148) 87,246 5 - 17Non-compete agreements6,245 (5,600) 645 3 - 6Trade names47,493 (18,107) 29,386 10 - 15Distributor relationships22,160 (17,602) 4,558 8 - 15Trademark10,319 (424) 9,895 15 - IndefiniteIntangible Assets Total$528,157 $(169,109) $359,048 December 31, 2017 Gross carryingamount Accumulatedamortization Net intangibles Amortizationperiod (in years)Customer relationships$428,544 $(138,566) $289,978 4 - 15Patents and technology110,910 (16,733) 94,177 5 - 17Non-compete agreements6,625 (6,041) 584 3 - 6Trade names64,359 (22,090) 42,269 10 - 15Distributor relationships22,160 (16,338) 5,822 8 - 15Trademark10,319 (85) 10,234 15 - IndefiniteIntangible Assets Total$642,917 $(199,853) $443,064 Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amountmay not be recoverable. In the fourth quarter of 2018, due to the impairment indicators discussed above, we determined that certain intangibleassets in our Downhole reporting unit were impaired. As a result, we recognized $50.2 million of impairment losses on these intangible assets(primarily customer relationships and trade names) in the fourth quarter of 2018. In the second quarter of 2018, we made the decision to exitspecific products within the Subsea and Downhole product lines. As a result, we recognized $14.5 million of impairment losses on certainintangible assets (primarily customer relationships). In 2017, impairment losses totaling $1.1 million were recorded on certain intangible assetswithin the Subsea and Downhole reporting units related to management’s decision to abandon specific product lines. There were no intangibleasset impairments recorded during the year ended December 31, 2016. Impairment charges are included in “Goodwill and intangible assetimpairments” in the consolidated statements of comprehensive loss.79Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Amortization expense was $41.4 million, $30.7 million and $26.1 million for the years ended December 31, 2018, 2017 and 2016, respectively. Theestimated future amortization expense for the next five years is as follows (in thousands):Year ending December 31, Amount2019 $34,5912020 33,8642021 32,9742022 31,1962023 28,9948. DebtNotes payable and lines of credit as of December 31, 2018 and 2017 consisted of the following (in thousands): December 31, 2018 December 31, 20176.25% Senior notes due October 2021$400,000 $400,000Unamortized debt premium1,176 1,583Debt issuance cost(3,121) (4,222)Senior secured revolving credit facility119,000 108,446Other debt1,656 2,099Total debt518,711 507,906Less: current maturities(1,167) (1,156)Long-term debt$517,544 $506,750Senior Notes Due 2021In October 2013, we issued $300.0 million of 6.25% senior unsecured notes due 2021 at par, and in November 2013, we issued an additional$100.0 million aggregate principal amount of the notes at a price of 103.25% of par, plus accrued interest from October 2, 2013 (the “SeniorNotes”). The Senior Notes bear interest at a rate of 6.25% per annum, payable on April 1 and October 1 of each year, and mature on October 1,2021. Net proceeds from the issuance of approximately $394.0 million, after deducting initial purchasers’ discounts and offering expenses andexcluding accrued interest paid by the purchasers, were used for the repayment of the then-outstanding term loan balance and a portion of theCredit Facility balance.The terms of the Senior Notes are governed by the indenture, dated October 2, 2013 (the “Indenture”), by and among us, the guarantors namedtherein and Wells Fargo Bank, National Association, as trustee. The Senior Notes are senior unsecured obligations, and are guaranteed on asenior unsecured basis by our subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility tothe extent of the value of the collateral securing the Credit Facility. The Senior Notes contain customary covenants including some limitations andrestrictions on our ability to pay dividends on, purchase or redeem our common stock; redeem or prepay our subordinated debt; make certaininvestments; incur or guarantee additional indebtedness or issue certain types of equity securities; create certain liens, sell assets, includingequity interests in our restricted subsidiaries; restrict dividends or other payments of our restricted subsidiaries; consolidate, merge or transfer allor substantially all of our assets; engage in transactions with affiliates; and create unrestricted subsidiaries. Many of these restrictions willterminate if the Senior Notes become rated investment grade. The Indenture also contains customary events of default, including nonpayment,breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, failure to pay certain judgments and certain eventsof bankruptcy and insolvency. We are required to offer to repurchase the Senior Notes in connection with specified change in control events or withexcess proceeds of asset sales not applied for permitted purposes.We may redeem the Senior Notes due 2021:•at a redemption price of 101.563% of their principal amount plus accrued and unpaid interest and additional interest, if any, for the twelve-month period beginning October 1, 2018; and then•at a redemption price of 100.000% of their principal amount plus accrued interest and unpaid interest and additional interest, if any,beginning on October 1, 2019.80Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Credit FacilityOn October 30, 2017, we amended and restated our Credit Facility to, among other things, increase revolving credit commitments from $140.0million to $300.0 million (with a sublimit of up to $25.0 million available for the issuance of letters of credit for the account of the Company andcertain of our domestic subsidiaries) (the “U.S. Line”), of which up to $30.0 million is available to certain of our Canadian subsidiaries for loans inU.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 Canadiansubsidiaries) (the “Canadian Line”). Lender commitments under the Credit Facility, subject to certain limitations, may be increased by an additional$100.0 million. The Credit Facility matures in July 2021, but if our outstanding Notes due October 2021 are refinanced or replaced withindebtedness maturing in or after February 2023, the final maturity of the Credit Facility will automatically extend to October 2022.Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada andcertain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Our borrowing capacity under the Credit Facility couldbe reduced or eliminated, depending on future fluctuations in our balances of receivables and inventory. As of December 31, 2018, our totalborrowing base was $299.4 million, of which $119.0 million was drawn and $13.1 million was used for security of outstanding letters of credit,resulting in remaining availability of $167.3 million.Borrowings under the U.S. Line bear interest at a rate equal to, at our option, either (a) the LIBOR rate or (b) a base rate determined by reference tothe highest of (i) the rate of interest per annum determined from time to time by Wells Fargo as its prime rate in effect at its principal office in SanFrancisco, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus anapplicable margin. Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the CDOR rate or (b) abase rate determined by reference to the highest of (i) the prime rate for Canadian dollar commercial loans made in Canada as reported from timeto time by Thomson Reuters and (ii) the CDOR rate plus 1.00%, in each case plus an applicable margin. The applicable margin for LIBOR andCDOR loans will initially range from 1.75% to 2.25%, depending upon average excess availability under the 2017 Credit Facility. After the firstquarter ending on or after March 31, 2018 in which our total net leverage ratio is less than or equal to 4.00:1.00, the applicable margin for LIBORand CDOR loans will range from 1.50% to 2.00%, depending upon average excess availability under the Credit Facility. The weighted averageinterest rate under the Credit Facility was approximately 4.08% during the year ended December 31, 2018.The Credit Facility also provides for a commitment fee in the amount of (a) 0.375% per annum on the unused portion of commitments if averageusage of the Credit Facility is greater than 50% and (b) 0.500% per annum on the unused portion of commitments if average usage of the 2017Credit Facility is less than or equal to 50%. After the first quarter ending on or after March 31, 2018 in which our total net leverage ratio is less thanor equal to 4.00:1.00, the commitment fees will range from 0.25% to 0.375%, depending upon average usage of the Credit Facility.If excess availability under the Credit Facility falls below the greater of 10.0% of the borrowing base and $20.0 million, we will be required tomaintain 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 Facilityexceeds such thresholds for at least 60 consecutive days.Other debtOther debt consists primarily of various capital leases of equipment.Deferred loan costsThe Company has incurred loan costs that have been capitalized and are amortized to interest expense over the term of the Senior Notes and theCredit Facility. As a result, approximately $1.9 million, $1.7 million and $1.9 million were amortized to interest expense for the years endedDecember 31, 2018, 2017 and 2016, respectively. On February 25, 2016 and December 12, 2016, the Company amended its Credit Facility whichreduced lender commitments from $600.0 million to $140.0 million. In connection with these amendments, the Company wrote off $3.0 million ofdeferred financing costs related to the Credit Facility in 2016. In October 2017, the Company further amended and restated its existing CreditFacility which increased lender commitments to $300.0 million and recorded an additional $2.4 million to deferred financing costs.81Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Future principal payments under long-term debt for each of the years ending December 31 are as follows (in thousands):2019 $1,1672020 4892021 519,0002022 —2023 —Thereafter —Total future payment $520,656Add: Unamortized debt premium 1,176Less: Debt issuance cost (3,121)Total debt $518,7119. Income TaxesThe components of loss before income taxes for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands): 2018 2017 2016U.S.$(285,141) $(3,015) $(155,058)Non-U.S.(104,613) (52,264) 17,059Loss before income taxes$(389,754) $(55,279) $(137,999)The components of income tax expense (benefit) for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands): 2018 2017 2016Current U.S. Federal and state$(6,932) $(1,426) $(38,589)Non-U.S.4,810 5,398 6,956Total current(2,122) 3,972 (31,633)Deferred U.S. Federal and state(21,467) 6,415 (18,290)Non-U.S.7,915 (6,266) (6,128)Total deferred(13,552) 149 (24,418)Provision (benefit) for income taxes$(15,674) $4,121 $(56,051)82Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The reconciliation between the actual provision for income taxes from continuing operations and that computed by applying the U.S. statutory rateto income before income taxes and noncontrolling interests are outlined below (in thousands): 2018 2017 2016Income tax expense at the statutory rate$(81,849)(21.0)% $(19,348)(35.0)% $(48,300)(35.0)%State taxes, net of federal tax benefit(2,564)(0.7)% (294)(0.5)% (1,425)(1.0)%Non-U.S. operations(10,166)(2.6)% 6,33711.5 % (5,791)(4.2)%Domestic incentives(286)(0.1)% (254)(0.5)% (170)(0.1)%Prior year federal, non-U.S. and state tax(2,880)(0.7)% (1,283)(2.3)% (777)(0.6)%Nondeductible expenses5020.1 % 6441.2 % 3450.3 %Goodwill impairment46,05111.8 % 14,73126.6 % —— %Global Tubing acquisition—— % (9,160)(16.6)% —— %U.S. tax reform(15,604)(4.0)% 10,13818.3 % —— %Valuation allowance50,00512.8 % 4,5238.2 % —— %Other1,1170.4 % (1,913)(3.4)% 67— %Income tax expense (benefit)$(15,674)(4.0)% $4,1217.5 % $(56,051)(40.6)%Our effective tax rate was (4.0)%, 7.5%, and (40.6)% for the years ended December 31, 2018, 2017 and 2016, respectively. For the year endedDecember 31, 2018, we recognized the following significant items impacting our effective tax rate:–$15.6 million of tax benefit associated with U.S. tax reform, as described below,–$46.1 million of tax expense associated with the impairment of non-tax deductible goodwill for our Drilling and Downhole reporting units,and–$50.0 million of tax expense consisting of a full valuation allowance of $18.4 million against our deferred tax assets in the U.K., Germanyand Singapore and a partial valuation allowance of $31.6 million against our deferred tax assets in the U.S. as further described belowunder the primary components of deferred taxes.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017, a comprehensive U.S. tax reform package that, effective January 1,2018, among other things, lowered the corporate income tax rate from 35% to 21% and moved the country towards a territorial tax system with aone-time mandatory tax on previously deferred earnings of non-U.S. subsidiaries. The effects of U.S. tax reform on us include two majorcategories: (i) recognition of liabilities for taxes on mandatory deemed repatriation and (ii) re-measurement of deferred taxes. In 2017, we recordedprovisional amounts as an estimate of federal and state tax related to the effects of U.S. tax reform including the recognition of liabilities for taxeson mandatory deemed repatriation of non-U.S. earnings of $27.7 million and a $17.6 million tax benefit for the re-measurement of deferred taxesbased on the new 21% U.S. corporate tax rate, resulting in a net $10.1 million provisional net tax charge for the year.During 2018, we completed our analysis of the impact of U.S. tax reform based on further guidance provided on the new tax law by the U.S.Treasury Department and Internal Revenue Service. We finalized our accounting for the effects of U.S. tax reform during 2018 based on theadditional guidance issued and recognized an income tax benefit of $15.6 million resulting in an overall net tax benefit related to U.S. tax reform of$5.5 million.83Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The primary components of deferred taxes include (in thousands): 2018 2017Deferred tax assets Reserves and accruals$7,259 $5,932Inventory18,694 20,836Stock awards5,637 6,235Net operating loss and other tax carryforwards66,098 31,164Other549 1,419Gross deferred tax assets98,237 65,586Valuation allowance(54,441) (4,523)Total deferred tax assets43,796 61,063Deferred tax liabilities Property and equipment(9,565) (12,172)Goodwill and intangible assets(42,502) (76,454)Investment in unconsolidated subsidiary(5,402) —Prepaid expenses and other(392) (325)Total deferred tax liabilities(57,861) (88,951)Net deferred tax liabilities$(14,065) $(27,888)Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by theCompany and the respective sellers at the time of acquisition.At December 31, 2018, we had $193.9 million of U.S. net operating loss carryforwards and $6.2 million of state net operating losses. Of theselosses, $151.7 million will expire no later than 2037 if they are not utilized prior to that date. The remaining $48.4 million will not expire. We alsohad $113.5 million of non-U.S. net operating loss carryforwards with indefinite expiration dates. The ultimate realization of income tax benefit forthese net operating loss carryforwards depends on our ability to generate sufficient taxable income in the respective taxing jurisdictions. Where wehave unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income tooffset such losses. We no longer 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 and Singapore. See the discussion below regarding the valuation allowances recognized related to the deferred tax assets inthese jurisdictions.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.During the fourth quarter of 2018, we recognized $50.0 million of tax expense related to the increase in our valuation allowance provided againstour deferred tax assets. We increased our valuation allowance related to our U.K. deferred tax assets by $3.6 million as it had been previouslydetermined in 2017 that the U.K. deferred tax assets were not realizable. In addition, we recognized $31.6 million of tax expense for a partialvaluation allowance related to our deferred tax assets in the U.S. and $14.8 million of tax expense for a full valuation allowance related to ourdeferred tax assets in Germany and Singapore, writing down our deferred tax assets in these jurisdictions to what is more likely than notrealizable. In making such a determination for these jurisdictions, we considered all available positive and negative evidence, including our recenthistory of pretax losses over the prior three year period, the goodwill and intangible asset impairments for our Drilling and Downhole reporting units,the future reversals of existing taxable temporary differences, the projected future taxable income or loss, including the effect of U.S. tax reform,and tax-planning.Taxes are provided as necessary with respect to non-U.S. earnings that are not permanently reinvested. For all other non-U.S. earnings, no U.S.taxes are provided because such earnings are intended to be reinvested indefinitely to finance non-U.S. activities. The determination of theamount of the unrecognized deferred tax liability for temporary differences related to investments in non-U.S. subsidiaries is not practicable.84Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)We file income tax returns in the U.S. as well as in various states and non-U.S. jurisdictions. With few exceptions, we are no longer subject toincome tax examination by tax authorities in these jurisdictions prior to 2012.We account for uncertain tax positions in accordance with guidance in FASB ASC 740, which prescribes the minimum recognition threshold a taxposition taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation ofthe beginning and ending amount of uncertain tax positions is as follows (in thousands):Balance at January 1, 2018 $14,768Additional based on tax positions related to current year 1,485Lapse of statute of limitations (2,999)Balance at December 31, 2018 13,254The total amount of unrecognized tax benefits at December 31, 2018 was $13.3 million, of which it is reasonably possible that $2.6 million couldbe settled during the next twelve-month period as a result of the conclusion of various tax audits or due to the expiration of the applicable statuteof limitations. Substantially all of the unrecognized tax benefits at December 31, 2018 would impact our future effective income tax rate, ifrecognized.We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of loss.As of December 31, 2018 and 2017, we had accrued approximately $0.3 million and $0.6 million in interest and penalties, respectively. During theyears ended December 31, 2018 and 2017, we recognized no material change in the interest and penalties related to uncertain tax positions.10. Fair Value MeasurementsAt December 31, 2018 and 2017, the Company had $119.0 million and $108.4 million, respectively, of debt outstanding under the Credit Facilitywhich incurs interest at a variable interest rate and therefore, the carrying amount approximates fair value. The fair value of the debt is classifiedas a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for thoseor similar instruments. At December 31, 2018, the fair value and the carrying value of the Company’s unsecured Senior Notes approximated$362.0 million and $398.1 million, respectively. At December 31, 2017, the fair value and the carrying value of the Company’s unsecured SeniorNotes approximated $402.0 million and $397.4 million, respectively.There were no other outstanding financial instruments as of December 31, 2018 and 2017 that required measuring the amounts at fair value on arecurring basis. The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods andthere were no transfers between levels of the fair value hierarchy during the year ended December 31, 2018.11. Commitments and ContingenciesLitigationIn the ordinary course of business, the Company is, and in the future, could be involved in various pending or threatened legal actions, some ofwhich may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonablyanticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has establishedreserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated. The reservesaccrued at December 31, 2018 and 2017 are immaterial. In the opinion of management, the Company’s ultimate liability, if any, with respect tothese actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.Asbestos litigationOne of our subsidiaries has been named as one of many defendants in a number of product liability claims for alleged exposure to asbestos.These lawsuits are typically filed on behalf of plaintiffs who allege exposure to asbestos, against numerous defendants, often forty or more, whoare alleged to have manufactured or distributed products containing asbestos. The injuries alleged by plaintiffs in these cases range frommesothelioma and other cancers to asbestosis.85Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The earliest claims against our subsidiary were filed in New Jersey in 1998, and our subsidiary currently has active cases in Missouri, New Jersey,New York, and Illinois. These complaints do not typically include requests for a specific amount of damages. Our subsidiary acquired thetrademark for the product line in question in 1985. To date, the claims against our subsidiary alleging illnesses due to asbestos have been basedon products manufactured by the previous