FORUM ENERGY TECHNOLOGIES, INC. - FORM 10-Q

FORUM ENERGY TECHNOLOGIES, INC. - FORM 10-Q - October 31, 2014

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Attached files

FORUM ENERGY TECHNOLOGIES, INC. Reports

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EXCEL - IDEA: XBRL DOCUMENT - FORUM ENERGY TECHNOLOGIES, INC.	Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - FORUM ENERGY TECHNOLOGIES, INC.	fetex3222014q310-q.htm
EX-31.2 - EXHIBIT 31.2 - FORUM ENERGY TECHNOLOGIES, INC.	fetex3122014q310-q.htm
EX-31.1 - EXHIBIT 31.1 - FORUM ENERGY TECHNOLOGIES, INC.	fetex3112014q310-q.htm
EX-32.1 - EXHIBIT 32.1 - FORUM ENERGY TECHNOLOGIES, INC.	fetex3212014q310-q.htm

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Quarterly Period Ended September 30, 2014



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35504

FORUM ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)



Delaware		61-1488595
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

920 Memorial City Way, Suite 1000

Houston, Texas 77024

(Address of principal executive offices)

(281) 949-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of October 24, 2014, there were 94,148,831 common shares outstanding.

Table of Contents



PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed consolidated statements of operations and comprehensive income	3
Condensed consolidated balance sheets	4
Condensed consolidated statements of cash flows	5
Notes to condensed consolidated financial statements	6
Item 2. Management's discussion and analysis of financial condition and results of operations	21
Item 3. Quantitative and qualitative disclosures about market risk	32
Item 4. Controls and procedures	32
PART II - OTHER INFORMATION	33
Item 1. Legal proceedings	33
Item 1A. Risk factors	33
Item 2. Unregistered sales of equity securities and use of proceeds	33
Item 6. Exhibits	34
SIGNATURES	35

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Forum Energy Technologies, Inc. and subsidiaries

Condensed consolidated statements of operations and comprehensive income

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share information)	2014			2013			2014			2013
Net sales	$	468,822		$	390,192		$	1,301,039		$	1,131,078
Cost of sales	316,784			265,021			883,070			776,618
Gross profit	152,038			125,171			417,969			354,460
Operating expenses
Selling, general and administrative expenses	81,316			71,594			230,087			202,697
Transaction expenses	1,516			376			2,326			2,191
Loss (gain) on sale of assets and other	(85		)	209			320			229
Total operating expenses	82,747			72,179			232,733			205,117
Earnings from equity investment	6,749			2,946			17,997			2,946
Operating income	76,040			55,938			203,233			152,289
Other expense (income)
Interest expense	7,699			4,373			23,174			10,847
Foreign exchange (gains) losses and other, net	(5,222		)	2,311			(616		)	1,863
Deferred loan costs written off	—			2,149			—			2,149
Total other expense	2,477			8,833			22,558			14,859
Income before income taxes	73,563			47,105			180,675			137,430
Provision for income tax expense	21,332			13,924			52,395			42,371
Net income	52,231			33,181			128,280			95,059
Less: Income attributable to noncontrolling interest	5			40			2			59
Net income attributable to common stockholders	52,226			33,141			128,278			95,000

Weighted average shares outstanding
Basic	93,331			91,443			92,728			90,347
Diluted	96,198			94,734			95,631			94,527
Earnings per share
Basic	$	0.56		$	0.36		$	1.38		$	1.05
Diluted	$	0.54		$	0.35		$	1.34		$	1.01


Other comprehensive income, net of tax:
Net income	52,231			33,181			128,280			95,059
Change in foreign currency translation, net of tax of $0	(34,474		)	24,114			(21,754		)	(789		)
Gain on pension liability	—			—			2			—
Comprehensive income	17,757			57,295			106,528			94,270
Less: comprehensive loss (income) attributable to noncontrolling interests	(32		)	(32		)	(20		)	50
Comprehensive income attributable to common stockholders	$	17,725		$	57,263		$	106,508		$	94,320

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

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Forum Energy Technologies, Inc. and subsidiaries

Condensed consolidated balance sheets

(Unaudited)



(in thousands, except share information)	September 30, 2014			December 31, 2013
Assets
Current assets
Cash and cash equivalents	$	74,084		$	39,582
Accounts receivable—trade, net	313,855			250,272
Inventories	454,470			441,049
Prepaid expenses and other current assets	38,309			29,707
Costs and estimated profits in excess of billings	28,230			24,012
Deferred income taxes, net	28,834			24,846
Total current assets	937,782			809,468
Property and equipment, net of accumulated depreciation	188,991			180,292
Deferred financing costs, net	13,746			15,658
Intangibles	281,850			295,352
Goodwill	808,762			802,318
Investment in unconsolidated subsidiary	57,199			60,292
Other long-term assets	5,797			5,489
Total assets	$	2,294,127		$	2,168,869
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	898		$	998
Accounts payable—trade	134,078			100,221
Accrued liabilities	123,402			96,529
Deferred revenue	14,816			15,837
Billings in excess of costs and profits recognized	19,043			6,398
Total current liabilities	292,237			219,983
Long-term debt, net of current portion	420,417			512,077
Deferred income taxes, net	100,282			97,774
Other long-term liabilities	13,135			8,069
Total liabilities	826,071			837,903
Commitments and contingencies
Equity
Common stock, $0.01 par value, 296,000,000 shares authorized, 94,250,854 and 92,803,389 shares issued	942			928
Additional paid-in capital	858,663			826,064
Treasury stock at cost, 3,627,259 and 3,585,098 shares	(31,578		)	(30,249		)
Warrants	26			687
Retained earnings	653,418			525,140
Accumulated other comprehensive income	(13,984		)	7,785
Total stockholders’ equity	1,467,487			1,330,355
Noncontrolling interest in subsidiary	569			611
Total equity	1,468,056			1,330,966
Total liabilities and equity	$	2,294,127		$	2,168,869

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

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Forum Energy Technologies, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(Unaudited)



	Nine Months Ended September 30,
(in thousands, except share information)	2014			2013
Cash flows from operating activities
Net income	$	128,280		$	95,059
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	28,274			26,498
Amortization of intangible assets	20,608			17,478
Share-based compensation expense	14,334			15,442
Deferred income taxes	(4,477		)	11,474
Deferred loan costs written off	—			2,149
Earnings from equity investment, net of distributions	3,092			(2,946		)
Other	3,644			582
Changes in operating assets and liabilities
Accounts receivable—trade	(67,793		)	441
Inventories	(14,520		)	35,264
Prepaid expenses and other current assets	(6,872		)	(12,175		)
Accounts payable, deferred revenue and other accrued liabilities	66,744			(9,012		)
Costs and estimated profits in excess of billings, net	8,439			(16,127		)
Net cash provided by operating activities	$	179,753		$	164,127
Cash flows from investing activities
Acquisition of businesses, net of cash acquired	(38,289		)	(181,717		)
Investment in unconsolidated subsidiary	—			(112,241		)
Distribution from unconsolidated subsidiary	—			64,228
Capital expenditures for property and equipment	(39,932		)	(44,717		)
Proceeds from sale of business, property and equipment	8,735			739
Net cash used in investing activities	$	(69,486	)	$	(273,708	)
Cash flows from financing activities
Borrowings under Credit Facility	—			345,520
Repayment of long-term debt	(91,760		)	(235,346		)
Payment of contingent consideration	—			(11,435		)
Excess tax benefits from stock based compensation	7,291			4,225
Repurchases of stock	(1,328		)	(850		)
Proceeds from stock issuance	10,332			4,768
Deferred financing costs	(6		)	(7,600		)
Net cash provided by (used in) financing activities	$	(75,471	)	$	99,282
Effect of exchange rate changes on cash	(294		)	(2,563		)
Net increase (decrease) in cash and cash equivalents	34,502			(12,862		)
Cash and cash equivalents
Beginning of period	39,582			41,063
End of period	$	74,084		$	28,201
Noncash investing and financing activities
Accrued purchases of property and equipment	$	1,443		$	—
Payment of contingent consideration via stock	—			4,075

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

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements

(Unaudited)

1. Organization and basis of presentation

Forum Energy Technologies, Inc. (the "Company"), a Delaware corporation, is a global oilfield products company, serving the subsea, drilling, completion, production and infrastructure sectors of the oil and natural gas industry. The Company designs, manufactures and distributes products and engages in aftermarket services, parts supply and related services that complement the Company’s product offering.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

The Company's investment in an operating entity where the Company has the ability to exert significant influence, but does not control operating and financial policies, is accounted for using the equity method. The Company's share of the net income of this entity is recorded as "Earnings from equity investment" in the condensed consolidated statements of operations and comprehensive income. The investment in this entity is included in "Investment in unconsolidated subsidiary" in the condensed consolidated balance sheets. The Company reports its share of equity earnings within operating income as the investee's operations are integral to the operations of the Company.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company's financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014 or any other interim period.

These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ("GAAP") for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2013, which are included in the Company’s 2013 Annual Report on Form 10-K filed with the SEC on February 28, 2014 (the "Annual Report").

2. Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), which are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.

In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statements - Going Concern. The new standard requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern for both annual and interim reporting periods. The guidance is effective for the Company for the fiscal year beginning January 1, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on the consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new standard is effective for reporting periods beginning after December 15, 2016 and early adoption is not permitted. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The new standard will be effective January 1, 2017 and the Company is currently evaluating the impacts of adoption and the implementation approach to be used.

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

discontinued operation. The guidance is effective for the Company for the fiscal year beginning January 1, 2015, and is not expected to have a material impact on the consolidated financial statements.

3. Acquisitions and investment in joint venture

2014 Acquisition

Effective May 1, 2014, the Company completed the acquisition of Quality Wireline & Cable, Inc. ("Quality") for consideration of $38.3 million. Quality is a Calgary, Alberta based manufacturer of high-performance cased-hole electro-mechanical wireline cables and specialty cables for the oil and gas industry. Quality is included in the Drilling & Subsea segment. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):



	2014 Acquisition
Current assets, net of cash acquired	$	7,595
Property and equipment	3,837
Intangible assets (primarily customer relationships)	11,527
Non-tax-deductible goodwill	19,942
Current liabilities	(1,615		)
Deferred tax liabilities	(2,997		)
Net assets acquired	$	38,289

2013 Acquisitions

Effective July 1, 2013, the Company completed the following two acquisitions for aggregate consideration of approximately $180.0 million:


•	Blohm + Voss Oil Tools GmbH and related entities ("B+V"), a manufacturer of pipe handling equipment used on offshore and onshore drilling rigs with locations in Hamburg, Germany and Willis, Texas. B+V is included in the Drilling & Subsea segment; and


•	Moffat 2000 Ltd. ("Moffat"), a Newcastle, England based manufacturer of subsea pipeline inspection gauge launching and receiving systems, and subsea connectors. Moffat is included in the Drilling & Subsea segment.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):



	2013 Acquisitions
Current assets, net of cash acquired	$	60,669
Property and equipment	4,545
Intangible assets (primarily customer relationships)	59,242
Non-tax-deductible goodwill	100,257
Current liabilities	(17,619		)
Long-term liabilities	(7,879		)
Deferred tax liabilities	(20,108		)
Net assets acquired	$	179,107

Revenues and net income related to the acquisitions were not significant for the year ended December 31, 2013. Pro forma results of operations for the 2014 and 2013 acquisitions have not been presented because the effects were not material to the consolidated financial statements on either an individual or aggregate basis.

Effective July 1, 2013, the Company jointly purchased Global Tubing, LLC ("Global Tubing") with an equal partner, with management retaining a small interest. Global Tubing is a Dayton, Texas based provider of coiled tubing strings and

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

related services. The Company's equity investment is reported in the Production & Infrastructure segment and is accounted for using the equity method of accounting. As Global Tubing's products are complementary to the Company’s well intervention and stimulation products and the investment's business is integral to the Company's operations, the earnings from the equity investment are included within operating income.