owner prior to 1985 that are alleged to have contained asbestos. Our subsidiary did not utilize asbestosin the production of these products after its purchase of the trademark, as by that date the hazards of asbestos exposure were well known andasbestos had begun to fall into disuse. Our subsidiary has been successful in obtaining dismissals in most lawsuits without any cash contribution.This is because the “successor liability” law in most states does not hold a purchaser in good faith liable for the actions of the seller prior to theacquisition date unless the purchaser contractually assumed the liabilities, which our subsidiary did not. There are exceptions to the successorliability doctrine in many states, so there are no assurances that our subsidiary will not be found liable for the actions of its predecessor. The lawin other states on so called “successor liability” may be different or ambiguous in this regard, and could also expose our subsidiary to liability. Oursubsidiary could also be found liable should a trier of fact determine that it did use asbestos in its products, notwithstanding our position to thecontrary. To date, asbestos claims have not had a material adverse effect on our business, financial condition, results of operations, or cash flow,as our annual out-of-pocket costs over the last five years has been less than $200,000. There were fewer than 25 new cases filed against oursubsidiary in each of last two years, and a significant number of existing cases were dismissed, settled or otherwise disposed of over the lastyear. We currently have fewer than 150 lawsuits pending against this subsidiary. Our subsidiary has over $17 million in face amount of insuranceper occurrence and over $23 million of aggregate primary insurance coverage. In addition, our subsidiary has over $950 million in face amount ofexcess coverage applicable to the claims. There can be no guarantee that all of this can be collected due to policy terms and conditions andinsurer insolvencies in the past or in the future. In January 2011, we entered into an agreement with seven of our primary insurers under which theyhave agreed to pay 80% of the costs of handling and settling each asbestos claim against the affected subsidiary. The insurers’ portion of thesettlements is funded by our aggregate primary limits, which are eroded only by settlements and not legal fees. Approximately $2.0 million insettlements has been paid by insurers to date, with approximately $40,000 paid over the course of the last two years. Our subsidiary and thesubscribing insurers have the right to withdraw from this agreement, but to date, no party has exercised this right or expressed an intent to do so.Portland Harbor Superfund litigationIn May 2009, one of the Company’s subsidiaries (which is presently a dormant company with nominal assets except for rights under insurancepolicies) was named along with many defendants in a suit filed by the Port of Portland, Oregon seeking reimbursement of costs related to a five-year study of contaminated sediments at the port. In March 2010, the subsidiary also received a notice letter from the Environmental ProtectionAgency indicating that it had been identified as a potentially responsible party with respect to environmental contamination in the “study area” forthe Portland Harbor Superfund Site. Under a 1997 indemnity agreement, the subsidiary is indemnified by a third party with respect to lossesrelating to environmental contamination. As required under the indemnity agreement, the subsidiary provided notice of these claims, and theindemnitor has assumed responsibility and is providing a defense of the claims. Although the Company believes that it is unlikely that thesubsidiary contributed to the contamination at the Portland Harbor Superfund Site, the potential liability of the subsidiary and the ability of theindemnitor to fulfill its indemnity obligations cannot be quantified at this time.Operating leasesThe Company has operating leases for warehouse, office space, manufacturing facilities and equipment. The leases generally require theCompany to pay certain expenses including taxes, insurance, maintenance, and utilities. The minimum future lease commitments undernoncancelable leases in effect at December 31, 2018 are as follows:2019$17,536202014,826202112,800202211,20220235,701Thereafter15,069 $77,13486Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Total rent expense was $18.3 million, $19.3 million and $18.6 million under operating leases for the years ended December 31, 2018, 2017 and2016, respectively.Letters of credit and guaranteesThe Company executes letters of credit in the normal course of business to secure the delivery of product from specific vendors and also toguarantee the Company fulfilling certain performance obligations relating to certain large contracts. At December 31, 2018, the Company had $13.6million in letters of credit outstanding.12. Earnings Per ShareThe reconciliation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except pershare amounts): Year ended December 31, 2018 2017 2016Net loss attributable to common stockholders$(374,080) $(59,400) $(81,978) Basic - weighted average shares outstanding108,771 98,689 91,226Dilutive effect of stock options and restricted stock— — —Diluted - weighted average shares outstanding108,771 98,689 91,226 Loss per share Basic$(3.44) $(0.60) $(0.90)Diluted$(3.44) $(0.60) $(0.90)For all periods presented, we excluded all potentially dilutive restricted shares and stock options in calculating diluted earnings per share as theeffect was anti-dilutive due to the net losses incurred for these periods.13. Stockholders' Equity and Employee Benefit PlansShares issued for AcquisitionOn January 9, 2017, the Company issued 196,249 shares of common stock to acquire 100% of the general partnership interests of InnovativeValve Components. On October 2, 2017, the Company issued 11.5 million shares of common stock to acquire the remaining membership interestsin Global Tubing. Refer to Note 4 Acquisitions & Dispositions for further details on these acquisitions.Equity offeringIn December 2016, the Company offered and sold 4.0 million shares of the Company’s common stock and raised $85.1 million in cash (net ofexpenses) pursuant to a public equity offering.Employee benefit plansWe sponsor a 401(k) savings plan for U.S. employees and related savings plans for certain non-U.S. employees. These plans benefit eligibleemployees by allowing them the opportunity to make contributions up to certain limits. We contribute by matching a percentage of eachemployee’s contributions. In 2016, for certain plans, we temporarily suspended the matching of contributions. Subsequent to the closing of allacquisitions, employees of those acquired entities will generally be eligible to participate in the Company’s 401(k) savings plan. We also have thediscretion to provide a profit sharing contribution to each participant depending on the Company’s performance for the applicable year. Theexpense under the Company’s plan was $6.2 million, $5.4 million, and $1.4 million for the years ended December 31, 2018, 2017 and 2016,respectively.The Company has an Employee Stock Purchase Plan, which allows eligible employees to purchase shares of the Company’s common stock atsix-month intervals through periodic payroll deductions at a price per share equal to 85.0% of the lower of the fair market value at the beginningand ending of the six-month intervals.87Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Stock repurchasesIn October 2014, the board of directors approved a program for the repurchase of outstanding shares of the Company’s common stock with anaggregate purchase price of up to $150.0 million. The Company has purchased approximately 4.5 million shares (primarily in 2014) under thisprogram for aggregate consideration of approximately $100.2 million.14. Stock Based CompensationFET stock based compensation planIn August 2010, the Company created the 2010 Stock Incentive Plan (the “2010 Plan”) to allow for employees, directors and consultants of theCompany and its subsidiaries to maintain stock ownership in the Company through the award of stock options, restricted stock, restricted stockunits or any combination thereof. Under the terms of the 2010 Plan, a total of 18.5 million shares were authorized for awards.In May 2016, the Company created a new 2016 Stock and Incentive Plan (the “ 2016 Plan”). Under the terms of the 2016 Plan, the aggregatenumber of shares that may be issued may not exceed the number of shares reserved but not issued under the 2010 Plan as of May 17, 2016, theeffective date of the 2016 plan, a total of 5.7 million shares. No further awards shall be made under the 2010 Plan after such date, and outstandingawards granted under the 2010 Plan shall continue to be outstanding. Approximately 2.8 million shares remained available under the 2016 Plan forfuture grants as of December 31, 2018.The total amount of stock based compensation expense recorded was approximately $19.9 million, $20.3 million and $20.5 million for the yearsended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, the Company expects to record stock based compensationexpense of approximately $27.0 million over a weighted average remaining term of approximately two years. Future grants will result in additionalcompensation expense.Stock optionsThe exercise price of each option is based on the fair market value of the Company’s stock at the date of grant. Options generally have a ten-yearlife and vest annually in equal increments over three or four years. The Company’s policy for issuing stock upon a stock option exercise is toissue new shares. Compensation expense is recognized on a straight line basis over the vesting period. The following tables provide additionalinformation related to the options:2018 ActivityNumber of shares (in thousands) Weighted averageexercise price Remaining weightedaverage contractual lifein years Intrinsic value(in millions)Beginning balance5,817 $12.66 4.6 $—Granted505 $12.00 Exercised(35) $7.11 Forfeited/expired(547) $15.22 Total outstanding5,740 $12.39 3.7 $—Options exercisable4,850 $12.25 3.0 $—As of December 31, 2018, the share price of the Company was less than the exercise price for all outstanding stock options and, therefore, theintrinsic value for stock options outstanding and exercisable were both zero.The assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted in 2018, 2017 and 2016 are as follows: 2018 2017 2016Weighted average fair value$5.62 $8.95 $3.85Assumptions Expected life (in years)6.25 6.25 6.25Volatility44% 43% 40%Dividend yield—% —% —%Risk free interest rate2.74% 2.11% 1.40%88Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The intrinsic value of the options exercised was $0.2 million in 2018, $1.6 million in 2017 and $1.3 million in 2016. The intrinsic value is the amountby which the fair value of the underlying share exceeds the exercise price of an option.Restricted stockRestricted stock generally vests over a three or four year period from the date of grant. The following table provides additional information relatedto our restricted stock:2018 ActivityRestricted stock (shares inthousands)Nonvested at beginning of year292Granted63Vested(124)Forfeited(36)Nonvested at the end of year195The weighted average grant date fair value of the restricted stock was $12.00, $19.00 and $10.28 per share during the years ended December 31,2018, 2017 and 2016, respectively. The total fair value of shares vested was $1.7 million during 2018, $2.3 million during 2017 and $3.9 millionduring 2016.Restricted stock unitsRestricted stock units generally vest over a three or four year period from the date of grant. The following table provides additional informationrelated to our restricted stock units:2018 ActivityRestricted stock units(shares in thousands)Nonvested at beginning of year2,226Granted1,507Vested(856)Forfeited(422)Nonvested at the end of year2,455The weighted average grant date fair value of the restricted stock units was $10.54, $17.97 and $9.74 per share during the years endedDecember 31, 2018, 2017 and 2016, respectively. The total fair value of units vested was $14.2 million, $10.0 million, and $8.4 million during 2018,2017 and 2016, respectively.Performance share awardsDuring 2018, the Company granted 160,010 performance share awards with service-vesting and market-vesting conditions. These awards maysettle between zero and two shares of the Company’s common stock for each performance share unit awarded. The number of shares issuedpursuant to the performance share awards will be determined based on the total shareholder return of the Company’s common stock as comparedto a group of peer companies, measured annually over a one-year, two-year, and three-year performance period.15. Related Party TransactionsThe Company has sold and purchased inventory, services and fixed assets to and from various affiliates of certain directors. The dollar amountsrelated to these related party activities are not significant to the Company’s consolidated financial statements.16. Business SegmentsThe Company reports its results of operations in the following three reportable segments: Drilling & Subsea, Completions and Production &Infrastructure.The Drilling & Subsea segment designs, manufactures and supplies products and provides related services to the drilling, energy and subseaconstruction and services markets, and other markets such as alternative energy, defense and communications. The Completions segmentdesigns, manufactures and supplies products and provides related89Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)services to the well construction, completion, stimulation and intervention markets. The Production & Infrastructure segment designs,manufactures and supplies products, and provides related equipment and services for production and infrastructure markets.The Company’s reportable segments are strategic units that offer distinct products and services. They are managed separately since eachbusiness segment requires different marketing strategies. Operating segments have not been aggregated as part of a reportable segment. TheCompany evaluates the performance of its reportable segments based on operating income. This segmentation is representative of the manner inwhich our Chief Operating Decision Maker and our board of directors view the business. We consider the Chief Operating Decision Maker to be theChief Executive Officer.The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data bysegment follows (in thousands): Year ended December 31, 2018 2017 2016Revenue: Drilling & Subsea $229,078 $234,742 $224,447Completions 477,987 260,191 131,786Production & Infrastructure 361,407 327,287 233,754Eliminations (4,253) (3,600) (2,352)Total revenue $1,064,219 $818,620 $587,635 Segment operating income (loss): Drilling & Subsea $(33,688) $(31,563) $(53,055)Completions 32,277 (6,746) (45,609)Production & Infrastructure 6,022 7,811 655Corporate (35,079) (33,427) (27,440)Total segment operating loss (30,468) (63,925) (125,449)Goodwill and intangible asset impairments 363,522 69,062 —Transaction expenses 3,446 6,511 865Loss (gain) on disposal of assets and other (438) 2,097 2,638Operating loss $(396,998) $(141,595) $(128,952) Depreciation and amortization Drilling & Subsea $18,948 $25,582 $28,827Completions 46,980 30,512 25,549Production & Infrastructure 8,407 8,608 6,738Corporate 173 427 646Total depreciation and amortization $74,508 $65,129 $61,76090Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)A summary of capital expenditures by reportable segment is as follows (in thousands): Year ended December 31,Capital expenditures 2018 2017 2016Drilling & Subsea $4,218 $5,424 $7,774Completions 8,846 6,458 2,557Production & Infrastructure 4,877 6,855 1,953Corporate 6,102 7,972 4,544Total capital expenditures $24,043 $26,709 $16,828A summary of consolidated assets by reportable segment is as follows (in thousands): Year ended December 31,Assets 2018 2017 2016Drilling & Subsea $363,043 $645,254 $766,234Completions 1,173,102 1,202,379 696,208Production & Infrastructure 243,354 251,685 175,940Corporate 50,153 95,910 196,810Total assets $1,829,652 $2,195,228 $1,835,192Corporate assets primarily include deferred tax assets and deferred loan costs.A summary of long-lived assets by country is as follows (in thousands): Year ended December 31,Long-lived assets: 2018 2017 2016United States $868,295 $1,087,381 $809,545Europe & Africa 100,451 213,008 184,768Canada 87,221 88,280 79,403Asia-Pacific 984 7,984 7,855Middle East 6,049 7,362 3,175Latin America 635 832 730Total long-lived assets $1,063,635 $1,404,847 $1,085,476The following table presents our revenues disaggregated by geography based on shipping destination (in thousands): Year ended December 31, 2018 2017 2016Revenue: $% $% $%United States $811,72476.3% $621,44576.0% $361,94161.7%Canada 68,6356.4% 60,8987.4% 42,5207.2%Europe & Africa 57,6325.4% 61,1347.5% 77,84713.2%Middle East 54,5415.1% 25,6343.1% 25,9754.4%Asia-Pacific 46,5034.4% 28,6943.5% 51,8808.8%Latin America 25,1842.4% 20,8152.5% 27,4724.7%Total Revenue $1,064,219100.0% $818,620100.0% $587,635100.0%91Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)The following table presents our revenues disaggregated by product line (in thousands): Year ended December 31, 2018 2017 2016Revenue: $% $% $%Drilling Technologies $178,29316.6 % $169,04520.6 % $136,03323.3 %Subsea Technologies 50,7854.8 % 65,6978.0 % 88,41415.0 %Downhole Technologies 104,9749.9 % 76,0109.3 % 59,54510.1 %Stimulation and Intervention 228,62721.5 % 148,66518.2 % 72,24112.3 %Coiled Tubing 144,38613.6 % 35,5164.3 % —— %Production Equipment 141,16913.3 % 124,32315.2 % 77,16613.1 %Valve Solutions 220,23820.7 % 202,96424.8 % 156,58826.6 %Eliminations (4,253)(0.4)% (3,600)(0.4)% (2,352)(0.4)%Total revenue $1,064,219100.0 % $818,620100.0 % $587,635100.0 %92Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)17. Condensed Consolidating Financial StatementsThe Senior Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees arefull and unconditional, joint and several and on an unsecured basis.Condensed consolidating statements of comprehensive loss Year ended December 31, 2018 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Revenue $— $936,319 $187,647 $(59,747) $1,064,219Cost of sales — 717,519 151,787 (61,459) 807,847Gross Profit — 218,800 35,860 1,712 256,372Operating Expenses Selling, general and administrative expenses — 231,492 55,488 — 286,980Goodwill and intangible assets impairment — 233,635 129,887 — 363,522Transaction Expenses — 2,926 520 — 3,446Loss (gain) on disposal of assets and other — (1,274) 836 — (438)Total operating expenses — 466,779 186,731 — 653,510Earnings (loss) from equity investment — 529 (389) — 140Equity loss from affiliate, net of tax (348,557) (118,601) — 467,158 —Operating loss (348,557) (366,051) (151,260) 468,870 (396,998)Other expense (income) Interest expense 32,307 158 67 — 32,532Foreign exchange and other gains, net — (296) (5,974) — (6,270)(Gain) loss on contribution of subsea rentals business — 5,856 (39,362) — (33,506)Total other (income) expense, net 32,307 5,718 (45,269) — (7,244)Loss before income taxes (380,864) (371,769) (105,991) 468,870 (389,754)Income tax expense (benefit) (6,784) (23,212) 14,322 — (15,674)Net loss (374,080) (348,557) (120,313) 468,870 (374,080) Other comprehensive income (loss), net of tax: Net loss (374,080) (348,557) (120,313) 468,870 (374,080)Change in foreign currency translation, net of tax of $0 (24,752) (24,752) (24,752) 49,504 (24,752)Gain on pension liability 1,489 1,489 1,489 (2,978) 1,489Comprehensive loss $(397,343) $(371,820) $(143,576) $515,396 $(397,343)93Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating statements of comprehensive loss Year ended December 31, 2017 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Revenue $— $703,409 $182,417 $(67,206) $818,620Cost of sales — 550,931 145,743 (66,842) 629,832Gross Profit — 152,478 36,674 (364) 188,788Operating Expenses Selling, general and administrative expenses — 205,672 48,041 — 253,713Goodwill and intangible assets impairment — 33,301 35,761 — 69,062Transaction Expenses — 6,521 (10) — 6,511Loss on disposal of assets and other — 1,981 116 — 2,097Total operating expenses — 247,475 83,908 — 331,383Earnings from equity investment — 1,000 — — 1,000Equity loss from affiliate, net of tax (41,253) (53,682) — 94,935 —Operating loss (41,253) (147,679) (47,234) 94,571 (141,595)Other expense (income) Interest expense (income) 27,919 (569) (542) — 26,808Foreign exchange and other losses (gains), net — (118) 7,386 — 7,268Gain realized on previously held equity investment — (120,392) — — (120,392)Total other (income) expense, net 27,919 (121,079) 6,844 — (86,316)Loss before income taxes (69,172) (26,600) (54,078) 94,571 (55,279)Income tax expense (benefit) (9,772) 14,653 (760) — 4,121Net loss (59,400) (41,253) (53,318) 94,571 (59,400) Other comprehensive income (loss), net of tax: Net loss (59,400) (41,253) (53,318) 94,571 (59,400)Change in foreign currency translation, net of tax of $0 36,163 36,163 36,163 (72,326) 36,163Gain on pension liability 107 107 107 (214) 107Comprehensive loss $(23,130) $(4,983) $(17,048) $22,031 $(23,130)94Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating statements of comprehensive loss Year ended December 31, 2016 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Revenue $— $436,785 $198,684 $(47,834) $587,635Cost of sales — 375,509 161,190 (48,799) 487,900Gross Profit — 61,276 37,494 965 99,735Operating Expenses Selling, general and administrative expenses — 187,974 39,034 — 227,008Transaction Expenses — 825 40 — 865Loss on disposal of assets and other — 2,616 22 — 2,638Total operating expenses — 191,415 39,096 — 230,511Earnings from equity investment — 1,824 — — 1,824Equity earnings (loss) from affiliate, net of tax (62,180) 14,663 — 47,517 —Operating loss (62,180) (113,652) (1,602) 48,482 (128,952)Other expense (income) Interest expense (income) 27,480 (110) 40 — 27,410Foreign exchange and other gains, net — (5,264) (16,077) — (21,341)Deferred loan costs written off 2,978 — — — 2,978Total other (income) expense, net 30,458 (5,374) (16,037) — 9,047Income (loss) before income taxes (92,638) (108,278) 14,435 48,482 (137,999)Income tax expense (benefit) (10,660) (46,098) 707 — (56,051)Net income (loss) (81,978) (62,180) 13,728 48,482 (81,948)Less: Income attributable to noncontrolling interest — — 30 — 30Net income (loss) attributable to common stockholders (81,978) (62,180) 13,698 48,482 (81,978) Other comprehensive income (loss), net of tax: Net income (loss) (81,978) (62,180) 13,728 48,482 (81,948)Change in foreign currency translation, net of tax of $0 (45,722) (45,722) (45,722) 91,444 (45,722)Loss on pension liability (335) (335) (335) 670 (335)Comprehensive loss (128,035) (108,237) (32,329) 140,596 (128,005)Less: comprehensive loss attributable to noncontrolling interests — — (162) — (162)Comprehensive loss attributable to common stockholders $(128,035) $(108,237) $(32,491) $140,596 $(128,167)95Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating balance sheets December 31, 2018 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Assets Current assets Cash and cash equivalents $— $24,977 $22,264 $— $47,241Accounts receivable—trade, net — 177,986 28,069 — 206,055Inventories, net — 416,237 69,878 (7,092) 479,023Prepaid expenses and other current assets — 23,585 92 — 23,677Costs and estimated profits in excess of billings — 6,202 2,957 — 9,159Accrued revenue — — 862 — 862Total current assets — 648,987 124,122 (7,092) 766,017Property and equipment, net of accumulated depreciation — 156,434 20,924 — 177,358Deferred financing costs, net 2,071 — — — 2,071Intangible assets — 320,056 38,992 — 359,048Goodwill — 433,415 36,232 — 469,647Investment in unconsolidated subsidiary — 1,222 43,760 — 44,982Deferred income taxes, net — 1,170 64 — 1,234Other long-term assets — 4,194 5,101 — 9,295Investment in affiliates 877,764 265,714 — (1,143,478) —Long-term advances to affiliates 674,220 — 98,532 (772,752) —Total assets $1,554,055 $1,831,192 $367,727 $(1,923,322) $1,829,652Liabilities and equity Current liabilities Current portion of long-term debt $— $1,150 $17 $— $1,167Accounts payable—trade — 121,019 22,167 — 143,186Accrued liabilities 6,873 40,913 33,246 — 81,032Deferred revenue — 4,742 3,593 — 8,335Billings in excess of costs and profits recognized — 84 3,126 — 3,210Total current liabilities 6,873 167,908 62,149 — 236,930Long-term debt, net of current portion 517,056 480 8—— 517,544Deferred income taxes, net — — 15,299 — 15,299Other long-term liabilities — 12,288 17,465 — 29,753Long-term payables to affiliates — 772,752 — (772,752) —Total liabilities 523,929 953,428 94,921 (772,752) 799,526 —Total equity 1,030,126 877,764 272,806 (1,150,570) 1,030,126Total liabilities and equity $1,554,055 $1,831,192 $367,727 $(1,923,322) $1,829,65296Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating balance sheets December 31, 2017 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Assets Current assets Cash and cash equivalents $— $73,981 $41,235 $— $115,216Accounts receivable—trade, net — 168,162 34,752 — 202,914Inventories, net — 374,527 77,454 (8,804) 443,177Prepaid expenses and other current assets — 12,679 6,811 — 19,490Costs and estimated profits in excess of billings — 9,584 — — 9,584Total current assets — 638,933 160,252 (8,804) 790,381Property and equipment, net of accumulateddepreciation — 167,407 29,874 — 197,281Deferred financing costs, net 2,900 — — — 2,900Intangible assets — 390,752 52,312 — 443,064Goodwill — 599,677 155,568 — 755,245Deferred income taxes, net — — 3,344 — 3,344Other long-term assets — 2,086 927 — 3,013Investment in affiliates 1,250,593 418,799 — (1,669,392) —Long-term advances to affiliates 667,968 — 90,524 (758,492) —Total assets $1,921,461 $2,217,654 $492,801 $(2,436,688) $2,195,228Liabilities and equity Current liabilities Current portion of long-term debt $— $1,048 $108 $— $1,156Accounts payable—trade — 117,158 20,526 — 137,684Accrued liabilities 6,638 46,962 13,165 — 66,765Deferred revenue — 4,455 4,364 — 8,819Billings in excess of costs and profits recognized — 1,394 487 — 1,881Total current liabilities 6,638 171,017 38,650 — 216,305Long-term debt, net of current portion 505,807 908 35—— 506,750Deferred income taxes, net — 22,737 8,495 — 31,232Other long-term liabilities — 13,907 18,018 — 31,925Long-term payables to affiliates — 758,492 — (758,492) —Total liabilities 512,445 967,061 65,198 (758,492) 786,212 Total equity 1,409,016 1,250,593 427,603 (1,678,196) 1,409,016Total liabilities and equity $1,921,461 $2,217,654 $492,801 $(2,436,688) $2,195,22897Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating statements of cash flows Year ended December 31, 2018 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Cash flows from operating activities $10,461 $(76) $15,972 $(23,950) $2,407Cash flows from investing activities Capital expenditures for property and equipment — (20,288) (3,755) — (24,043)Acquisition of businesses, net of cash acquired — (60,622) — — (60,622)Investment in unconsolidated subsidiary — — — — —Proceeds from sale of business, property and equipment — 5,192 4,066 — 9,258Long-term loans and advances to affiliates (18,130) 9,690 — 8,440 —Net cash provided by (used in) investing activities (18,130) (66,028) 311 8,440 (75,407)Cash flows from financing activities Borrowings of debt 221,980 — — — 221,980Repayments of debt (211,783) — — — (211,783)Repurchases of stock (2,777) — — — (2,777)Proceeds from stock issuance 249 — — — 249Payment of capital lease obligations — (1,030) (117) — (1,147)Long-term loans and advances to affiliates — 18,130 (9,690) (8,440) —Dividend paid to affiliates — — (23,950) 23,950 —Net cash provided by (used in) financing activities 7,669 17,100 (33,757) 15,510 6,522 Effect of exchange rate changes on cash — — (1,497) — (1,497) Net decrease in cash, cash equivalents and restricted cash — (49,004) (18,971) — (67,975)Cash, cash equivalents and restricted cash at beginning ofperiod — 73,981 41,235 — 115,216Cash, cash equivalents and restricted cash at end of period $— $24,977 $22,264 $— $47,24198Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating statements of cash flows Year ended December 31, 2017 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Cash flows from operating activities $(15,718) $483 $3,702 $(28,500) $(40,033)Cash flows from investing activities Capital expenditures for property and equipment — (20,499) (6,210) — (26,709)Acquisition of businesses, net of cash acquired — (157,297) (4,892) — (162,189)Investment in unconsolidated subsidiary — (1,041) — — (1,041)Proceeds from sale of property and equipment — 2,038 (67) — 1,971Long-term loans and advances to affiliates (86,097) 22,072 — 64,025 —Net cash used in investing activities (86,097) (154,727) (11,169) 64,025 (187,968)Cash flows from financing activities Borrowings of debt 107,431 — — — 107,431Repurchases of stock (4,742) — — — (4,742)Proceeds from stock issuance 1,491 — — — 1,491Payment of capital lease obligations — (1,147) (40) — (1,187)Deferred financing costs (2,430) — — — (2,430)Long-term loans and advances to affiliates — 86,097 (22,072) (64,025) —Dividend paid to affiliates — — (28,500) 28,500 —Net cash provided by (used in) financing activities 101,750 84,950 (50,612) (35,525) 100,563 Effect of exchange rate changes on cash — — 8,232 — 8,232 Net decrease in cash, cash equivalents and restricted cash (65) (69,294) (49,847) — (119,206)Cash, cash equivalents and restricted cash at beginning ofperiod 65 143,275 91,082 — 234,422Cash, cash equivalents and restricted cash at end of period $— $73,981 $41,235 $— $115,21699Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)Condensed consolidating statements of cash flows Year ended December 31, 2016 FET (Parent) GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations Consolidated (in thousands)Cash flows from operating activities $(16,882) $31,055 $73,772 $(23,203) $64,742Cash flows from investing activities Capital expenditures for property and equipment — (12,033) (4,795) — (16,828)Acquisition of businesses, net of cash acquired — (4,072) — — (4,072)Proceeds from sale of property and equipment — 9,442 321 — 9,763Long-term loans and advances to affiliates (69,340) 12,912 — 56,428 —Net cash provided by (used in) investing activities (69,340) 6,249 (4,474) 56,428 (11,137)Cash flows from financing activities Repurchases of stock (623) — — — (623)Proceeds from stock issuance 87,676 — — — 87,676Payment of capital lease obligations — (253) 161 — (92)Deferred financing costs (766) — — — (766)Long-term loans and advances to affiliates — 69,340 (12,912) (56,428) —Dividend paid to affiliates — — (23,203) 23,203 —Net cash provided by (used in) financing activities 86,287 69,087 (35,954) (33,225) 86,195 Effect of exchange rate changes on cash — — (14,627) — (14,627) Net increase in cash, cash equivalents and restricted cash 65 106,391 18,717 — 125,173Cash, cash equivalents and restricted cash at beginning ofperiod — 36,884 72,365 — 109,249Cash, cash equivalents and restricted cash at end of period $65 $143,275 $91,082 $— $234,422100Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued)18. Quarterly Results of Operations (Unaudited)The following tables summarize the Company’s results by quarter for the years ended December 31, 2018 and 2017. The quarterly results may notbe comparable primarily due to acquisitions in 2018, 2017 and 2016. Refer to Note 4 Acquisitions & Dispositions for further information. 2018(in thousands, except per share information)Q1 Q2 Q3 Q4Revenues$250,231 $274,003 $267,037 $272,948Cost of sales182,944 201,334 192,496 231,073Gross profit67,287 72,669 74,541 41,875Total operating expenses (1)73,030 84,721 72,764 422,995Earnings (loss) from equity investment(963) 350 659 94Operating income (loss)(6,706) (11,702) 2,436 (381,026)Total other expense (income), net (2)(21,868) 2,001 6,598 6,025Income (loss) before income taxes15,162 (13,703) (4,162) (387,051)Income tax expense (benefit)(12,904) 1,646 (1,108) (3,308)Net income (loss)28,066 (15,349) (3,054) (383,743) Weighted average shares outstanding Basic108,423 108,714 108,856 109,082Diluted110,857 108,714 108,856 109,082Earnings (loss) per share Basic$0.26 $(0.14) $(0.03) $(3.52)Diluted$0.25 $(0.14) $(0.03) $(3.52)(1) Total operating expenses included $14.5 million of intangible asset impairments for the Subsea and Downhole product lines in Q2, $298.8 million of goodwill impairmentcharges in Q4 and $50.2 million of intangible asset impairments in Q4. See Note 7 Goodwill and Intangible Assets for further information related to these charges.(2) Total other expenses included a $33.5 million gain on contribution of our subsea rentals business in Q1. See Note 4 Acquisitions & Dispositions for further informationrelated to this gain.101Table of ContentsForum Energy Technologies, Inc. and subsidiariesNotes to consolidated financial statements (continued) 2017(in thousands, except per share information)Q1 Q2 Q3 Q4Revenues$171,096 $201,115 $198,709 $247,700Cost of sales132,117 151,860 151,150 194,705Gross profit38,979 49,255 47,559 52,995Total operating expenses (1)61,056 131,779 64,839 73,709Earnings (loss) from equity investment1,462 2,568 3,361 (6,391)Operating loss(20,615) (79,956) (13,919) (27,105)Total other expense (income), net (2)8,126 8,987 8,726 (112,155)Income (loss) before income taxes(28,741) (88,943) (22,645) 85,050Income tax expense (benefit)(12,973) (11,070) (7,817) 35,981Net income (loss)(15,768) (77,873) (14,828) 49,069 Weighted average shares outstanding Basic95,860 96,170 96,275 105,947Diluted95,860 96,170 96,275 108,581Earnings (loss) per share Basic$(0.16) $(0.81) $(0.15) $0.46Diluted$(0.16) $(0.81) $(0.15) $0.45(1) Total operating expenses in Q2 included a $68.0 million goodwill impairment for our Subsea reporting unit. See Note 7 Goodwill and Intangible Assets for further informationrelated to this charges.(2) Total other expenses in Q4 included a $120.4 million gain realized on our previously held equity investment. See Note 4 Acquisitions & Dispositions for further informationrelated to this gain.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act). The Company’s disclosurecontrols and procedures have been designed to provide reasonable assurance that information required to be disclosed in our reports filed orsubmitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules andforms. Our disclosure controls and procedures include controls and procedures designed to provide reasonable assurance that information requiredto be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of December 31, 2018. Based on thatevaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at thereasonable assurance level as of December 31, 2018.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control overfinancial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles.Our management performed an assessment of the overall effectiveness of our internal control over financial reporting as of December 31, 2018,utilizing the criteria described in the “Internal Control - Integrated Framework” (2013) issued102Table of Contentsby the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that theCompany’s internal control over financial reporting is effective as of December 31, 2018.Our independent registered public accounting firm, PricewaterhouseCoopers LLP, audited the effectiveness of our internal control over financialreporting as of December 31, 2018, as stated in their report which appears herein.Remediation of Material WeaknessAs previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, management identified the followingmaterial weakness in the operation of our internal control over financial reporting that existed as of December 31, 2017:We did not maintain effective controls over the development of fair value measurements utilized in the application of the acquisition method ofaccounting for business combinations, and for purposes of testing goodwill for impairment. Specifically, our review procedures over thedevelopment and application of inputs, assumptions, and calculations used in fair value measurements associated with business combinationsand goodwill impairment testing did not operate at an appropriate level of precision commensurate with our financial reporting requirements. Thiscontrol deficiency resulted in an adjustment to the gain realized upon the consolidation of Global Tubing, LLC which was recorded prior to theissuance of the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2017. Additionally, this controldeficiency could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement tothe annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined thatthis control deficiency constitutes a material weakness.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected ona timely basis. This material weakness did not result in a restatement of any of the Company’s previously filed consolidated financial statements.During the fiscal year ended December 31, 2018, our management, with oversight from our Audit Committee, developed and implementedremediation plans in response to the identified material weakness described above. These plans included the implementation of additional controlsand procedures to address the development of fair value measurements utilized in the application of the acquisition method of accounting forbusiness combinations, and for purposes of testing goodwill for impairment. We finalized the testing of these new controls and procedures duringthe quarter ended December 31, 2018. Based on the results of procedures performed, management concluded that the previously identifiedmaterial weakness has been remediated as of December 31, 2018.Changes in Internal Control over Financial ReportingThere have been no changes in internal control over financial reporting during the quarter ended December 31, 2018 that have materially affected,or are reasonably likely to materially affect, the Company’s internal control over financial reporting.Item 9B. Other informationNone.Item 10. Directors, executive officers and corporate governanceInformation required by this item is incorporated herein by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders.Code of EthicsWe have adopted a Financial Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer (or other principal financialofficer), Chief Accounting Officer (or other principal accounting officer) and other senior financial officers. We have posted a copy of the codeunder “Corporate Governance” in the “Investors” section of our internet website at www.f-e-t.com. Copies of the code may be obtained free ofcharge on our website. Any waivers of the code must be approved by our board of directors or a designated committee of our board of directors.Any change to, or waiver from, the Code of Ethics will be promptly disclosed as required by applicable U.S. federal securities laws and thecorporate governance rules of the NYSE.103Table of ContentsItem 11. Executive compensationInformation required by this item is incorporated herein by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders.Item 12. Security ownership of certain beneficial owners and management and related stockholder mattersInformation required by this item is incorporated herein by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation required by this item is incorporated herein by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders.Item 14. Principal accountant fees and servicesInformation required by this item is incorporated herein by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders.Item 15. Exhibits(a) The following documents are filed as part of this Annual Report on Form 10-K:1. Financial Statements filed as part of this reportIndex to Consolidated Financial StatementsPageReport of Independent Registered Public Accounting Firm58Consolidated Statements of Comprehensive Loss60Consolidated Balance Sheets61Consolidated Statements of Cash Flows62Consolidated Statements of Changes in Stockholders’ Equity63Notes to Consolidated Financial Statements642. Financial Statement SchedulesAll financial statement schedules have been omitted since the required information is not applicable or is not present in amounts sufficient torequire submission of the schedule, or because the information required is included on the Consolidated Financial Statements and Notes thereto.104Table of Contents3. ExhibitsIndex to ExhibitsExhibit NumberDESCRIPTION2.1*Combination Agreement dated July 16, 2010 by and among Forum Oilfield Technologies, Inc., Allied Production Services, Inc.,Allied Merger Sub, LLC, Global Flow Technologies, Inc., Global Flow Merger Sub, LLC, Subsea Services International, Inc.,Subsea Merger Sub, LLC, Triton Group Holdings LLC, Triton Merger Sub, LLC and SCF-VII, L.P. (incorporated herein byreference to Exhibit 2.1 to the Company’s Registration Statement on Form S-1 (the “Registration Statement”), filed on August31, 2011) File No. 333-180676. 3.1*Third Amended and Restated Certificate of Incorporation of Forum Energy Technologies, Inc. dated March 28, 2011(incorporated herein by reference to Exhibit 3.2 to Amendment No. 5 to the Registration Statement, filed on March 29, 2012)(File No. 333-180676). 3.2*Second Amended and Restated Bylaws of Forum Energy Technologies, Inc. dated April 17, 2012 (incorporated herein byreference to Exhibit 3.1 on the Company’s Current Report on Form 8-K, filed on April 17, 2012) (File No. 1-35504). 4.1*Indenture, dated October 2, 2013, among Forum Energy Technologies, Inc., the guarantors named therein and Wells FargoBank, National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report onForm 8-K, filed on October 4, 2013). 4.2*Registration Rights Agreement by and among Forum Energy Technologies and the other parties thereto (incorporated herein byreference to Exhibit B to Exhibit 4.2 to the Registration Statement, filed on August 31, 2011) (File No. 333-180676). 4.3*Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the RegistrationStatement, filed on December 29, 2011) (File No. 333-180676). 4.4*Form of Note (incorporated herein by reference to Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed onOctober 4, 2013). 10.1*Stock Purchase Agreement between Forum Energy Technologies, Inc. and Tinicum, L.P., dated as of March 28, 2012(incorporated herein by reference to Exhibit 10.30 to Amendment No. 5 to the Registration Statement, filed on March 29, 2012) )(File No. 333-180676). 10.2*#Form of Nonstatutory Stock Option Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.5 tothe Company’s Quarterly Report on Form 10-Q, filed on April 29, 2014). 10.3*#Form of Restricted Stock Unit Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10-Q, filed May 1, 2015). 10.4*#Form of Nonstatutory Stock Option Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10-Q, filed on May 1, 2015). 