4. Inventories

The Company's significant components of inventory at September 30, 2014 and December 31, 2013 were as follows (in thousands):



	September 30, 2014			December 31, 2013
Raw materials and parts	$	150,270		$	139,573
Work in process	44,244			51,819
Finished goods	291,863			276,076
Gross inventories	486,377			467,468
Inventory reserve	(31,907		)	(26,419		)
Inventories	$	454,470		$	441,049

5. Goodwill and intangible assets

Goodwill

The changes in the carrying amount of goodwill from January 1, 2014 to September 30, 2014, were as follows (in thousands):



	Drilling & Subsea			Production & Infrastructure			Total
Goodwill Balance at January 1, 2014 net	$	723,355		$	78,963		$	802,318
Acquisitions and divestitures	16,287			—			16,287
Impact of non-U.S. local currency translation	(9,634		)	(209		)	(9,843		)
Goodwill Balance at September 30, 2014 net	$	730,008		$	78,754		$	808,762

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

Intangible assets

Intangible assets consisted of the following as of September 30, 2014 and December 31, 2013, respectively (in thousands):



	September 30, 2014
	Gross carrying amount		Accumulated amortization			Net amortizable intangibles		Amortization period (in years)
Customer relationships	$	288,718	$	(82,100	)	$	206,618	4-15
Patents and technology	31,680		(7,546		)	24,134		5-17
Non-compete agreements	7,216		(5,618		)	1,598		3-6
Trade names	48,854		(14,514		)	34,340		10-15
Distributor relationships	22,160		(12,230		)	9,930		8-15
Trademark	5,230		—			5,230		Indefinite
Intangible Assets Total	$	403,858	$	(122,008	)	$	281,850



	December 31, 2013
	Gross carrying amount		Accumulated amortization			Net amortizable intangibles		Amortization period (in years)
Customer relationships	$	283,171	$	(67,435	)	$	215,736	4-15
Patents and technology	33,843		(6,510		)	27,333		5-17
Non-compete agreements	6,577		(5,108		)	1,469		3-6
Trade names	46,654		(11,948		)	34,706		10-15
Distributor relationships	22,160		(11,282		)	10,878		8-15
Trademark	5,230		—			5,230		Indefinite
Intangible Assets Total	$	397,635	$	(102,283	)	$	295,352

6. Debt

Notes payable and lines of credit as of September 30, 2014 and December 31, 2013 consisted of the following (in thousands):



	September 30, 2014			December 31, 2013
6.25% Senior Notes due October 2021	$	402,903		$	403,208
Senior secured revolving credit facility	17,004			108,000
Other debt	1,408			1,867
Total debt	421,315			513,075
Less: current maturities	(898		)	(998		)
Long-term debt	$	420,417		$	512,077

Senior Notes Due 2021

The Senior Notes bear interest at a rate of 6.250% per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021. The Senior Notes are senior unsecured obligations, and are guaranteed on a senior unsecured basis by the Company’s subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility to the extent of the value of the collateral securing the Credit Facility.

In connection with the initial issuance and sale of the Senior Notes, the Company and the subsidiary guarantors entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company and the subsidiary guarantors agreed for the benefit of the holders of the Senior Notes to use commercially reasonable efforts to register with the SEC and exchange offer for senior notes due 2021 having identical terms as the Senior Notes. In satisfaction

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

of its obligations under the Registration Rights Agreement, the Company completed the exchange offer on September 15, 2014.

Credit Facility

The Company has a Credit Facility with several financial institutions as lenders that provides for a $600.0 million revolving credit facility with up to $75.0 million available for letters of credit and up to $25.0 million in swingline loans. Subject to terms of the Credit Facility, the Company has the ability to increase the revolving Credit Facility by an additional $300.0 million. The Credit Facility matures in November 2018. Weighted average interest rates under the Credit Facility at September 30, 2014 and December 31, 2013 were 1.91% and 2.17%, respectively.

Availability under the Credit Facility was approximately $572.0 million at September 30, 2014. There have been no changes to the financial covenants disclosed in Item 7 of the Annual Report and the Company was in compliance with all financial covenants at September 30, 2014.

7. Income taxes

The Company's effective tax rate was 29.0% for the nine months ended September 30, 2014 and 30.8% for the nine months ended September 30, 2013. The tax provision is lower than the comparable period in 2013 primarily due to benefits received from certain domestic tax incentives and a higher proportion of our earnings being generated outside the United States in jurisdictions subject to lower tax rates. The effective tax rate can vary from period to period depending on the Company's relative mix of U.S. and non-U.S. earnings. The effective tax rate was 29.0% for the three months ended September 30, 2014 and 29.6% for the three months ended September 30, 2013. The tax provision for the three months ended September 30, 2014 is lower than the comparable period in 2013 primarily due to benefits received from certain domestic tax incentives and a higher proportion of our earnings being generated outside the United States in jurisdictions subject to lower tax rates.

8. Fair value measurements

At September 30, 2014, the carrying value of the Credit Facility was $17.0 million. Substantially all of the debt incurs interest at a variable interest rate and, therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of the Company’s Senior Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At September 30, 2014, the fair value and the carrying value of the Company’s Senior Notes approximated $415.8 million and $402.9 million, respectively. At December 31, 2013, the fair value and the carrying value of the Company’s Senior Notes approximated $419.3 million and $403.2 million, respectively.

There were no outstanding financial assets as of September 30, 2014 and December 31, 2013 that required measuring the amounts at fair value. The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and there were no transfers between levels of the fair value hierarchy during the nine months ended September 30, 2014.