10.5*#Form of Nonstatutory Stock Option Agreement - Three Year Cliff Vesting (Employees and Consultants) (incorporated herein byreference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on October 30, 2015). 10.6*#Employment Agreement dated as of August 2, 2010 between Forum Energy Technologies, Inc. and C. Christopher Gaut(incorporated herein by reference to Exhibit 10.2 to the Registration Statement, filed on August 31, 2011) ) (File No. 333-180676). 10.7*#Employment Agreement dated as of October 25, 2010 between Forum Energy Technologies, Inc. and James L. McCulloch(incorporated herein by reference to Exhibit 10.7 to the Registration Statement, filed on August 31, 2011) ) (File No. 333-180676). 10.8*#Amendment to Employment Agreement dated as of April 12, 2012 between Forum Energy Technologies, Inc. and C. ChristopherGaut (incorporated herein by reference to Exhibit 10.2 on the Company’s Current Report on Form 8-K, filed on April 17, 2012)(File No. 1-35504). 10.9*#Amendment to Employment Agreement dated as of April 12, 2012 between Forum Energy Technologies, Inc. and James W.Harris (incorporated herein by reference to Exhibit 10.4 on the Company’s Current Report on Form 8-K, filed on April 17, 2012). 105Table of Contents10.10*#Amendment to Employment Agreement dated as of April 12, 2012 between Forum Energy Technologies, Inc. and James L.McCulloch (incorporated herein by reference to Exhibit 10.5 on the Company’s Current Report on Form 8-K, filed on April 17,2012). 10.11*#Employment Agreement dated as of January 13, 2014 between Forum Energy Technologies, Inc. and Prady Iyyanki(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 8, 2014). 10.12*#Employment Agreement, dated February 16, 2018, by and between Forum Energy Technologies, Inc. and C. Christopher Gaut(incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on February 21, 2018). 10.13*#Indemnification Agreement dated as of August 2, 2010 between Forum Energy Technologies and C. Christopher Gaut(incorporated herein by reference to Exhibit 10.9 to the Registration Statement, filed on August 31, 2011) (File No. 333-180676). 10.14*#Form of Indemnification Agreement between Forum Energy Technologies, Inc. and the executive officers identified on Annex Athereto (incorporated herein by reference to Exhibit 10.10 to the Registration Statement, filed on August 31, 2011) (File No. 333-180676). 10.15*#Form of Indemnification Agreement between Forum Energy Technologies and each of the non-SCF directors identified on AnnexA thereto (incorporated herein by reference to Exhibit 10.11 to the Registration Statement, filed on August 31, 2011) (File No.333-180676). 10.16*#Form of Indemnification Agreement between Forum Energy Technologies and each of the SCF directors identified on Annex Athereto (incorporated herein by reference to Exhibit 10.12 to the Registration Statement, filed on August 31, 2011) (File No. 333-180676). 10.17*#Forum Energy Technologies, Inc. Severance Plan (incorporated herein by reference to Exhibit 10.15 to the RegistrationStatement, filed on August 31, 2011) (File No. 333-180676). 10.18*#Forum Energy Technologies, Inc. Deferred Compensation and Restoration Plan (incorporated herein by reference to Exhibit 10.6to the Company’s Current Report on Form 10-Q, filed on May 3, 2013). 10.19*#Letter Agreement dated March 28, 2012 between Forum Energy Technologies, Inc. and Tinicum, L.P. (incorporated herein byreference to Exhibit 10.31 to Amendment No. 5 to the Registration Statement, filed on March 29, 2012) (File No. 333-180676). 10.20*#Forum Energy Technologies, Inc. 2010 Stock Incentive Plan (as amended and restated effective August 15, 2012) (incorporatedherein by reference to Exhibit 10.2 to the Company’s Current Report on Form 10- Q, filed November 6, 2012) (File No. 1-35504). 10.21*#Subscription Agreement dated July 16, 2010 by and among Forum Oilfield Technologies, Inc., SCF-VII, L.P., Sunray Capital,LP, C. Christopher Gaut and W. Patrick Connelly, as amended (incorporated herein by reference to Exhibit 10.21 to theRegistration Statement, filed on August 31, 2011) (File No. 333-180676). 10.22*#Retirement and Separation Agreement, effective as of December 18, 2014 (incorporated herein by reference to Exhibit 10.1 tothe Company’s Current Report on Form 8-K, filed on December 18, 2014). 10.23*#Severance Agreement dated as of February 16, 2018 between Forum Energy Technologies, Inc. and Pablo G. Mercado(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 21, 2018). 10.24*#Severance Agreement dated as of February 16, 2018 between Forum Energy Technologies, Inc. and Michael D. Danford(incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on February 21, 2018).10.25*#Severance Agreement dated as of December 19, 2018 between Forum Energy Technologies, Inc. and C. Christopher Gaut(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, filed on December 21, 2018). 10.26#Severance Agreement dated as of September 1, 2018 between Forum Energy Technologies, Inc. and D. Lyle Williams. 10.27*#Retirement Agreement dated as of July 31, 2018 between Forum Energy Technologies, Inc. and James W. Harris (incorporatedherein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 2, 2018). 10.28*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 1) (incorporated herein by reference to Exhibit10.3 to the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2016). 106Table of Contents10.29*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 2) (incorporated herein by reference to Exhibit10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2016). 10.30*#Form of Restricted Stock Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.5 to theCompany’s Quarterly Report on Form 10-Q, filed on May 3, 2016). 10.31*#Form of Nonstatutory Stock Option Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.6 tothe Company’s Quarterly Report on Form 10-Q, filed on May 3, 2016). 10.32*#Form of Performance Share Award Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.7 tothe Company’s Quarterly Report on Form 10-Q, filed on May 3, 2016). 10.33*#Forum Energy Technologies, Inc. 2016 Stock and Incentive Plan (incorporated herein by reference to Appendix A to theCompany’s Proxy Statement on Schedule 14A filed on April 1, 2016). 10.34*#Form of Restricted Stock Unit Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q, filed on November 2, 2016). 10.35*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 1) (incorporated herein by reference to Exhibit10.3 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2017). 10.36*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 2) (incorporated herein by reference to Exhibit10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2017). 10.37*#Form of Nonstatutory Stock Option Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.5 tothe Company’s Quarterly Report on Form 10-Q, filed on May 2, 2017). 10.38*#Form of Performance Share Award Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.6 tothe Company’s Quarterly Report on Form 10-Q, filed on May 2, 2017). 10.39*#Amended and Restated Employee Stock Purchase Plan, dated as of July 1, 2017 (incorporated herein by reference to Exhibit10.1 to the Company’s Quarterly Report on Form 10-Q, filed on August 1, 2017). 10.40*#Form of Restricted Stock Agreement (Directors) (incorporated herein by reference to Exhibit 10.4 to the Company’s QuarterlyReport on Form 10-Q, filed on May 2, 2018). 10.41*#Form of Restricted Stock Unit Agreement (Directors) (incorporated herein by reference to Exhibit 10.5 to the Company’sQuarterly Report on Form 10-Q, filed on May 2, 2018). 10.42*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 1) (incorporated herein by reference to Exhibit10.6 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2018). 10.43*#Form of Restricted Stock Unit Agreement (Employees and Consultants - Group 2) (incorporated herein by reference to Exhibit10.7 to the Company’s Quarterly Report on Form 10-Q, filed on May 2, 2018). 10.44*#Form of Nonstatutory Stock Option Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.8 tothe Company’s Quarterly Report on Form 10-Q, filed on May 2, 2018). 10.45*#Form of Performance Share Award Agreement (Employees and Consultants) (incorporated herein by reference to Exhibit 10.9 tothe Company’s Quarterly Report on Form 10-Q, filed on May 2, 2018). 10.46*Purchase and Sale Agreement, dated August 25, 2017, by and among Q-GT (V) Investment Partners, LLC, Forum EnergyTechnologies, Inc. and Global Tubing, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K, filed on August 28, 2017). 10.47*Amendment No. 2 to the Registration Rights Agreement, dated as of August 25, 2017, by and among Forum EnergyTechnologies and the other parties thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K, filed on August 28, 2017). 10.48*Registration Rights Agreement, dated as of October 2, 2017, by and between Forum Energy Technologies, Inc. and Q-GT (V)Investment Partners, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filedon October 3, 2017). 10.49*Third Amended and Restated Credit Agreement, dated as of October 30, 2017, by and among Forum Energy Technologies, Inc.,Forum Canada ULC, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 2, 2017). 107Table of Contents10.50*#Form of Restricted Stock Unit Agreement (Gaut). 10.51*#Form of Performance Share Award Agreement (Gaut). 21.1**Subsidiaries of Forum Energy Technologies, Inc. 23.1**Consent of PricewaterhouseCoopers LLP. 31.1**Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2**Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1**Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2**Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS**XBRL Instance Document. 101.SCH**XBRL Taxonomy Extension Schema Document. 101.CAL**XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB**XBRL Taxonomy Extension Label Linkbase Document. 101.PRE**XBRL Taxonomy Extension Presentation Linkbase Document. 101.DEF**XBRL Taxonomy Extension Definition Linkbase Document.* Previously filed.** Filed herewith.# Identifies management contracts and compensatory plans or arrangements.Item 16. Form 10-K SummaryNone.108Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. FORUM ENERGY TECHNOLOGIES, INC. By:/s/ Pablo G. Mercado February 28, 2019 Pablo G. Mercado Senior Vice President, Chief Financial Officer and Treasurer (As Duly Authorized Officer and Principal Financial Officer) February 28, 2019By:/s/ Tylar K. Schmitt Tylar K. Schmitt Vice President and Chief Accounting Officer (As Duly Authorized Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities an on the dates indicated.Signature Title Date /s/ C. Christopher Gaut President, Chief Executive Officer and Chairman of the Board(Principal Executive Officer) February 28, 2019C. Christopher Gaut /s/ Pablo G. MercadoSenior Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer) February 28, 2019Pablo G. Mercado /s/ Tylar K. Schmitt Vice President and Chief Accounting Officer(Principal Accounting Officer) February 28, 2019Tylar K. Schmitt /s/ Evelyn M. Angelle Director February 28, 2019Evelyn M. Angelle /s/ David C. Baldwin Director February 28, 2019David C. Baldwin /s/ John A. Carrig Director February 28, 2019John A. Carrig /s/ Michael McShane Director February 28, 2019Michael McShane /s/ Terence O’Toole Director February 28, 2019Terence O’Toole /s/ Louis A. Raspino Director February 28, 2019Louis A. Raspino /s/ John Schmitz Director February 28, 2019John Schmitz /s/ Andrew L. Waite Director February 28, 2019Andrew L. Waite 109Exhibit 10.26SEVERANCE AGREEMENTTHIS SEVERANCE AGREEMENT (“Agreement”) is made on this 1st day of September, 2018 (the “Effective Date”), byand between Forum Energy Technologies, Inc., a Delaware corporation (the “Company”), and D. Lyle Williams (“Executive”).W I T N E S S E T H:WHEREAS, Executive is an employee of the Company, and the Company desires to provide additional inducement forExecutive to remain in the ongoing employ of the Company.NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, theCompany and Executive agree as follows:Article I DEFINITIONSIn addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized wordsshall have the meanings indicated below:1.1 “Acquiring Person” shall mean any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of theExchange Act).1.2 “Annual Bonus” shall mean Executive’s annual incentive bonus opportunity under the Company’s ManagementIncentive Plan or a successor plan.1.3 “Base Salary” shall mean Executive’s annual base salary.1.4 “Board” shall mean the Board of Directors of the Company.1.5 “Cause” shall mean a determination by the Company that Executive (%3) has engaged in gross negligence or willfulmisconduct in the performance of Executive’s duties with respect to the Company or any of its affiliates, (%3) has materially breachedany material provision of this Agreement or any written agreement or corporate policy or code of conduct established by the Companyor any of its affiliates, (%3) has willfully engaged in conduct that is materially injurious to the Company or any of its affiliates, or(%3) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with afelony involving fraud, dishonesty or moral turpitude (or a crime of similar import in a foreign jurisdiction).1.6 “Change in Control” shall mean:(a) The acquisition by any Acquiring Person of beneficial ownership (within the meaning of Rule 13d-3 promulgatedunder the Exchange Act) of fifty percent (50%) or more of either (1) the then outstanding shares of common stock of theCompany (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding votingsecurities of the Company entitled to vote generally in the election of directors (the “Outstanding Company VotingSecurities”); provided, however, that for purposes of thissubsection (a) any acquisition by any Acquiring Person pursuant to a transaction which complies with clause (c)(1) of thisdefinition shall not constitute a Change in Control; or(b) Individuals, who, immediately following the Effective Date, constitute the Board (the “Incumbent Board”) ceasefor any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a directorsubsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved bya vote of at least a majority of the directors then comprising the Incumbent Board shall be considered for purposes of thisdefinition as though such individual was a member of the Incumbent Board, but excluding, for these purposes, any suchindividual whose initial assumption of office as a director occurs as a result of an actual or threatened election contest withrespect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf ofan Acquiring Person other than the Board; or(c) The consummation of a Corporate Transaction unless, following such Corporate Transaction, (1) all orsubstantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding CompanyCommon Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficiallyown, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and thecombined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as thecase may be, of the Company (if it be the ultimate parent entity following such Corporate Transaction) or the corporationresulting from such Corporate Transaction (or the ultimate parent entity which as a result of such transaction owns theCompany or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), and (2) at leasta majority of the members of the board of directors of the ultimate parent entity resulting from such Corporate Transaction weremembers of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for suchCorporate Transaction. For purposes of the foregoing sentence, only (A) shares of common stock and voting securities of theCompany, assuming the Company is the ultimate parent entity following such Corporate Transaction, held by a beneficialowner immediately prior to such Corporate Transaction and any additional shares of common stock and voting securities of theCompany issuable to such beneficial owner in connection with such Corporate Transaction in respect of the shares of commonstock and voting securities of the Company held by such beneficial owner immediately prior to such Corporate Transaction, or(B) shares of common stock and voting securities of the ultimate parent entity following such Corporate Transaction, assumingthe Company is not the ultimate parent entity following such Corporate Transaction, issuable to a beneficial owner in respect ofthe shares of common stock and voting securities of the Company held by such beneficial owner immediately prior to suchCorporate Transaction, in either case shall be included in determining whether or not the fifty percent (50%) ownership test inthis subsection (c) has been satisfied.1.7 “Code” shall mean the Internal Revenue Code of 1986, as amended.21.8 “Corporate Transaction” shall mean a reorganization, merger or consolidation of the Company, any of its subsidiaries orsale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole (other thanto an entity wholly owned, directly or indirectly, by the Company) or the liquidation or dissolution of the Company.1.9 “Date of Termination” shall mean the date Executive’s employment with the Company is considered to have terminatedpursuant to Section 2.4.1.10 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.1.11 “Good Reason” shall mean the occurrence of any of the following events:(a) a material diminution in Executive’s Base Salary, other than as part of a decrease of up to 10% for all of theCompany’s executive officers; or(b) if Executive is not the Chief Executive Officer of the Company at the time of the event, a material diminution inExecutive’s authority, duties, or responsibilities, excluding a change in management structure primarily affecting reportingresponsibility where Executive continues to report to the same position that such individual reported to prior to the event or thechange or reports directly to the Company’s Chief Executive Officer; or(c) if Executive is the Chief Executive Officer of the Company at the time of the event, Executive ceases to beemployed in the position of Chief Executive Officer of the Company; or(d) the involuntary relocation of the geographic location of Executive’s principal place of employment by more than75 miles from the location of Executive’s principal place of employment as of the Effective Date.Notwithstanding the foregoing provisions of this Section 1.11 or any other provision in this Agreement to the contrary, any assertionby Executive of a termination of employment for “Good Reason” shall not be effective unless all of the following requirements aresatisfied: (%4) the condition described in Section 1.11(a), (b), (c) or (d) giving rise to Executive’s termination of employment musthave arisen without Executive’s consent; (%3) Executive must provide written notice to the Company of such condition in accordancewith Section 9.1 within 45 days of the initial existence of the condition; (%3) the condition specified in such notice must remainuncorrected for 30 days after receipt of such notice by the Company; and (%3) the date of Executive’s termination of employment mustoccur within 90 days after the initial existence of the condition specified in such notice.1.12 “Notice of Termination” shall mean a written notice delivered to the other party indicating the specific terminationprovision in this Agreement relied upon for termination of Executive’s employment and the intended Date of Termination and shall setforth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under theprovision so indicated.31.13 “Section 409A Payment Date” shall mean the earlier of (%3) the date of Executive’s death or (%3) the date that is sixmonths after the date of termination of Executive’s employment with the Company.1.14 “Severance Multiple” shall mean two; provided, however, that the Severance Multiple shall mean three if Executive’semployment hereunder shall terminate on or within two years after the occurrence of a Change in Control.1.15 “Target Bonus Percentage” shall mean Executive’s highest target Annual Bonus opportunity (expressed as a percentageof Executive’s Base Salary) for the year in which the Date of Termination occurs or for the two calendar years immediately precedingsuch year.ARTICLE II TERMINATION OF EMPLOYMENT2.1 Company’s Right to Terminate. The Company may terminate Executive’s employment with the Company at any timefor any of the following reasons by providing Executive with a Notice of Termination:(a) upon Executive being unable to perform Executive’s employment duties or fulfill Executive’s employmentobligations by reason of any physical or mental impairment for a continuous period of not less than three months as determinedby the Company and certified in writing by a competent medical physician selected by the Company; or(b) Executive’s death; or(c) for Cause; or(d) for any other reason whatsoever or for no reason at all, in the sole discretion of the Company.2.2 Executive’s Right to Terminate. Executive shall have the right to terminate Executive’s employment with the Companyfor Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Executive, by providing theCompany with a Notice of Termination. In the case of a termination of employment by Executive pursuant to this Section 2.2, the Dateof Termination specified in the Notice of Termination shall not be less than 15 nor more than 60 days from the date such Notice ofTermination is given, and the Company may require a Date of Termination earlier than that specified in the Notice of Termination(and, if such earlier Date of Termination is so required, it shall not change the basis for Executive’s termination nor be construed orinterpreted as a termination of employment pursuant to Section 2.1).2.3 Deemed Resignations. Unless otherwise agreed to in writing by the Company and Executive prior to the termination ofExecutive’s employment, any termination of Executive’s employment shall constitute (%3) an automatic resignation of Executive as anofficer of the Company and each affiliate of the Company and (%3) an automatic resignation of Executive from the Board (ifapplicable), from the board of directors of any affiliate of the Company and from the4board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or anyaffiliate holds an equity interest and with respect to which board or similar governing body Executive serves as the Company’s or suchaffiliate’s designee or other representative.2.4 Meaning of Termination of Employment. For all purposes of this Agreement, Executive shall be considered to haveterminated employment with the Company when Executive incurs a “separation from service” with the Company within the meaningof section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder; provided, however, that whethersuch a separation from service has occurred shall be determined based upon a reasonably anticipated permanent reduction in the levelof bona fide services to be performed to no more than 49% of the average level of bona fide services provided in the immediatelypreceding 36 months.ARTICLE III PROTECTION OF INFORMATION3.1 Disclosure to and Property of the Company. For purposes of this Article III, the term “the Company” shall include theCompany and any of its affiliates, and any reference to “employment” or similar terms shall include a director and/or consultingrelationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions,whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Executive, individually or in conjunctionwith others, during the period of Executive’s employment by the Company (whether during business hours or otherwise and whetheron the Company’s premises or otherwise) that relate to the Company’s or any of its affiliates’ businesses, trade secrets, products orservices (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, productspecifications, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms,evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contactswithin the customer’s organizations or within the organization of acquisition prospects, or production, marketing and merchandisingtechniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas,concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Confidential Information”) shallbe disclosed to the Company and are and shall be the sole and exclusive property of the Company or its affiliates, as applicable.Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence,manuals, models, specifications, computer programs, E‑mail, voice mail, electronic databases, maps, drawings, architectural renditions,models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries,inventions and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and exclusive property of theCompany (or its affiliates). Executive agrees to perform all actions reasonably requested by the Company or its affiliates to establishand confirm such exclusive ownership. Upon termination of Executive’s employment with the Company, for any reason, Executivepromptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.53.2 Disclosure to Executive. The Company shall disclose to Executive and place Executive in a position to have access to ordevelop Confidential Information and Work Product of the Company (or its affiliates); and shall entrust Executive with businessopportunities of the Company (or its affiliates); and shall place Executive in a position to develop business good will on behalf of theCompany (or its affiliates).3.3 No Unauthorized Use or Disclosure. Executive agrees to preserve and protect the confidentiality of all ConfidentialInformation and Work Product of the Company and its affiliates. Executive agrees that Executive will not, at any time during or afterExecutive’s employment with the Company, make any unauthorized disclosure of, and Executive shall not remove from the Companypremises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, inthe carrying out of Executive’s responsibilities hereunder. Executive shall use all reasonable efforts to cause all persons or entities towhom any Confidential Information shall be disclosed by Executive hereunder to preserve and protect the confidentiality of suchConfidential Information. Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to theextent disclosure thereof is specifically required by law. At the request of the Company at any time, Executive agrees to deliver to theCompany all Confidential Information that Executive may possess or control. Executive agrees that all Confidential Information of theCompany (whether now or hereafter existing) conceived, discovered or made by Executive during the period of Executive’semployment by the Company exclusively belongs to the Company (and not to Executive), and upon request by the Company forspecified Confidential Information, Executive will promptly disclose such Confidential Information to the Company and perform allactions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall bethird party beneficiaries of Executive’s obligations under this Article III. As a result of Executive’s employment by the Company,Executive may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, suchas customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Executive also agrees to preserve andprotect the confidentiality of such third party Confidential Information and Work Product.3.4 Ownership by the Company. If, during Executive’s employment by the Company, Executive creates any work ofauthorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations,or acquisitions, computer programs, E‑mail, voice mail, electronic databases, drawings, maps, architectural renditions, models,manuals, brochures, or the like) relating to the Company’s business, products, or services, whether such work is created solely byExecutive or jointly with others (whether during business hours or otherwise and whether on the Company’s premises or otherwise),including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Executive in the scopeof Executive’s employment; or, if the work relating to the Company’s business, products, or services is not prepared by Executivewithin the scope of Executive’s employment but is specially ordered by the Company as a contribution to a collective work, as a partof a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text,then the work shall be considered to be work made for hire and the Company shall be the author of the work. If the work relating tothe Company’s business, products, or services is neither prepared by Executive within the scope of Executive’s employment nor awork specially ordered6that is deemed to be a work made for hire during Executive’s employment by the Company, then Executive hereby agrees to assign,and by these presents does assign, to the Company all of Executive’s worldwide right, title, and interest in and to such work and allrights of copyright therein.3.5 Assistance by Executive. During the period of Executive’s employment by the Company, Executive shall assist theCompany and its nominee, at any time, in the protection of the Company’s or its affiliates’ worldwide right, title and interest in and toConfidential Information and Work Product and the execution of all formal assignment documents requested by the Company or itsnominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States andforeign countries. After Executive’s employment with the Company terminates, at the request from time to time and expense of theCompany or its affiliates, Executive shall assist the Company or its nominee(s) in the protection of the Company’s or its affiliates’worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignmentdocuments requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registrationof copyright in the United States and foreign countries.3.6 Remedies. Executive acknowledges that money damages would not be a sufficient remedy for any breach of this ArticleIII by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article III by terminating paymentsthen owing to Executive under this Agreement or otherwise and to specific performance and injunctive relief as remedies for suchbreach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article III but shall bein addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executive’s agents.However, if it is determined that Executive has not committed a breach of this Article III, then the Company shall resume the paymentsand benefits due under this Agreement and pay to Executive and Executive’s spouse, if applicable, all payments and benefits that hadbeen suspended pending such determination.3.7 Protected Rights. Notwithstanding any provision of this Agreement to the contrary, nothing contained in this Agreementlimits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National LaborRelations Board, the Occupational Health and Safety Administration, the Securities and Exchange Commission or any other federal,state or local governmental agency or commission (“Government Agencies”). This Agreement does not limit Executive’s ability tocommunicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted byany Government Agency, including providing documents or other information, without notice to the Company. This Agreement doesnot limit Executive’s right to receive an award for information provided to any Government Agencies. Executive has been informedthat nothing herein shall prevent Executive from making a disclosure of a trade secret that: (1) is made (A) in confidence to a federal,state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting orinvestigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, ifsuch filing is made under seal. Further, Executive has been informed that an individual who files a lawsuit for retaliation by anemployer of reporting a suspected violation of law may disclose a trade secret to the attorney of the individual and use the trade secretinformation in the court proceeding, if the individual (x) files any document7containing the trade secret under seal and (y) does not disclose the trade secret, except pursuant to court orderARTICLE IV STATEMENTS CONCERNING THE COMPANY4.1 Statements Concerning the Company. Executive shall refrain, both during and after the termination of the employmentrelationship, from publishing any oral or written statements about the Company, any of its affiliates or any of the Company’s or suchaffiliates’ directors, officers, employees, consultants, agents or representatives that (%3) are slanderous, libelous or defamatory,(%3) disclose Confidential Information of the Company, any of its affiliates or any of the Company’s or any such affiliates’ businessaffairs, directors, officers, employees, consultants, agents or representatives, or (%3) place the Company, any of its affiliates, or any ofthe Company’s or any such affiliates’ directors, officers, employees, consultants, agents or representatives in a false light before thepublic. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and itsaffiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.ARTICLE V EFFECT OF TERMINATION OF EMPLOYMENT5.1 Effect of Termination of Employment.(a) If Executive’s employment hereunder shall terminate for any reason described in Section 2.1(a), 2.1(b), or 2.1(c) orpursuant to Executive’s resignation for other than Good Reason, then all compensation and all benefits to Executive hereundershall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to(%3) payment of all accrued and unpaid Base Salary to the Date of Termination, (%3) reimbursement for all incurred butunreimbursed expenses for which Executive is entitled to reimbursement in accordance with Company policies, (%3) paymentof all accrued and unused paid vacation for the calendar year in which the Date of Termination occurs, and (%3) benefits towhich Executive is entitled under the terms of any applicable benefit plan or program.(b) If Executive’s employment hereunder shall terminate pursuant to Executive’s resignation for Good Reason or byaction of the Company pursuant to Section 2.1 for any reason other than those encompassed by Section 2.1(a), 2.1(b), or2.1(c), then all compensation and all benefits to Executive shall terminate contemporaneously with such termination ofemployment, except that (i) Executive shall be entitled to receive the compensation and benefits described in clauses (i) through(iv) of Section 5.1(a) and (ii) if, on the Date of Termination, the Company does not have a right to terminate Executive’semployment under Section 2.1(a), 2.1(b), or 2.1(c) and subject to Executive’s delivery, within 50 days after the Date ofTermination, and non-revocation of an executed release substantially in the form of the release contained at Appendix A (the“Release”), Executive shall receive the following additional compensation and benefits from the Company (but no otheradditional compensation or benefits after such termination):8(A) the Company shall pay to Executive any unpaid Annual Bonus for the calendar year ending priorto the Date of Termination, which amount shall be payable in a lump-sum on the date such annual bonuses are paid toexecutives who have continued employment with the Company (but in no event earlier than 60 days after the Date ofTermination (or, if earlier, the December 31 next following such calendar year) nor later than the December 31 nextfollowing such calendar year);(B) the Company shall pay to Executive a bonus for the calendar year in which the Date ofTermination occurs in an amount equal to the Annual Bonus for such year as determined in good faith by the Board inaccordance with the applicable performance criteria and based on the Company’s performance for such year, whichamount shall be prorated through and including the Date of Termination (based on the ratio of the number of daysExecutive was employed by the Company during such year to the number of days in such year), payable in a lump-sumon or before the date such annual bonuses are paid to executives who have continued employment with the Company(but in no event earlier than 60 days after the Date of Termination nor later than the May 15 next following suchcalendar year);(C) the Company shall pay to Executive an amount equal to the Severance Multiple times the sum of(i) Executive’s Base Salary as of the Date of Termination and (ii) Executive’s Target Bonus Percentage as of the Dateof Termination multiplied by Executive’s Base Salary as of the Date of Termination, which amount shall be paid in alump sum payment on the date that is 60 days after the Date of Termination occurs; and(D) during the portion, if any, of the 18-month period following the Date of Termination that Executiveelects to continue coverage for Executive and Executive’s spouse and eligible dependents, if any, under the Company’sgroup health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and/orsections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, the Company shallpromptly reimburse Executive on a monthly basis for the difference between the amount Executive pays to effect andcontinue such coverage and the employee contribution amount that active senior executive employees of the Companypay for the same or similar coverage under such group health plans.Notwithstanding the time of payment provisions of Section 5.1(b)(ii) above, if Executive is a specified employee (as such termis defined in section 409A of the Code and as determined by the Company in accordance with any method permitted undersection 409A of the Code) and the payment of any amounts described in such Section would be subject to additional taxes andinterest under section 409A of the Code because the timing of such payment is not delayed as provided in section 409A(a)(2)(B)(i) of the Code and the regulations thereunder, then such amount (together with interest on a non-compounded basis, fromthe date such payment would have been made had this payment delay not applied to the actual9date of payment, at the prime rate of interest announced by Wells Fargo Bank, National Association (or any successor thereto)at its principal office in Charlotte, North Carolina on the date of Executive’s termination of employment (or the first businessday following such date if such termination does not occur on a business day)) shall be paid within five business days after theSection 409A Payment Date.ARTICLE VI NON-COMPETITION AGREEMENT6.1 Definitions. As used in this Article VI, the following terms shall have the following meanings:“Business” means (a) during the period of Executive’s employment by the Company, the design, manufacture and supply ofproducts and services for the oil and gas industry provided by the Company and its subsidiaries during such period and other productsand services that are functionally equivalent to the foregoing, and (b) during the portion of the Prohibited Period that begins on thetermination of Executive’s employment with the Company, the design, manufacture and supply of products and services for the oil andgas industry provided by the Company and its subsidiaries at the time of such termination of employment (or, if earlier, at the timeimmediately preceding the date upon which a Change in Control occurs) and other products and services that are functionallyequivalent to the foregoing.“Competing Business” means any business, individual, partnership, firm, corporation or other entity (other than an affiliate ofthe Company, L. E. Simmons & Associates, Inc. (“LESA”) and its affiliates, or another entity in which SCF-V, L.P., a Delawarelimited partnership, SCF-VI, L.P., a Delaware limited partnership, SCF-VII, L.P., a Delaware limited partnership, or any future limitedpartnership established by an affiliate of LESA has an ownership interest) which wholly or in any significant part engages in anybusiness competing with the Business in the Restricted Area. In no event will the Company or any of its subsidiaries be deemed aCompeting Business.“Governmental Authority” means any governmental, quasi-governmental, state, county, city or other political subdivision ofthe United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory bodythereof.“Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise,permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relatesto environmental standards or controls, energy regulations and occupational, safety and health standards or controls including thosearising under environmental laws) of any Governmental Authority.“Prohibited Period” means the period during which Executive is employed by the Company hereunder and a period of twoyears following the end of Executive’s employment with the Company.“Restricted Area” means any geographical area within 100 miles in which the Company and its subsidiaries engage in theBusiness during the period during which Executive is employed10hereunder, which such area includes, without limitation, the parishes in Louisiana set forth on Appendix B hereto.6.2 Non-Competition; Non-Solicitation. Executive and the Company agree to the non-competition and non-solicitationprovisions of this Article VI in consideration for the Confidential Information provided by the Company to Executive pursuant toArticle III of this Agreement, to protect the trade secrets and confidential information of the Company or its affiliates disclosed orentrusted to Executive by the Company or its affiliates or created or developed by Executive for the Company or its affiliates, to protectthe business goodwill of the Company or its affiliates developed through the efforts of Executive and/or the business opportunitiesdisclosed or entrusted to Executive by the Company or its affiliates and as an additional incentive for the Company to enter into thisAgreement.(a) Subject to the exceptions set forth in Section 6.2(b) below, Executive expressly covenants and agrees that duringthe Prohibited Period (%3) Executive will refrain from carrying on or engaging in, directly or indirectly, any CompetingBusiness in the Restricted Area and (%3) Executive will not, and Executive will cause Executive’s affiliates not to, directly orindirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractorto), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise beaffiliated with any business, individual, partnership, firm, corporation or other entity which engages in a Competing Business inthe Restricted Area, as Executive expressly agrees that each of the foregoing activities would represent carrying on or engagingin a Competitive Business, as prohibited by this Section 6.2(a).(b) Notwithstanding the restrictions contained in Section 6.2(a), Executive or any of Executive’s affiliates may own anaggregate of not more than 2% of the outstanding stock of any class of any corporation engaged in a Competing Business, ifsuch stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of anational securities exchange, without violating the provisions of Section 6.2(a), provided that neither Executive nor any ofExecutive’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporationand is not involved in the management of such corporation.