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

9. Business segments

The Company’s operations are divided into the following two operating segments, which are our reportable segments: Drilling & Subsea ("D&S") and Production & Infrastructure ("P&I"). The amounts indicated below as "Corporate" relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenue:
Drilling & Subsea	$	307,454		$	248,344		$	848,474		$	679,482
Production & Infrastructure	161,696			142,731			453,640			452,845
Intersegment eliminations	(328		)	(883		)	(1,075		)	(1,249		)
Total Revenue	$	468,822		$	390,192		$	1,301,039		$	1,131,078

Operating income:
Drilling & Subsea	$	57,929		$	42,568		$	155,330		$	110,630
Production & Infrastructure	29,816			21,402			80,260			65,600
Corporate	(10,274		)	(7,447		)	(29,711		)	(21,521		)
Total segment operating income	77,471			56,523			205,879			154,709
Transaction expenses	1,516			376			2,326			2,191
Loss (gain) on sale of assets and other	(85		)	209			320			229
Income from operations	$	76,040		$	55,938		$	203,233		$	152,289

A summary of consolidated assets by reportable segment is as follows (in thousands):



	September 30, 2014		December 31, 2013
Assets
Drilling & Subsea	$	1,716,361	$	1,655,355
Production & Infrastructure	499,360		468,520
Corporate	78,406		44,994
Total assets	$	2,294,127	$	2,168,869

10. Earnings per share

The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Net Income attributable to common stockholders	$	52,226	$	33,141	$	128,278	$	95,000

Average shares outstanding (basic)	93,331		91,443		92,728		90,347
Common stock equivalents	2,867		3,291		2,903		4,180
Diluted shares	96,198		94,734		95,631		94,527
Earnings per share
Basic earnings per share	$	0.56	$	0.36	$	1.38	$	1.05
Diluted earnings per share	$	0.54	$	0.35	$	1.34	$	1.01

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

The diluted earnings per share calculation excludes approximately 0.4 million and 0.3 million stock options for the three months ended September 30, 2014 and 2013 respectively, and 0.5 million and 0.3 million stock options for the nine months ended September 30, 2014 and 2013, respectively, because they were anti-dilutive as the option exercise price was greater than the average market price of the common stock.

11. Commitments and contingencies

In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions, that may or may not be covered by insurance. Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are considered to be probable and can be reasonably estimated. The reserves accrued at September 30, 2014 and December 31, 2013, respectively, are immaterial. It is management's opinion that the Company's ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

12. Stockholders' equity

Share-based compensation

During the nine months ended September 30, 2014, the Company granted 368,054 options and 778,471 shares of restricted stock or restricted stock units, which includes 115,610 performance share awards with a market condition. The stock options were granted with an exercise price of $26.96. Of the restricted stock or restricted stock units granted, 621,128 vest ratably over four years on each anniversary of the grant date. 41,733 shares of restricted stock or restricted stock units were granted to the non-employee members of the Board of Directors, which have a twelve month vesting period from the date of grant. The performance share awards granted may settle for between zero and two shares of the Company's common stock. The number of shares issued pursuant to the performance share awards will be determined based on the total shareholder return of the Company's common stock as compared to a group of peer companies, measured annually over a three-year performance period.

13. Related party transactions

The Company entered into lease agreements for office and warehouse space with former owners of acquired companies or affiliates of a director. The Company has sold and purchased inventory, services and fixed assets to and from various affiliates of certain directors. The dollar amounts related to these related party activities are not significant to the Company’s condensed consolidated financial statements.

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)

14. Condensed consolidating financial statements

The Senior Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several and on an unsecured basis.



Condensed consolidating statements of operations and comprehensive income

	Three months ended September 30, 2014
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Net sales	$	—		$	330,772		$	179,458		$	(41,408	)	$	468,822
Cost of sales	—			230,938			127,423			(41,577		)	316,784
Gross profit	—			99,834			52,035			169			152,038
Operating expenses
Selling, general and administrative expenses	—			63,228			18,088			—			81,316
Other operating expense	—			1,419			12			—			1,431
Total operating expenses	—			64,647			18,100			—			82,747
Earnings from equity investment	—			6,749			—			—			6,749
Equity earnings from affiliate, net of tax	57,161			28,048			—			(85,209		)	—
Operating income	57,161			69,984			33,935			(85,040		)	76,040
Other expense (income)
Interest expense (income)	7,593			75			31			—			7,699
Interest income with affiliate	—			(1,887		)	—			1,887			—
Interest expense with affiliate	—			—			1,887			(1,887		)	—
Foreign exchange (gains) losses and other, net	—			(744		)	(4,478		)	—			(5,222		)
Total other expense (income)	7,593			(2,556		)	(2,560		)	—			2,477
Income before income taxes	49,568			72,540			36,495			(85,040		)	73,563
Provision for income tax expense	(2,658		)	15,379			8,611			—			21,332
Net income	52,226			57,161			27,884			(85,040		)	52,231
Less: Income attributable to noncontrolling interest	—			—			5			—			5
Net income attributable to common stockholders	52,226			57,161			27,879			(85,040		)	52,226

Other comprehensive income, net of tax:
Net income	52,226			57,161			27,884			(85,040		)	52,231
Change in foreign currency translation, net of tax of $0	(34,474		)	(34,474		)	(34,474		)	68,948			(34,474		)
Comprehensive income	17,752			22,687			(6,590		)	(16,092		)	17,757
Less: comprehensive (income) loss attributable to noncontrolling interests	—			—			(32		)	—			(32		)
Comprehensive income attributable to common stockholders	$	17,752		$	22,687		$	(6,622	)	$	(16,092	)	$	17,725

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating statements of operations and comprehensive income

	Three months ended September 30, 2013
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Net sales	$	—		$	287,551		$	139,986		$	(37,345	)	$	390,192
Cost of sales	—			203,657			98,369			(37,005		)	265,021
Gross profit	—			83,894			41,617			(340		)	125,171
Operating expenses
Selling, general and administrative expenses	—			55,957			15,637			—			71,594
Other operating expense	—			282			303			—			585
Total operating expenses	—			56,239			15,940			—			72,179
Earnings from equity investment	—			2,946			—			—			2,946
Equity earnings from affiliates, net of tax	37,369			16,633			—			(54,002		)	—
Operating income	37,369			47,234			25,677			(54,342		)	55,938
Other expense (income)
Interest expense (income)	4,355			12			6			—			4,373
Interest income with affiliate	—			(2,001		)	—			2,001			—
Interest expense with affiliate	—						2,001			(2,001		)	—
Foreign exchange (gains) losses and other, net	—			(85		)	2,396			—			2,311
Deferred loan costs written off	2,149			—			—			—			2,149
Total other expense (income)	6,504			(2,074		)	4,403			—			8,833
Income before income taxes	30,865			49,308			21,274			(54,342		)	47,105
Provision for income tax expense	(2,276		)	11,939			4,261			—			13,924
Net income	33,141			37,369			17,013			(54,342		)	33,181
Less: Income attributable to noncontrolling interest	—			—			40			—			40
Net income attributable to common stockholders	33,141			37,369			16,973			(54,342		)	33,141

Other comprehensive income, net of tax:
Net income	33,141			37,369			17,013			(54,342		)	33,181
Change in foreign currency translation, net of tax of $0	24,114			24,114			24,114			(48,228		)	24,114
Comprehensive income	57,255			61,483			41,127			(102,570		)	57,295
Less: comprehensive (income) loss attributable to noncontrolling interests	—			—			(32		)	—			(32		)
Comprehensive income attributable to common stockholders	$	57,255		$	61,483		$	41,095		$	(102,570	)	$	57,263

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating statements of operations and comprehensive income

	Nine months ended September 30, 2014
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Net sales	$	—		$	941,885		$	480,049		$	(120,895	)	$	1,301,039
Cost of sales	—			659,444			342,269			(118,643		)	883,070
Gross profit	—			282,441			137,780			(2,252		)	417,969
Operating expenses
Selling, general and administrative expenses	—			176,331			53,756			—			230,087
Other operating expense	—			2,965			(319		)	—			2,646
Total operating expenses	—			179,296			53,437			—			232,733
Earnings from equity investment	—			17,997			—			—			17,997
Equity earnings from affiliate, net of tax	143,310			59,688			—			(202,998		)	—
Operating income	143,310			180,830			84,343			(205,250		)	203,233
Other expense (income)
Interest expense (income)	23,126			77			(29		)	—			23,174
Interest income with affiliate	—			(5,770		)	—			5,770			—
Interest expense with affiliate	—			—			5,770			(5,770		)	—
Foreign exchange (gains) losses and other, net	—			274			(890		)	—			(616		)
Total other expense (income)	23,126			(5,419		)	4,851			—			22,558
Income before income taxes	120,184			186,249			79,492			(205,250		)	180,675
Provision for income tax expense	(8,094		)	42,939			17,550			—			52,395
Net income	128,278			143,310			61,942			(205,250		)	128,280
Less: Income attributable to noncontrolling interest	—			—			2			—			2
Net income attributable to common stockholders	128,278			143,310			61,940			(205,250		)	128,278

Other comprehensive income, net of tax:
Net income	128,278			143,310			61,942			(205,250		)	128,280
Change in foreign currency translation, net of tax of $0	(21,754		)	(21,754		)	(21,754		)	43,508			(21,754		)
Change in pension liability	2			2			2			(4		)	2
Comprehensive income	106,526			121,558			40,190			(161,746		)	106,528
Less: comprehensive (income) loss attributable to noncontrolling interests	—			—			(20		)	—			(20		)
Comprehensive income attributable to common stockholders	$	106,526		$	121,558		$	40,170		$	(161,746	)	$	106,508

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Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating statements of operations and comprehensive income

	Nine months ended September 30, 2013
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Net sales	$	—		$	852,560		$	366,417		$	(87,899	)	$	1,131,078
Cost of sales	—			598,804			264,441			(86,627		)	776,618
Gross profit	—			253,756			101,976			(1,272		)	354,460
Operating expenses
Selling, general and administrative expenses	—			160,956			41,741			—			202,697
Other operating expense	—			2,136			284			—			2,420
Total operating expenses	—			163,092			42,025			—			205,117
Earnings from equity investment	—			2,946			—			—			2,946
Equity earnings from affiliates, net of tax	103,366			43,015			—			(146,381		)	—
Operating income	103,366			136,625			59,951			(147,653		)	152,289
Other expense (income)
Interest expense	10,722			85			40			—			10,847
Interest income with affiliate	—			(2,001		)	—			2,001			—
Interest expense with affiliate	—			—			2,001			(2,001		)	—
Foreign exchange (gains) losses and other, net	—			(608		)	2,471			—			1,863
Deferred loan costs written off	2,149			—			—			—			2,149
Total other expense (income)	12,871			(2,524		)	4,512			—			14,859
Income before income taxes	90,495			139,149			55,439			(147,653		)	137,430
Provision for income tax expense	(4,505		)	35,783			11,093			—			42,371
Net income	95,000			103,366			44,346			(147,653		)	95,059
Less: Income attributable to noncontrolling interest	—			—			59			—			59
Net income attributable to common stockholders	95,000			103,366			44,287			(147,653		)	95,000

Other comprehensive income, net of tax:
Net income	95,000			103,366			44,346			(147,653		)	95,059
Change in foreign currency translation, net of tax of $0	(789		)	(789		)	(789		)	1,578			(789		)
Comprehensive income	94,211			102,577			43,557			(146,075		)	94,270
Less: comprehensive (income) loss attributable to noncontrolling interests	—			—			50			—			50
Comprehensive income attributable to common stockholders	$	94,211		$	102,577		$	43,607		$	(146,075	)	$	94,320

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Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating balance sheets

	September 30, 2014
	FET (Parent)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
					(in thousands)
Assets
Current assets
Cash and cash equivalents	$	—	$	12,421	$	61,663	$	—		$	74,084
Accounts receivable—trade, net	—		204,248		109,607		—			313,855
Inventories	—		332,730		129,056		(7,316		)	454,470
Other current assets	—		62,064		33,309		—			95,373
Total current assets	—		611,463		333,635		(7,316		)	937,782
Property and equipment, net of accumulated depreciation	—		149,409		39,582		—			188,991
Intangibles	—		203,926		77,924		—			281,850
Goodwill	—		522,898		285,864		—			808,762
Investment in unconsolidated subsidiary	—		57,199		—		—			57,199
Investment in affiliates	1,306,259		491,942		—		(1,798,201		)	—
Long-term loans and advances to affiliates	581,528		97,324		—		(678,852		)	—
Other long-term assets	13,746		4,861		936		—			19,543
Total assets	$	1,901,533	$	2,139,022	$	737,941	$	(2,484,369	)	$	2,294,127
Liabilities and equity
Current liabilities
Accounts payable—trade	$	—	$	89,761	$	44,317	$	—		$	134,078
Accrued liabilities	14,143		77,451		31,808		—			123,402
Current portion of debt and other current liabilities	—		9,476		25,281		—			34,757
Total current liabilities	14,143		176,688		101,406		—			292,237
Long-term debt, net of current portion	419,903		480		34		—			420,417
Long-term loans and payables to affiliates	—		572,467		106,385		(678,852		)	—
Other long-term liabilities	—		83,128		30,289		—			113,417
Total liabilities	434,046		832,763		238,114		(678,852		)	826,071