(c) Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, andExecutive will cause Executive’s affiliates not to (%3) engage or employ, or solicit or contact with a view to the engagement oremployment of, or recommend or refer to any person or entity (other than the Company or one of its affiliates) for engagementor employment any person who is an officer or employee of the Company or any of its affiliates or (%3) canvass, solicit,approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of itsaffiliates any person or entity who or which is a customer of any of such entities during the period during which Executive isemployed by the Company.(d) The restrictions contained in Section 6.2 shall not apply to any product or service that the Company providedduring Executive’s employment but that the Company11no longer provides at the Date of Termination. Further, notwithstanding the other provisions of this Section 6.2, within theState of Oklahoma, the restrictions of Sections 6.2(a) and 6.2(c)(ii) shall be limited to preventing Executive from directlysoliciting the sale of goods, services or a combination of goods and services from any established customer of the Company, asmay exist from time-to-time.(e) Before accepting employment with any other person or entity while employed by the Company or during theProhibited Period, Executive will inform such person or entity of the restrictions contained in this Article VI.6.3 Relief. Executive and the Company agree and acknowledge that the limitations as to time, geographical area and scope ofactivity to be restrained as set forth in Section 6.2 are reasonable and do not impose any greater restraint than is necessary to protect thelegitimate business interests of the Company. Executive and the Company also acknowledge that money damages would not besufficient remedy for any breach of this Article VI by Executive, and the Company or its affiliates shall be entitled to enforce theprovisions of this Article VI by terminating payments then owing to Executive under this Agreement or otherwise and to specificperformance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed theexclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including therecovery of damages from Executive and Executive’s agents. However, if it is determined that Executive has not committed a breachof this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive allpayments and benefits that had been suspended pending such determination.6.4 Reasonableness; Enforcement. Executive hereby represents to the Company that Executive has read and understands,and agrees to be bound by, the terms of this Article VI. Executive acknowledges that the geographic scope and duration of thecovenants contained in this Article VI are the result of arm’s-length bargaining and are fair and reasonable in light of (%3) the natureand wide geographic scope of the operations of the Business, (%3) Executive’s level of control over and contact with the Business inall jurisdictions in which it is conducted, (%3) the fact that the Business is conducted throughout the Restricted Area and (%3) theamount of Confidential Information that Executive is receiving in connection with the performance of Executive’s duties hereunder. Itis the desire and intent of the parties that the provisions of this Article VI be enforced to the fullest extent permitted under applicableLegal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements,Executive and the Company hereby waive any provision of applicable Legal Requirements that would render any provision of thisArticle VI invalid or unenforceable.6.5 Reformation. The Company and Executive agree that the foregoing restrictions are reasonable under the circumstancesand that any breach of the covenants contained in this Article VI would cause irreparable injury to the Company. Executiveunderstands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses anywhere in the Restricted Areaduring the Prohibited Period, but acknowledges that Executive will receive sufficient consideration from the Company to justify suchrestriction. Further, Executive acknowledges that Executive’s skills are such that Executive can be gainfully employed in non-competitive12employment, and that the agreement not to compete will not prevent Executive from earning a living. Nevertheless, if any of theaforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time,or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determinationso as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modificationprospectively at this time, the Company and Executive intend to make this provision enforceable under the law or laws of all applicableStates, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shallremain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made toExecutive under this Agreement.ARTICLE VII DISPUTE RESOLUTION7.1 Arbitration. All claims or disputes between Executive and the Company or its parents, subsidiaries and affiliates(including, without limitation, claims relating to the validity, scope, and enforceability of this Article VII and claims arising under anyfederal, state or local law regarding the terms and conditions of employment or prohibiting discrimination in employment or governingthe employment relationship in any way) shall be submitted for final and binding arbitration in Houston, Texas in accordance with thethen-applicable rules for resolution of employment disputes of the American Arbitration Association (“AAA”). The arbitration shall beconducted by a single arbitrator chosen pursuant to the then-applicable rules for resolution of employment disputes of the AAA, andthe Company shall bear the costs of such arbitration. For the avoidance of doubt, the Company’s assumption of costs referenced in theprevious sentence applies to the costs of the AAA only, and does not include attorney or expert fees or other fees or costs incurred byExecutive. The arbitrator shall apply the substantive law of the State of Texas (excluding Texas choice-of-law principles that might callfor the application of some other state’s law), or federal law, or both as applicable to the claims asserted. The results of the arbitrationand the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shallbe enforceable in a court of law. No demand for arbitration may be made after the date when the institution of legal or equitableproceedings based on such claim or dispute would be barred by the applicable statute(s) of limitations. In the event either party mustresort to the judicial process to enforce the provisions of this Agreement, the award of an arbitrator or equitable relief granted by anarbitrator, the party successfully seeking enforcement shall be entitled to recover from the other party all costs of such litigationincluding, but not limited to, reasonable attorneys’ fees and court costs. To the fullest extent permitted by law, all proceedingsconducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential byall parties. Notwithstanding the foregoing, Executive and the Company further acknowledge and agree that a court of competentjurisdiction residing in Houston, Texas shall have the power to maintain the status quo pending the arbitration of any dispute under thisArticle VII, and this Article VII shall not require the arbitration of any application for emergency, temporary or preliminary injunctiverelief (including temporary restraining orders) by either party pending arbitration, including, without limitation, any application foremergency, temporary or preliminary injunctive relief for any claim arising out of Article III or Article VI of this Agreement; provided,however, that the remainder of any such dispute beyond the application13for such emergency, temporary or preliminary injunctive relief shall be subject to arbitration under this Article VII. THE PARTIESACKNOWLEDGE THAT, BY SIGNING THIS AGREEMENT, THEY ARE KNOWINGLY AND VOLUNTARILYWAIVING ANY RIGHTS THAT THEY MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY PROVIDEDHEREIN, A COURT TRIAL OF ANY CLAIM THAT IS SUBJECT TO THIS ARTICLE VII.ARTICLE VIII CERTAIN EXCISE TAXES8.1 Certain Excise Taxes. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualifiedindividual” (as defined in section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together withany other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a“parachute payment” (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreementshall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive fromthe Company and its affiliates will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in section280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise taximposed by section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking intoaccount any applicable excise tax under section 4999 of the Code and any other applicable taxes). The reduction of payments andbenefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order inwhich such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in timeand continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing anybenefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of thepayments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit ismade or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from theCompany (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three timesExecutive’s base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpaymenthas been made. Nothing in this Section 8.1 shall require the Company to be responsible for, or have any liability or obligation withrespect to, Executive’s excise tax liabilities under section 4999 of the Code. Notwithstanding the foregoing, if shareholder approval(obtained in a manner that satisfies the requirements of section 280G(b)(5) of the Code) of a payment or benefit to be provided toExecutive by the Company or any other person (whether under this Agreement or otherwise) would prevent Executive from receivinga “parachute payment” (as defined in section 280G(b)(2) of the Code), then, upon the request of Executive and his agreement (to theextent necessary) to subject his entitlement to the receipt of such payment or benefit to shareholder approval, the Company shall seeksuch approval in a manner that satisfies the requirements of section 280G of the Code and the regulations thereunder.14ARTICLE IX MISCELLANEOUS9.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing andshall be deemed to have been duly given (%3) when received if delivered personally or by courier, (%3) on the date receipt isacknowledged if delivered by certified mail, postage prepaid, return receipt requested or (%3) one day after transmission if sent byfacsimile transmission with confirmation of transmission, as follows:If to Executive, addressed to:the most recent home address for Executive in the Company’s files.If to the Company, addressed to:Forum Energy Technologies, Inc. 920 Memorial City Way Suite 1000 Houston, Texas 77024 Attention: General Counsel Facsimile: (713) 583-9346or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes ofaddress shall be effective only upon receipt.9.2 Applicable Law; Submission to Jurisdiction.(a) This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Texas,without regard to conflicts of laws principles thereof.(b) With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent tothe exclusive jurisdiction, forum and venue of the state and federal courts located in Harris County, Texas.9.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to requirecompliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions orconditions at the same or at any prior or subsequent time.9.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid orunenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any otherprovision of this Agreement, and all other provisions shall remain in full force and effect.9.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be anoriginal, but all of which together will constitute one and the same Agreement.159.6 Withholding of Taxes and Other Employee Deductions. The Company may withhold from any benefits and paymentsmade pursuant to this Agreement all federal, state, city and other taxes and withholdings as may be required pursuant to any law orgovernmental regulation or ruling and all other customary deductions made with respect to the Company’s employees generally.9.7 Headings. The Section headings have been inserted for purposes of convenience and shall not be used for interpretivepurposes.9.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and thesingular number includes the plural and conversely.9.9 Affiliate and Subsidiary. As used in this Agreement, (a) the term “affiliate” as used with respect to a particular person orentity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership orcontrol with, such particular person or entity and (b) the term “subsidiary” as used with respect to a particular entity shall mean a director indirect subsidiary of such entity.9.10 Successors. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of theCompany. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, arepersonal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary orinvoluntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the otherparty. In addition, any payment owed to Executive hereunder after the date of Executive’s death shall be paid to Executive’s estate.9.11 Term. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vestedprior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles III, IV, V, IV, and V shallsurvive any termination of the employment relationship and/or of this Agreement.9.12 Entire Agreement. Except as provided in any signed written agreement contemporaneously or hereafter executed by theCompany and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, andcontains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment ofExecutive by the Company. Without limiting the scope of the preceding sentence, all understandings and agreements preceding thedate of execution of this Agreement and relating to the subject matter hereof including, without limitation, any prior employmentagreement or severance agreement between Executive and the Company or an affiliate, are hereby null and void and of no furtherforce and effect, and this Agreement supersedes and cancels Executive’s prior eligibility, if any, under any severance plan of theCompany and its affiliates.9.13 Modification; Waiver. Any modification to or waiver of this Agreement will be effective only if it is in writing andsigned by the parties to this Agreement.169.14 Actions by the Board. Any and all determinations or other actions required of the Board hereunder that relatespecifically to Executive’s employment by the Company or the terms and conditions of such employment shall be made by themembers of the Board other than Executive if Executive is a member of the Board, and Executive shall not have any right to vote ordecide upon any such matter.9.15 Executive’s Representations and Warranties. Executive represents and warrants to the Company that (%3) Executivedoes not have any agreements with Executive’s prior employer that will prohibit Executive from working for the Company or fulfillingExecutive’s duties and obligations to the Company and (%3) Executive has complied with all duties imposed on Executive withrespect to Executive’s former employer, e.g., Executive does not possess any tangible property belonging to Executive’s formeremployer.9.16 Delayed Payment Restriction. Notwithstanding any provision in this Agreement to the contrary, if any payment orbenefit provided for herein would be subject to additional taxes and interest under section 409A of the Code if Executive’s receipt ofsuch payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided toExecutive (or Executive’s estate, if applicable) until the Section 409A Payment Date.[Signatures begin on next page.]17IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.FORUM ENERGY TECHNOLOGIES, INC. By: /s/ Prady Iyyanki Name: Prady Iyyanki Title: President and CEOEXECUTIVE /s/ D. Lyle Williams D. Lyle Williams18Appendix A RELEASE AGREEMENTThis Release Agreement (this “Agreement”) constitutes the release referred to in that certain Severance Agreement (the“Severance Agreement”) effective as of ___________, 20__, by and between __________ (“Executive”) and Forum EnergyTechnologies, Inc., a Delaware corporation (the “Company”).1.General Release.(a) For good and valuable consideration, including the Company’s provision of certain payments and benefits toExecutive in accordance with Section 5.1(b)(ii) of the Severance Agreement, Executive hereby releases, discharges and forever acquitsthe Company, its affiliates and subsidiaries, the past, present and future stockholders, members, partners, directors, managers,employees, agents, attorneys, heirs, legal representatives, successors and assigns of the foregoing, as well as all employee benefit plansmaintained by the Company or any of its affiliates or subsidiaries and all fiduciaries and administrators of any such plan, in theirpersonal and representative capacities (collectively, the “Company Parties”), from liability for, and hereby waives, any and all claims,rights, damages, or causes of action of any kind related to Executive’s employment with any Company Party, the termination of suchemployment, and any other acts or omissions related to any matter on or prior to the date of this Agreement (collectively, the “ReleasedClaims”).(b) The Released Claims include without limitation those arising under or related to: (%3) the Age Discrimination inEmployment Act of 1967; (%3) Title VII of the Civil Rights Act of 1964; (%3) the Civil Rights Act of 1991; (%3) sections 1981through 1988 of Title 42 of the United States Code; (%3) the Employee Retirement Income Security Act of 1974, including, but notlimited to, sections 502(a)(1)(A), 502(a)(1)(B), 502(a)(2), and 502(a)(3) to the extent the release of such claims is not prohibited byapplicable law; (%3) the Immigration Reform Control Act; (%3) the Americans with Disabilities Act of 1990; (%3) the National LaborRelations Act; (%3) the Occupational Safety and Health Act; (%3) the Family and Medical Leave Act of 1993; (%3) any state orfederal anti-discrimination law; (%3) any state or federal wage and hour law; (%3) any other local, state or federal law, regulation orordinance; (%3) any public policy, contract, tort, or common law; (%3) costs, fees, or other expenses including attorneys’ fees incurredin these matters; (%3) any employment contract, incentive compensation plan or stock option plan with any Company Party or to anyownership interest in any Company Party except as expressly provided in the Severance Agreement and any stock option or otherequity compensation agreement between Executive and the Company; and (%3) compensation or benefits of any kind not expressly setforth in the Severance Agreement or any such stock option or other equity compensation agreement.(c) In no event shall the Released Claims include (%3) any claim which arises after the date of this Agreement, or(%3) any claims for the payments and benefits payable to Executive under Section 5.1(b)(ii) of the Severance Agreement.(d) Notwithstanding this release of liability, nothing in this Agreement prevents Executive from filing any non-legallywaivable claim (including a challenge to the validity of thisA-1Agreement) with the Equal Employment Opportunity Commission (“EEOC”) or comparable state or local agency or participating inany investigation or proceeding conducted by the EEOC or comparable state or local agency; however, Executive understands andagrees that Executive is waiving any and all rights to recover any monetary or personal relief or recovery as a result of such EEOC, orcomparable state or local agency proceeding or subsequent legal actions.(e) This Agreement is not intended to indicate that any such claims exist or that, if they do exist, they are meritorious.Rather, Executive is simply agreeing that, in exchange for the consideration recited in the first sentence of Section 1(a) of thisAgreement, any and all potential claims of this nature that Executive may have against the Company Parties, regardless of whetherthey actually exist, are expressly settled, compromised and waived.