Total stockholder's equity	1,467,487		1,306,259		499,258		(1,805,517		)	1,467,487
Noncontrolling interest in subsidiary	—		—		569		—			569
Equity	1,467,487		1,306,259		499,827		(1,805,517		)	1,468,056
Total liabilities and equity	$	1,901,533	$	2,139,022	$	737,941	$	(2,484,369	)	$	2,294,127

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Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating balance sheets

	December 31, 2013
	FET (Parent)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
					(in thousands)
Assets
Current assets
Cash and cash equivalents	$	—	$	—	$	39,582	$	—		$	39,582
Accounts receivable—trade, net	—		172,563		77,709		—			250,272
Inventories	—		310,191		135,924		(5,066		)	441,049
Other current assets	63		41,495		37,007		—			78,565
Total current assets	63		524,249		290,222		(5,066		)	809,468
Property and equipment, net of accumulated depreciation	—		143,180		37,112		—			180,292
Intangibles	—		220,980		74,372		—			295,352
Goodwill	—		526,083		276,235		—			802,318
Investment in unconsolidated subsidiary	—		60,292		—		—			60,292
Investment in affiliates	1,209,699		454,024		—		(1,663,723		)	—
Long-term loans and advances to affiliates	623,337		97,316		—		(720,653		)	—
Other long-term assets	15,658		4,168		1,321		—			21,147
Total assets	$	1,848,757	$	2,030,292	$	679,262	$	(2,389,442	)	$	2,168,869
Liabilities and equity
Current liabilities
Accounts payable—trade	$	—	$	69,467	$	30,754	$	—		$	100,221
Accrued liabilities	7,194		43,693		45,642		—			96,529
Current portion of debt and other current liabilities	—		9,217		14,016		—			23,233
Total current liabilities	7,194		122,377		90,412		—			219,983
Long-term debt, net of current portion	511,208		824		45		—			512,077
Long-term loans and payables to affiliates	—		619,778		100,875		(720,653		)	—
Other long-term liabilities	—		77,614		28,229		—			105,843
Total liabilities	518,402		820,593		219,561		(720,653		)	837,903

Total stockholder's equity	1,330,355		1,209,699		459,090		(1,668,789		)	1,330,355
Noncontrolling interest in subsidiary	—		—		611		—			611
Equity	1,330,355		1,209,699		459,701		(1,668,789		)	1,330,966
Total liabilities and equity	$	1,848,757	$	2,030,292	$	679,262	$	(2,389,442	)	$	2,168,869

Table of Contents

Forum Energy Technologies, Inc. and subsidiaries

Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating statements of cash flows

	Nine months ended September 30, 2014
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Cash flows from (used in) operating activities	$	(6,101	)	$	120,323		$	65,531		$	—		$	179,753
Cash flows from investing activities
Acquisition of businesses, net of cash acquired	—			—			(38,289		)	—			(38,289		)
Capital expenditures for property and equipment	—			(30,808		)	(9,124		)	—			(39,932		)
Long-term loans and advances to affiliates	88,410			—			—			(88,410		)	—
Other	—			8,421			314			—			8,735
Net cash provided by (used in) investing activities	$	88,410		$	(22,387	)	$	(47,099	)	$	(88,410	)	$	(69,486	)
Cash flows from financing activities
Repayment of long-term debt	(91,307		)	(328		)	(125		)	—			(91,760		)
Long-term loans and advances to affiliates	—			(92,478		)	4,068			88,410			—
Other	8,998			7,291			—			—			16,289
Net cash provided by (used in) financing activities	$	(82,309	)	$	(85,515	)	$	3,943		$	88,410		$	(75,471	)
Effect of exchange rate changes on cash	—			—			(294		)	—			(294		)
Net increase (decrease) in cash and cash equivalents	—			12,421			22,081			—			34,502
Cash and cash equivalents
Beginning of period	—			—			39,582			—			39,582
End of period	$	—		$	12,421		$	61,663		$	—		$	74,084

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Notes to condensed consolidated financial statements (continued)

(Unaudited)



Condensed consolidating statements of cash flows

	Nine months ended September 30, 2013
	FET (Parent)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
							(in thousands)
Cash flows from (used in) operating activities	$	(6,581	)	$	125,915		$	44,793		$	—		$	164,127
Cash flows from investing activities
Acquisition of businesses, net of cash acquired	—			(53,951		)	(127,766		)	—			(181,717		)
Investment in unconsolidated subsidiary	—			(112,241		)	—			—			(112,241		)
Distribution from unconsolidated subsidiary	—			64,228			—			—			64,228
Capital expenditures for property and equipment	—			(35,090		)	(9,627		)	—			(44,717		)
Long-term loans and advances to affiliates	(100,007		)	—			—			100,007			—
Other	—			291			448			—			739
Net cash provided by (used in) investing activities	$	(100,007	)	$	(136,763	)	$	(136,945	)	$	100,007		$	(273,708	)
Cash flows from financing activities
Borrowings under Credit Facility	342,614			2,906			—			—			345,520
Repayment of long-term debt	(232,344		)	(3,068		)	66			—			(235,346		)
Payment of contingent consideration	—			(11,435		)	—			—			(11,435		)
Long-term loans and advances to affiliates	—			10,128			89,879			(100,007		)	—
Other	(3,682		)	4,225			—			—			543
Net cash provided by (used in) financing activities	$	106,588		$	2,756		$	89,945		$	(100,007	)	$	99,282
Effect of exchange rate changes on cash	—			—			(2,563		)	—			(2,563		)
Net increase (decrease) in cash and cash equivalents	—			(8,092		)	(4,770		)	—			(12,862		)
Cash and cash equivalents
Beginning of period	—			8,092			32,971			—			41,063
End of period	$	—		$	—		$	28,201		$	—		$	28,201