(f) By signing this Agreement, Executive is bound by it. Anyone who succeeds to Executive’s rights andresponsibilities, such as heirs or the executor of Executive’s estate, is also bound by this Agreement. This release also applies to anyclaims brought by any person or agency or class action under which Executive may have a right or benefit. THIS RELEASEINCLUDES MATTERS ATTRIBUTABLE TO THE SOLE OR PARTIAL NEGLIGENCE (WHETHER GROSS ORSIMPLE) OR OTHER FAULT, INCLUDING STRICT LIABILITY, OF ANY OF THE COMPANY PARTIES.2. Covenant Not to Sue; Executive’s Representation. Executive agrees not to bring or join any lawsuit against any of theCompany Parties in any court relating to any of the Released Claims. Executive represents that Executive has not brought or joinedany claim, lawsuit or arbitration against any of the Company Parties in any court or before any administrative agency or arbitralauthority and has made no assignment of any rights Executive has asserted or may have against any of the Company Parties to anyperson or entity, in each case, with respect to any Released Claims. Executive expressly represents that, as of the date Executiveexecutes this Agreement, Executive has been provided all leaves (paid and unpaid) and paid all wages and compensation owed toExecutive by the Company Parties with the exception of all payments owed as a condition of Executive’s executing (and not revoking)this Agreement.3. Acknowledgments. By executing and delivering this Agreement, Executive acknowledges that:(a) Executive has carefully read this Agreement;(b) Executive has had at least [twenty-one (21)] [forty-five (45)] days to consider this Agreement before the executionand delivery hereof to the Company [Add if 45 days applies: , and Executive acknowledges that attached to this Agreement is a list of(%3) the job titles and ages of all employees selected for participation in the employment termination or exit incentive programpursuant to which Executive is being offered this Agreement, (%3) the job titles and ages of all employees in the same jobclassification or organizational unit who were not selected for participation in the program, and (%3) information about the unitaffected by the program, including any eligibility factors for such program and any time limits applicable to such program];A-2(c) Executive has been and hereby is advised in writing that Executive may, at Executive’s option, discuss thisAgreement with an attorney of Executive’s choice and that Executive has had adequate opportunity to do so; and(d) Executive fully understands the final and binding effect of this Agreement; the only promises made to Executive tosign this Agreement are those stated in the Severance Agreement and herein; and Executive is signing this Agreement voluntarily andof Executive’s own free will, and that Executive understands and agrees to each of the terms of this Agreement.4. Revocation Right. Executive may revoke this Agreement within the seven day period beginning on the date Executivesigns this Agreement (such seven day period being referred to herein as the “Release Revocation Period”). To be effective, suchrevocation must be in writing signed by Executive and must be delivered to the Chief Executive Officer of the Company before 11:59p.m., Houston, Texas time, on the last day of the Release Revocation Period. This Agreement is not effective, and no considerationshall be paid to Executive, until the expiration of the Release Revocation Period without Executive’s revocation. If an effectiverevocation is delivered in the foregoing manner and timeframe, this Agreement shall be of no force or effect and shall be null and voidab initio.Executed on this ___________ day of _____________, _______.__________________________________________[EXECUTIVE]STATE OF ________________ § § COUNTY OF ________________ §BEFORE ME, the undersigned authority personally appeared C. Christopher Gaut, by me known or who produced valididentification as described below, who executed the foregoing instrument and acknowledged before me that he subscribed to suchinstrument on this _____ day of ______________, ________.NOTARY PUBLIC in and for the State of ___________________ My Commission Expires: ___________________ Identification produced:A-3APPENDIX B RESTRICTED AREAThe following parishes in the State of Louisiana:CaddoIberiaLafayetteSt. MartinB-1Exhibit 10.50FORUM ENERGY TECHNOLOGIES, INC.2016 STOCK AND INCENTIVE PLANThis Restricted Stock Unit Agreement (this “Agreement”) is made as of the ___ day of ___________, 2018 (the “Date ofGrant”), between Forum Energy Technologies, Inc., a Delaware corporation (the “Company”), and _________________ (the“Employee”).1.Award. Pursuant to the Forum Energy Technologies, Inc. 2016 Stock and Incentive Plan (the “Plan”), the Employeeis hereby awarded [number of units] units (the “RSUs”) evidencing the right to receive an equivalent number of shares of theCompany’s common stock, par value $.01 per share (the “Common Stock”), subject to certain restrictions thereon. The Employeeacknowledges receipt of a copy of the Plan, and agrees that this award of RSUs shall be subject to all of the terms and provisions of thePlan, including future amendments thereto, if any, pursuant to the terms thereof. Capitalized terms used in this Agreement that are notdefined herein shall have the meanings given to them in the Plan.2. Forfeiture Restrictions and Assignment.(a) Restrictions. The RSUs may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred,encumbered or disposed of, and except as otherwise provided in Section 3, in the event of the Employee’s termination of employmentfor any reason whatsoever, the Employee shall, for no consideration, forfeit all unvested RSUs. The obligation to forfeit unvestedRSUs upon termination of employment as provided in the preceding sentence is herein referred to as the “Forfeiture Restrictions.”(b) Lapse of Forfeiture Restrictions. Provided that the Employee has been continuously employed by the Company or anyof its Affiliates (collectively, the “Company Group”) from the Date of Grant through the lapse date set forth in the following schedule,the Forfeiture Restrictions shall lapse and the RSUs shall otherwise become vested with respect to a percentage of the RSUsdetermined in accordance with the following schedule:Additional Percentage ofTotal Number of RSUsVesting DateVesting on Vesting DateFirst Anniversary of Date of Grant 33%Second Anniversary of Date of Grant 33%Third Anniversary of Date of Grant RemainderExcept as otherwise provided in Section 3, any RSUs with respect to which the Forfeiture Restrictions do not lapse in accordance withthe preceding provisions of this Section 2(b) shall be forfeited to the Company for no consideration as of the date of the termination ofthe Employee’s employment with the Company.13. Termination of Employment.(a) Death or Disability. If the Employee dies or becomes Disabled (as defined below), to the extent not previously vestedpursuant to Section 2(b) above, each third of the RSUs described in Section 2(b) that are unvested as of the date of the Employee’sdeath or Disability, as applicable, shall become vested in a pro rata amount determined by a fraction with respect to each unvested thirdof the RSUs, the numerator of which shall be the number of months (not including any partial months) that have elapsed for the periodbeginning on the Date of Grant and ending on the date of the Employee’s death or Disability, as applicable, and the denominator ofwhich shall be the number of months for the period beginning on the Date of Grant and ending on the corresponding anniversary ofthe date on which each such unvested third of the RSUs would have vested pursuant to Section 2(b). Any remaining unvested RSUsshall be forfeited. The shares of Common Stock in respect of the vested RSUs shall be issued to the Employee thirty (30) days after theEmployee’s death or Disability, as applicable. For purposes of this Section 3(a), an Employee shall become “Disabled” or have a“Disability” on the date that the Employee becomes eligible for long-term disability benefits pursuant to the Company’s long-termdisability plan.(b) Retirement. If the Employee’s employment with the Company Group is terminated by reason of Retirement (as definedbelow), to the extent not previously vested pursuant to Section 2(b) above, the Committee may, in its sole and absolute discretion,determine that each third of the RSUs described in Section 2(b) that are unvested as of the date of the Employee’s Retirement shallbecome vested in a pro rata amount determined by a fraction with respect to each unvested third of the RSUs, the numerator of whichshall be the number of months (not including any partial months) that have elapsed for the period beginning on the Date of Grant andending on the date of the Employee’s Retirement, and the denominator of which shall be the number of months for the periodbeginning on the Date of Grant and ending on the corresponding anniversary of the date on which each such unvested third of theRSUs would have vested pursuant to Section 2(b). The shares of Common Stock in respect of the vested RSUs shall be issued to theEmployee thirty (30) days after the date of the Employee’s Retirement. For purposes of this Section 3(b), “Retirement” shall meantermination of the Employee’s service relationship with all members of the Company Group which is specifically determined by theCommittee in its sole and absolute discretion to constitute Retirement.(c) Good Reason. In lieu of the definition of “Good Reason” set forth in the Plan, “Good Reason” for purposes of thisAgreement shall mean the occurrence of any of the following events without the Employee’s express written consent:(i)a change in the Employee’s status, title or position with the Company Group, including as an officer of the Company,which, in the Employee’s good faith judgment, does not represent a promotion, with commensurate adjustment ofcompensation, from the Employee’s status, title or position as in effect immediately prior thereto; the assignment to theEmployee of any duties or responsibilities which, in the Employee’s good faith judgment, are inconsistent with theEmployee’s status, title or position in effect immediately prior to such assignment; the withdrawal from the Employee ofany duties or responsibilities which, in the Employee’s good faith2judgment, are consistent with such status, title or position in effect immediately prior to such withdrawal; or anyremoval of the Employee from or any failure to reappoint or reelect the Employee to any position; provided that thecircumstances described in this item (i) do not apply as a result of the Employee’s death, Retirement, or Disability orfollowing receipt by the Employee of written notice from the Company of the termination of the Employee’semployment for Cause;(ii)a reduction by the Company in the Employee’s then current base salary;(iii)the failure by the Company to continue in effect any benefit or compensation plan in which the Employee wasparticipating immediately prior to such failure other than as a result of the normal expiration or amendment of any suchplan in accordance with its terms; or the taking of any action, or the failure to act, by the Company which wouldadversely affect the Employee’s continued participation in any benefit or compensation plan on at least as favorable abasis to the Employee as is the case immediately prior to the action or failure to act or which would materially reducethe Employee’s benefits under any such plan or deprive the Employee of any material benefit enjoyed by the Employeeimmediately prior to the action or failure to act;(iv)the relocation of the principal place of the Employee’s employment to a location 25 miles further from the Employee’sthen current principal residence;(v)the failure by the Company upon a Change in Control to obtain an agreement, satisfactory to the Employee, from anysuccessor or assign of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) toexpressly assume and agree to perform this Agreement in the same manner and to the same extent the Company wouldbe required to perform if no succession or assignment had taken place; or(vi)any material default by the Company in the performance of its obligations under this Agreement.Any event or condition described in this Section 3(c) which occurs prior to the effective date of any Change in Control, butwhich the Employee reasonably demonstrates (x) was at the request of a third party who has indicated an intention ortaken steps reasonably calculated to effect a Change in Control, or (y) otherwise arose in connection with or inanticipation of a Change in Control, shall constitute Good Reason for purposes of this Agreement notwithstanding thatit occurred prior to such effective date. The Employee’s continued employment or failure to give the Company anynotice of termination for Good Reason shall not constitute consent to, or a waiver of rights with respect to, anycircumstances constituting Good Reason hereunder. For purposes of this Section 3(c), any good faith determination ofGood Reason made by the Employee shall be conclusive.4. Settlement and Delivery of Stock. Except as otherwise provided in Section 2(b) or 3, settlement of RSUs shall be madeno later than 15 days after the lapse of Forfeiture Restrictions.3Settlement will be made by issuance of shares of Common Stock. Notwithstanding the foregoing, the Company shall not be obligatedto issue any shares of Common Stock if counsel to the Company determines that such sale or delivery would violate any applicablelaw or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, anysecurities exchange or association upon which the Common Stock is listed or quoted. The Company shall in no event be obligated totake any affirmative action in order to cause the issuance of shares of Common Stock to comply with any such law, rule, regulation oragreement.5. Shareholder Rights. The Employee shall have no rights to dividends or other rights of a shareholder with respect to sharesof Common Stock subject to this award of RSUs unless and until such time as the award has been settled by the issuance of shares ofCommon Stock to the Employee. The Employee shall have the right to receive a cash dividend equivalent payment with respect to theRSUs for the period beginning on the Date of Grant and ending on the date the shares of Common Stock are issued to the Employee insettlement of the RSUs, which shall be payable at the same time as cash dividends on Common Stock are paid to Companystockholders.6. Corporate Acts. The existence of the RSUs shall not affect in any way the right or power of the Board or the stockholdersof the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capitalstructure or its business, any merger or consolidation of the Company, any issue of debt or equity securities, the dissolution orliquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any othercorporate act or proceeding. The prohibitions of Section 2(a) hereof shall not apply to the transfer of RSUs pursuant to a plan ofreorganization of the Company, but the stock, securities or other property received in exchange therefor shall also become subject tothe Forfeiture Restrictions.7. Withholding of Tax. To the extent that the settlement of RSUs results in compensation income or wages to the Employeefor federal, state, local or foreign tax purposes, the Company shall withhold an appropriate number of shares of Common Stock,having a Fair Market Value determined in accordance with the Plan, equal to the amount necessary to satisfy the minimum federal,state, local and foreign tax withholding obligation with respect to the settled RSUs. The issuance of shares of Common Stockdescribed in Section 4 will be net of such shares of Common Stock that are withheld to satisfy applicable taxes pursuant to thisSection 7. In lieu of withholding of shares of Common Stock, the Committee may, in its discretion, authorize tax withholding to besatisfied by a cash payment to the Company, by withholding an appropriate amount of cash from base pay, or by such other method asthe Committee determines may be appropriate to satisfy all obligations for withholding of such taxes. The Employee acknowledgesand agrees that the Company is making no representation or warranty as to the tax consequences to the Employee as a result of thereceipt of the RSUs, the lapse of any Forfeiture Restrictions or the issuance of shares of Common Stock pursuant thereto, or theforfeiture of any RSUs pursuant to the Forfeiture Restrictions.8. Employment Relationship. For purposes of this Agreement, the Employee shall be considered to be in the employment ofthe Company as long as the Employee remains an employee of the Company Group. Without limiting the scope of the precedingsentence, it is specifically4provided that the Employee shall be considered to have terminated employment with the Company Group at the time of the terminationof the “Affiliate” status of the entity or other organization that employs the Employee. Nothing in the adoption of the Plan, nor theaward of the RSUs thereunder pursuant to this Agreement, shall confer upon the Employee the right to continued employment by theCompany Group or affect in any way the right of the Company Group to terminate such employment at any time. Unless otherwiseprovided in a written employment agreement or by applicable law, the Employee’s employment by the Company shall be on an at-willbasis, and the employment relationship may be terminated at any time by either the Employee or the Company Group for any reasonwhatsoever, with or without cause or notice. Any question as to whether and when there has been a termination of such employment,and the cause of such termination, shall be determined by the Committee or its delegate, and its determination shall be final.9. Section 409A. The award of RSUs is intended to be (i) exempt from Section 409A of the Code (“Section 409A”)including, but not limited to, by reason of compliance with the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4); or (ii) in compliance with Section 409A, and the provisions of this Agreement shall be administered, interpreted and construedaccordingly. Payments under this Agreement in a series of installments shall be treated as a right to receive a series of separatepayments for purposes of Section 409A. If the Employee is identified by the Company as a “specified employee” within the meaningof Section 409A(a)(2)(B)(i) of the Code on the date on which the Employee has a “separation from service” (other than due to death)within the meaning of Section 1.409A-1(h) of the Treasury Regulations, notwithstanding the provisions of Sections 2 or 3 hereof, anytransfer of shares payable on account of a separation from service that are deferred compensation shall take place on the earlier of (i)the first business day following the expiration of six months from the Employee’s separation from service or (ii) such earlier date ascomplies with the requirements of Section 409A. To the extent required to comply with Section 409A, the Employee shall beconsidered to have terminated employment with the Company Group when the Employee incurs a “separation from service” with amember of the Company Group within the meaning of Section 409A(a)(2)(A)(i) of the Code. The Company makes no commitment orguarantee to the Employee that any federal or state tax treatment shall apply or be available to any person eligible for benefits underthis Agreement.10. Binding Effect; Survival. This Agreement shall be binding upon and inure to the benefit of any successors to theCompany and all persons lawfully claiming under the Employee.11. Amendment. Any modification of this Agreement shall be effective only if it is in writing and signed by both theEmployee and an authorized officer of the Company.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State ofDelaware, without regard to conflicts of law principles thereof.5IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto dulyauthorized, and the Employee has executed this Agreement, all as of the date first above written.FORUM ENERGY TECHNOLOGIES, INC.By: [ ][ ]EMPLOYEE 6Exhibit 10.51FORUM ENERGY TECHNOLOGIES, INC.2016 STOCK AND INCENTIVE PLANThis Performance Award Agreement (this “Agreement”) is made as of the ___ day of _________________, 2018 (the “Dateof Grant”), between Forum Energy Technologies, Inc., a Delaware corporation (the “Company”), and _________________ (the“Employee”).1.Award. The Employee is hereby awarded [number of performance shares] performance shares (each a“Performance Share”) pursuant to the Forum Energy Technologies, Inc. 2016 Stock and Incentive Plan (the “Plan”) which shall beallocated as the “Target Amount”. The Performance Shares represent the opportunity to receive a number of shares of Common Stockbased on the “Payout Multiplier” as defined in Exhibit A. The number of Performance Shares that are converted into “EarnedPerformance Shares” will be between 0% and 200% of the Target Amount. Each Performance Share that does not become an EarnedPerformance Share shall be forfeited.The exact number of Performance Shares that shall be converted into Earned Performance Shares and issued to the Employeeshall be based upon the achievement by the Company of the performance standards as set forth in Exhibit A hereto over a three-yearperiod beginning on January 1, 2019 (the “Performance Beginning Date”) and ending on December 31, 2021 (the “Performance EndDate”) (the period from the Performance Beginning Date to the Performance End Date is referred to as the “Performance Period”). Thedetermination by the Committee with respect to the achievement of such performance standards shall be made as soon asadministratively practicable following the Performance End Date after all necessary Company and peer information is available. Thespecific date on which such determination is formally made and approved by the Committee is referred to as the “Determination Date.”After the Determination Date, the Company shall notify the Employee of the number of Earned Performance Shares, if any, and thecorresponding number of shares of Common Stock to be issued to the Employee in satisfaction of the award. The shares of CommonStock shall be issued to the Employee on March 15, 2022 (the “Settlement Date”).The performance standards are based on the Company’s Total Shareholder Return compared against the Peer Group. Themethodology for calculating the number of Earned Performance Shares, including the definitions used therefor, is set forth in Exhibit Ahereto.The Employee acknowledges receipt of a copy of the Plan, and agrees that this award of Performance Shares shall be subject toall of the terms and provisions of the Plan, including future amendments thereto, if any, pursuant to the terms thereof. Capitalized termsused in this Agreement and Exhibit “A” hereto that are not defined herein shall have the meanings given to them in the Plan or ExhibitA, as applicable.2. Vesting/Forfeiture. Except as otherwise provided in Section 3 below, the Performance Shares shall vest on theDetermination Date, provided the Employee is continuously employed by the Company or any of its Affiliates (collectively, the“Company Group”) through the Determination Date. Except as otherwise provided in Section 3, the Performance Shares shall beautomatically forfeited on the date of the Employee’s termination of employment.13. Termination of Employment.