Table of Contents

Management's Discussion and Analysis

of Financial Condition and Results of Operations

Item 2. Management’s discussion and analysis of financial condition and results of operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “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 statements about:

•business strategy;

•cash flows and liquidity;

•the volatility of oil and natural gas prices;

•our ability to successfully manage our growth, including risks and uncertainties associated with integrating

and retaining key employees of the businesses we acquire;

•the availability of raw materials and specialized equipment;

•availability of skilled and qualified labor;

•our ability to accurately predict customer demand;

•competition in the oil and 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;

•benefits of our acquisitions;

•availability of key management personnel;

•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;

•the ability to operate effectively as a publicly traded company;

•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 Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or

suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 28, 2014 and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Overview

We are a global oilfield products company, serving the subsea, drilling, completion, production and infrastructure sectors of the oil and natural gas industry. We design, manufacture and distribute products, and engage in aftermarket services, parts supply and related services that complement our product offering. Our product offering includes a mix of highly engineered capital products and frequently replaced items that are used in the exploration, development, production and transportation of oil and natural gas. Our capital products 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; and downstream capital projects. Our engineered systems are critical components used on drilling rigs or in the course of subsea operations, while our consumable products are used to maintain efficient and safe operations at well sites in the well construction process, within the supporting infrastructure, and at processing centers and refineries. Historically, just over half of our revenue is derived from activity-based consumable products, while the balance is derived from capital products and a small amount from rental and other services.

We seek to design, manufacture and supply reliable products that create value for our diverse customer base, which includes, among others, oil and gas operators, land and offshore drilling contractors, well stimulation and intervention service providers, subsea construction and service companies, and pipeline and refinery operators.

We operate two business segments:

•

Drilling & Subsea segment. We design and manufacture products and provide related services to the subsea, drilling, well construction, completion and intervention markets. Through this segment, we offer subsea technologies, including robotic vehicles and other capital equipment, specialty components and tooling, a broad suite of complementary subsea technical services and rental items, and applied products for subsea pipelines; drilling technologies, including capital equipment and a broad line of products consumed in the drilling and well intervention process; and downhole technologies, including cementing and casing tools, completion products, and a range of downhole protection solutions.

•

Production & Infrastructure segment. We design and manufacture products and provide related equipment and services to the well stimulation, completion, production and infrastructure markets. Through this segment, we supply flow equipment, including well stimulation consumable products and related recertification and refurbishment services; production equipment, including well site production equipment and process equipment; and valves, which includes a broad range of industrial and process valves.

Market Conditions

Management believes that the long-term fundamentals underlying the global demand for energy, such as long-term economic and demographic trends, remain strong. The level of demand for our products and services is directly related to activity levels and the capital and operating budgets of our customers, which in turn are influenced heavily by the outlook for energy prices over a shorter term. Energy prices have historically been cyclical in nature, as exemplified by the recent decrease in oil prices. Current energy prices are affected by a wide range of factors, and changes in direction are difficult to predict.

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:



	Three months ended
	September 30,		June 30,		September 30,
	2014		2014		2013
Average global oil, $/bbl
West Texas Intermediate	$	91.16	$	103.06	$	105.78
United Kingdom Brent	$	94.87	$	109.06	$	110.07

Average North American Natural Gas, $/Mcf
Henry Hub	$	4.12	$	4.59	$	3.55

In the third quarter 2014, average oil prices were approximately 12% and 14% lower than in the second quarter of 2014 and the third quarter 2013, respectively. Average natural gas prices were approximately 10% lower than in the second quarter 2014, but 16% higher than in the third quarter 2013. These oil and natural gas price levels during the quarter were sufficient to support high levels of exploration and production activity, including the continued development of offshore projects, which stimulates demand for our subsea products. Since the end of the quarter, oil prices have declined to the mid-to-low $80s. If these decreases continue, they could lead to lower levels of activity and a decrease in demand for our products.

In addition to the commodity price levels, the average active rig count data below, based on the weekly Baker Hughes Incorporated rig count, reflect a broad measure of industry activity and resultant demand for our drilling and production related products and services.



	Three months ended
	September 30,	June 30,	September 30,
	2014	2014	2013
Active Rigs by Location
United States	1,903	1,852	1,770
Canada	386	199	350
International	1,348	1,348	1,285
Global Active Rigs	3,637	3,399	3,405

Land vs. Offshore Rigs
Land	3,245	3,016	3,026
Offshore	392	383	379
Global Active Rigs	3,637	3,399	3,405

U.S. Commodity Target
Oil/Gas	1,577	1,529	1,383
Gas	324	319	380
Unclassified	2	4	7
Total U.S. Rigs	1,903	1,852	1,770

U.S. Well Path
Horizontal	1,314	1,242	1,073
Vertical	372	395	436
Directional	217	215	261
Total U.S. Active Rigs	1,903	1,852	1,770

Generally, our sales are impacted by changes in rig activity and wells completed. Rig counts were at high levels during the third quarter 2014.The average U.S. rig count increased 3% from the second quarter 2014 and 8% from the third quarter 2013. The international rig count remained stable, while the Canadian rig count increased from its seasonally low second quarter and was up over 10% from the third quarter 2013. To the extent that future oil price declines result in lower levels of exploration and production capital expenditure plans in the future, the number of active rigs could decline.

In addition to the absolute number of active rigs, due to greater application of improved drilling and completion technologies, the current rig fleet is becoming more efficient allowing more wells to be drilled per rig. The trends in the capabilities of the rig fleet are reflected in the table above through the increases in horizontal and directional drilling rigs as a portion of the total rig count. If this trend continues, well completions could grow at a faster pace than the drilling rig count in the future. Higher drilling and completions activities should result in increased demand for our products.

Results of operations

We made two acquisitions and an investment in a joint venture at the beginning of the third quarter 2013 and one acquisition in the second quarter 2014. For additional information about these acquisitions, see Note 3 to the condensed consolidated financial statements in Item 1 of Part I of this quarterly report. For this reason, our results of operations for the nine months ended September 30, 2014 may not be comparable to historical results of operations for the same 2013 period.