(a) Death or Disability. If prior to the Determination Date with respect to the Performance Period, the Employee dies orbecomes Disabled, the Performance Shares shall vest on a pro rata basis determined by multiplying the Target Amount of PerformanceShares for the Performance Period by a fraction (not greater than 1.0), the numerator of which is the number of months (not includingany partial months) that have elapsed since the Performance Beginning Date to the date of the Employee’s death or Disability, asapplicable, and the denominator of which is the total number of months in the Performance Period. Any remaining unvestedPerformance Shares shall be forfeited. The shares of Common Stock in respect of the vested Performance Shares shall be issued to theEmployee thirty (30) days after the date of the Employee’s death or Disability, as applicable. For purposes of this Section 3(a), theEmployee shall become “Disabled” or have a “Disability” on the date that the Employee becomes eligible for long-term disabilitybenefits pursuant to the Company’s long-term disability plan.(b) Retirement. Provided the Employee remained continuously employed by the Company Group for the six (6) monthperiod following the Date of Grant, if the Employee’s employment with the Company Group is terminated prior to the DeterminationDate by reason of Retirement, the Committee may, in its sole and absolute discretion, determine that the Performance Shares shall veston a pro rata basis determined by multiplying the number of Performance Shares that would otherwise have been earned and vested onthe Determination Date by a fraction, the numerator of which is the number of months (not including any partial months) that haveelapsed since the Performance Beginning Date to the date of the Employee’s Retirement, and the denominator of which is the totalnumber of months in the Performance Period. The shares of Common Stock in respect of the Earned Performance Shares shall bebased on the Payout Multiplier and shall be issued to the Employee on the Settlement Date. Notwithstanding any other provision in thisSection 3(b), if the Employee’s Retirement occurs on or within two years after the date of consummation of such Change in Controlthat is a “change in control event” within the meaning of Treasury Regulation 1.409A-3(i)(5) (a “409A Change in Control Event”), thenumber of Earned Performance Shares shall be equal to the Target Amount and the shares of Common Stock in respect of the EarnedPerformance Shares shall be issued to the Employee thirty (30) days after the Employee’s termination of employment. For purposes ofthis Section 3(b), “Retirement” shall mean termination of the Employee’s service relationship with all members of the Company Groupwhich is specifically determined by the Committee in its sole and absolute discretion to constitute Retirement.(c) Good Reason. In lieu of the definition of “Good Reason” set forth in Article I of the Plan, “Good Reason” for purposes ofthis Agreement shall mean the occurrence of any of the following events without the Employee’s express written consent:(i)a change in the Employee’s status, title or position with the Company Group, including as an officer of the Company,which, in the Employee’s good faith judgment, does not represent a promotion, with commensurate adjustment ofcompensation, from the Employee’s status, title or position as in effect immediately prior thereto; the assignment to theEmployee of any duties or responsibilities which,2in the Employee’s good faith judgment, are inconsistent with the Employee’s status, title or position in effectimmediately prior to such assignment; the withdrawal from the Employee of any duties or responsibilities which, in theEmployee’s good faith judgment, are consistent with such status, title or position in effect immediately prior to suchwithdrawal; or any removal of the Employee from or any failure to reappoint or reelect the Employee to any position;provided that the circumstances described in this item (i) do not apply as a result of the Employee’s death, Retirement,or Disability or following receipt by the Employee of written notice from the Company of the termination of theEmployee’s employment for Cause;(ii)a reduction by the Company in the Employee’s then current base salary;(iii)the failure by the Company to continue in effect any benefit or compensation plan in which the Employee wasparticipating immediately prior to such failure other than as a result of the normal expiration or amendment of any suchplan in accordance with its terms; or the taking of any action, or the failure to act, by the Company which wouldadversely affect the Employee’s continued participation in any benefit or compensation plan on at least as favorable abasis to the Employee as is the case immediately prior to the action or failure to act or which would materially reducethe Employee’s benefits under any such plan or deprive the Employee of any material benefit enjoyed by the Employeeimmediately prior to the action or failure to act;(iv)the relocation of the principal place of the Employee’s employment to a location 25 miles further from the Employee’sthen current principal residence;(v)the failure by the Company upon a Change in Control to obtain an agreement, satisfactory to the Employee, from anysuccessor or assign of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) toexpressly assume and agree to perform this Agreement in the same manner and to the same extent the Company wouldbe required to perform if no succession or assignment had taken place; or(vi)any material default by the Company in the performance of its obligations under this Agreement.Any event or condition described in provisions (i) through (vi) above which occurs prior to the effective date of any Change inControl, but which the Employee reasonably demonstrates (x) was at the request of a third party who has indicated an intention ortaken steps reasonably calculated to effect a Change in Control, or (y) otherwise arose in connection with or in anticipation of aChange in Control, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to sucheffective date. The Employee’s continued employment or failure to give the Company any notice of termination for Good Reason shallnot constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. For purposes ofthis Section 3(c), any good faith determination of Good Reason made by the Employee shall be conclusive.34. Settlement and Delivery of Stock. Except as otherwise provided in Section 3, settlement of the Earned PerformanceShares shall be made on the Settlement Date. Settlement will be made by issuance of shares of Common Stock equal to the number ofEarned Performance Shares. Notwithstanding the foregoing, the Company shall not be obligated to issue any shares of Common Stockif counsel to the Company determines that such sale or delivery would violate any applicable law or any rule or regulation of anygovernmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association uponwhich the Common Stock is listed or quoted. The Company shall in no event be obligated to take any affirmative action in order tocause the issuance of shares of Common Stock to comply with any such law, rule, regulation or agreement.5. Shareholder Rights. The Employee shall have no rights to dividend equivalent payments with respect to the PerformanceShares and shall have no rights to dividends or other rights of a shareholder with respect to shares of Common Stock subject to thisaward of Performance Shares unless and until such time as the award has been settled by the issuance of shares of Common Stock tothe Employee. Any Earned Performance Shares shall be subject to adjustment under the Plan with respect to dividends or otherdistributions that are paid in shares of Common Stock with a record date that is after the Determination Date and prior to the SettlementDate of such Earned Performance Shares.6. Corporate Acts. The existence of the Performance Shares shall not affect in any way the right or power of the Board orthe stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in theCompany’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities, thedissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business orany other corporate act or proceeding.7. Withholding. To the extent that the vesting of the Performance Shares results in compensation income or wages to theEmployee for federal, state, local or foreign tax purposes, the Employee shall deliver to the Company or to any Affiliate nominated bythe Company at the time of such lapse, such amount of money or, if permitted by the Committee in its sole discretion, shares ofCommon Stock as the Company or any Affiliate nominated by the Company may require to meet its minimum obligation underapplicable tax or social security laws or regulations, and if the Employee fails to do so, the Company and its Affiliates are authorized towithhold from any cash or stock remuneration (including withholding any shares of Common Stock distributable to the Employeeunder this Agreement) then or thereafter payable to the Employee any tax or social security required to be withheld by reason of suchresulting compensation income or wages. The Employee acknowledges and agrees that the Company is making no representation orwarranty as to the tax consequences to the Employee as a result of the receipt of the Performance Shares, vesting of the PerformanceShares or the forfeiture of any Performance Shares pursuant to the Forfeiture Restrictions.8. Employment Relationship. For purposes of this Agreement, the Employee shall be considered to be in the employment ofthe Company as long as the Employee remains an employee of any member of the Company Group. Without limiting the scope of thepreceding sentence, it is4specifically provided that the Employee shall be considered to have terminated employment with the Company at the time of thetermination of the “Affiliate” status of the entity or other organization that employs the Employee.Nothing in the adoption of the Plan, nor the award of the Performance Shares thereunder pursuant to this Agreement, shall confer uponthe Employee the right to continued employment by the Company Group or affect in any way the right of the Company to terminatesuch employment at any time. Unless otherwise provided in a written employment agreement or by applicable law, the Employee’semployment by the Company Group shall be on an at-will basis, and the employment relationship may be terminated at any time byeither the Employee or the Company for any reason whatsoever, with or without cause or notice.Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall bedetermined by the Committee or its delegate, and its determination shall be final.9. Code Section 409A; No Guarantee of Tax Consequences. The award of Performance Shares is intended to be (i)exempt from Section 409A of the Code (“Section 409A”) including, but not limited to, by reason of compliance with the short-termdeferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4); or (ii) in compliance with Section 409A, and the provisions of thisAgreement shall be administered, interpreted and construed accordingly. Payments under this Agreement in a series of installmentsshall be treated as a right to receive a series of separate payments for purposes of Section 409A. If the Employee is identified by theCompany as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Employeehas a “separation from service” (other than due to death) within the meaning of Section 1.409A-1(h) of the Treasury Regulations,notwithstanding the provisions of Section 4 hereof, any transfer of shares payable on account of a separation from service that aredeferred compensation shall take place on the earlier of (i) the first business day following the expiration of six months from theEmployee’s separation from service, or (ii) such earlier date as complies with the requirements of Section 409A. To the extent requiredto comply with Section 409A, the Employee shall be considered to have terminated employment with the Company Group when theEmployee incurs a “separation from service” with a member of the Company Group within the meaning of Section 409A(a)(2)(A)(i)of the Code. The Company makes no commitment or guarantee to the Employee that any federal or state tax treatment shall apply orbe available to any person eligible for benefits under this Agreement.10. Binding Effect; Survival. This Agreement shall be binding upon and inure to the benefit of any successors to theCompany and all persons lawfully claiming under the Employee.11. Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior agreements and understandings, whether written or oral, between the parties with respectto Performance Shares commencing on the Performance Beginning Date. Any modification of this Agreement shall be effective only ifit is in writing and signed by both the Employee and an authorized officer of the Company.512. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State ofDelaware, without regard to conflicts of law principles thereof.FORUM ENERGY TECHNOLOGIES, INC.By: Name:Title: EMPLOYEE 13. Exhibit AMethodology for Calculating Earned Performance Shares1. Definitions. For purposes of determining the number of shares of Common Stock issuable to the Employee in respect ofthe Earned Performance Shares for each Performance Period, the following definitions shall apply:(a) Ending Share Price means the average closing price of the shares over the twenty trading days prior to the PerformanceEnd Date.(b) Peer Group means TechnipFMC plc; National Oilwell Varco, Inc.; Superior Energy Services, Inc.; OceaneeringInternational, Inc.; Exterran Corporation; Oil States International, Inc.; Hunting plc; Dril-Quip, Inc.; Cactus, Inc. and ApergyCorporation to the extent such entities or their successors are in existence and publicly traded as of the Performance End Date.(a) Starting Share Price means the average closing price of the shares over the twenty trading days prior to the PerformanceBeginning Date.(b) Total Shareholder Return means common stock price growth for each entity over the Performance Period, as measured bydividing the sum of the cumulative amount of dividends for the Performance Period, assuming dividend reinvestment, and thedifference between the entity’s Ending Share Price and the Starting Share Price; by the entity’s Starting Share Price. In theevent of a spin-off or similar divestiture during the Performance Period by an entity that is a member of the Peer Group, theCommittee may make such adjustments to the calculation of such entity’s Total Shareholder Return as it determines may beappropriate, including, without limitation, taking into account the common stock price growth for both the entity that is themember of the Peer Group and the divested entity over the Performance Period.For purposes of this Exhibit A, the share prices and dividends of peers that trade in foreign currency shall be converted to U.S. dollars.2. Committee Methodology. For purposes of determining the number of shares of Common Stock issuable to the Employeein respect of the Earned Performance Shares, the Committee shall:(a) Calculate the Total Shareholder Return for the Company and each company in the Peer Group for the Performance Period.(b) Rank the Company and each member of the Peer Group based on Total Shareholder Return with the company having thehighest Total Shareholder Return ranking in the first position and the company with the lowest Total Shareholder Returnranking in the tenth position.(c) Determine the number of Earned Performance Shares by multiplying the Employee’s Target Amount by the PayoutMultiplier in the Ten Company Payout Schedule below:Eleven Company Payout ScheduleCompany RankingPayout Multiplier12.0021.8031.6041.4051.2061.0070.8080.6090.40100.20110.00Notwithstanding the calculations described in clause (c) above, in the event the Total Shareholder Return for the Company is (I) lessthan 0%, the Payout Multiplier applied in clause (c) shall not exceed 1.00 or (II) greater than or equal to 20%, the Payout Multiplierapplied in clause (c) shall not be less than 1.00.If any calculation with respect to the Earned Performance Shares would result in a fractional share, the number of shares of CommonStock to be issued shall be rounded up to the nearest whole share.3. Peer Group Changes. If, as a result of merger, acquisition or a similar corporate transaction, a member of the Peer Groupceases to be a member of the Peer Group (an “Affected Peer Company”), the Affected Peer Company shall not be included in the TenCompany Payout Schedule and the applicable of the following alternative schedules shall be used in its place:Ten Company Payout ScheduleCompany RankingPayout Multiplier12.0021.7531.5041.2551.0061.0070.7580.5090.25100.00Nine Company Payout ScheduleCompany RankingPayout Multiplier12.0021.7531.5041.2551.0060.7570.5080.2590.00Eight Company Payout ScheduleCompany RankingPayout Multiplier12.0021.7131.4241.1350.8460.5570.2680.00Seven Company Payout ScheduleCompany RankingPayout Multiplier12.0021.6731.3341.0050.6760.3370.00Six Company Payout ScheduleCompany RankingPayout Multiplier12.0021.6031.2040.8050.4060.00Five Company Payout ScheduleCompany RankingPayout Multiplier12.0021.5031.0040.5050.00If a member of the Peer Group declares bankruptcy, it shall be deemed to remain in the Peer Group until the Performance End Dateand shall occupy the lowest ranking in the Payout Schedule. If, as a result of merger, acquisition or a similar corporate transaction,there are five or more Affected Peer Companies, the Committee may in its sole discretion revise the makeup of the Peer Group andmake adjustments to the Payout Multipliers.6Exhibit 21.1List of Subsidiaries of Forum Energy Technologies, Inc. Name JurisdictionFET (Barbados) SRL BarbadosFET Holdings LLC DelawareFET Global Holdings Limited United KingdomForum Global Tubing LLC DelawareForum International Holdings, Inc. DelawareForum US, Inc. DelawareForum Worldwide Holdings Limited United KingdomGlobal Tubing LLC DelawareExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos.333-180769, 333-188915, 333-213158, 333-218789)and Forms S-3 (No. 333-213266, 333-220814) of Forum Energy Technologies, Inc. of our report dated February 28, 2019 relating to the financial statementsand the effectiveness of internal control over financial reporting, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPHouston, TexasFebruary 28, 2019Exhibit 31.1Forum Energy Technologies, Inc.CertificationI, C. Christopher Gaut, certify that:1.I have reviewed this Annual Report on Form 10-K of Forum Energy Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 28, 2019 By: /s/ C. Christopher Gaut C. Christopher Gaut President, Chief Executive Officer and Chairman of the BoardExhibit 31.2Forum Energy Technologies, Inc.CertificationI, Pablo G. Mercado, certify that:1.I have reviewed this Annual Report on Form 10-K of Forum Energy Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 28, 2019 By: _/s/ Pablo G. Mercado_________________ Pablo G. Mercado Senior Vice President, Chief Financial Officer and TreasurerExhibit 32.1Certification Pursuant to 18 U.S.C. Section 1350(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)In connection with the Annual Report on Form 10-K of Forum Energy Technologies, Inc. (the “Company”) for the year ended December 31,2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), C. Christopher Gaut, as Chief Executive Officer ofthe Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best ofhis knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the"Exchange Act"); and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Dated: February 28, 2019 By: /s/ C. Christopher Gaut C. Christopher Gaut President, Chief Executive Officer and Chairman of the BoardA signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Companyand furnished to the Securities and Exchange Commission or its staff upon request.This certification shall not be deemed filed by the Company for purposes of § 18 of the Exchange Act.Exhibit 32.2Certification Pursuant to 18 U.S.C. Section 1350(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)In connection with the Annual Report on Form 10-K of Forum Energy Technologies, Inc. (the “Company”) for the year ended December 31,2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Pablo G. Mercado, as Chief Financial Officer of theCompany, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of hisknowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the"Exchange Act"); and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Dated: February 28, 2019 By: /s/ Pablo G. Mercado Pablo G. Mercado Senior Vice President, Chief Financial Officer and TreasurerA signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Companyand furnished to the Securities and Exchange Commission or its staff upon request.This certification shall not be deemed filed by the Company for purposes of § 18 of the Exchange Act.

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