Three months ended September 30, 2014 compared with three months ended September 30, 2013



	Three Months Ended September 30,						Favorable / (Unfavorable)
	2014			2013			$			%
(in thousands of dollars, except per share information)
Revenue:
Drilling & Subsea	$	307,454		$	248,344		$	59,110		23.8	%
Production & Infrastructure	161,696			142,731			18,965			13.3	%
Eliminations	(328		)	(883		)	555			*
Total revenue	$	468,822		$	390,192		$	78,630		20.2	%
Operating income:
Drilling & Subsea	$	57,929		$	42,568		$	15,361		36.1	%
Operating income margin %	18.8		%	17.1		%
Production & Infrastructure	29,816			21,402			8,414			39.3	%
Operating income margin %	18.4		%	15.0		%
Corporate	(10,274		)	(7,447		)	(2,827		)	(38.0	)%
Total segment operating income	$	77,471		$	56,523		$	20,948		37.1	%
Operating income margin %	16.5		%	14.5		%
Transaction expenses	1,516			376			(1,140		)	*
Loss (gain) on sale of assets and other	(85		)	209			294			*
Income from operations	76,040			55,938			20,102			35.9	%
Interest expense, net	7,699			4,373			(3,326		)	(76.1	)%
Foreign exchange (gains) losses and other, net	(5,222		)	2,311			7,533			*
Deferred loan costs written off	—			2,149			2,149			100.0	%
Other (income) expense, net	2,477			8,833			6,356			*
Income before income taxes	73,563			47,105			26,458			56.2	%
Income tax expense	21,332			13,924			(7,408		)	(53.2	)%
Net income	52,231			33,181			19,050			57.4	%
Less: Income attributable to non-controlling interest	5			40			(35		)	*
Income attributable to common stockholders	$	52,226		$	33,141		$	19,085		57.6	%

Weighted average shares outstanding
Basic	93,331			91,443
Diluted	96,198			94,734
Earnings per share
Basic	$	0.56		$	0.36
Diluted	$	0.54		$	0.35
* not meaningful

Revenue

Our revenue for the three months ended September 30, 2014 increased $78.6 million, or 20.2%, to $468.8 million compared to the three months ended September 30, 2013. For the three months ended September 30, 2014, our Drilling & Subsea segment and our Production & Infrastructure segment comprised 65.6% and 34.4% of our total revenue, respectively, which compared to 63.6% and 36.4% of total revenue, respectively, for the three months ended September 30, 2013. The changes in revenue by operating segment consisted of the following:

Drilling & Subsea segment — Revenue increased $59.1 million, or 23.8%, to $307.5 million during the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily attributable to increased activity in North America, as demonstrated by the 7.5% increase in the U.S. average rig count compared to the prior year period, which resulted in increased sales of our pipe handling and downhole products. We also realized revenue gains compared to the prior year period on workclass remotely operated vehicles used by the offshore construction companies to install subsea trees and infrastructure.

Production & Infrastructure segment — Revenue increased $19.0 million, or 13.3%, to $161.7 million during the three months ended September 30, 2014 compared to the three months ended September 30, 2013 attributable to increased sales of our consumable flow equipment products to pressure pumping service providers as U.S. activity levels continue to improve. We also saw an increase in valve sales into upstream areas in line with market activity.

Segment operating income and segment operating margin percentage

Segment operating income for the three months ended September 30, 2014, increased $20.9 million, or 37.1%, to $77.5 million compared to the three months ended September 30, 2013. The segment operating margin percentage is calculated by dividing segment operating income by revenue for the period. For the three months ended September 30, 2014, the segment operating margin percentage of 16.5% represents an increase of 200 basis points from the 14.5% operating margin percentage for three months ended September 30, 2013. The change in operating margin percentage for each segment is explained as follows:

Drilling & Subsea segment — The operating margin percentage increased 170 basis points to 18.8% for the three months ended September 30, 2014, from 17.1% for the three months ended September 30, 2013. Excluding severance and facility closure costs of $6.1 million incurred in the third quarter of 2013 to reduce our cost structure in line with activity levels at the time, the operating margin is down 80 basis points in the third quarter 2014. Some of this margin decrease is due to a collection in the prior year of a receivable that had been previously determined uncollectible.

Production & Infrastructure segment — The operating margin percentage improved 340 basis points to 18.4% for the three months ended September 30, 2014, from 15.0% for the three months ended September 30, 2013. The improvement in operating margin percentage was attributable to higher activity levels in flow equipment and valves, and higher equity earnings from our joint venture in Global Tubing, LLC.

Corporate — Selling, general and administrative expenses for Corporate increased by $2.8 million, or 38.0%, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013, due to higher personnel costs and higher professional fees. Corporate costs include, among other items, payroll related costs for general management and management of finance and administration, legal, human resources and information technology; professional fees for legal, accounting and related services; and marketing costs.

Other items not included in segment operating income

Other income and expense

Other income and expense includes interest expense and foreign exchange gains and losses. We incurred $7.7 million of interest expense during the three months ended September 30, 2014, an increase of $3.3 million from the three months ended September 30, 2013. The increase in interest expense was attributable to the higher interest rate on our Senior Notes issued in the fourth quarter 2013 compared to the variable interest rate under our Credit Facility. The change in foreign exchange gains or losses is primarily the result of movements in the British pound relative to the U.S. dollar.

Taxes

Tax expense includes current income taxes expected to be due based on taxable income to be reported during the periods in the various jurisdictions in which we conduct business, and deferred income taxes based on changes in the tax effect of temporary differences between the bases 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 by income before income taxes, was 29.0% for the three months ended September 30, 2014 and 29.6% for the three months ended September 30, 2013. The tax provision for the three months ended September 30, 2014 is lower than the comparable period in 2013 primarily due to benefits received from certain domestic tax incentives and a higher proportion of our earnings being generated outside the United States in jurisdictions subject to lower tax rates.

Nine months ended September 30, 2014 compared with nine months ended September 30, 2013



	Nine months ended September 30,						Favorable / (Unfavorable)
	2014			2013			$			%
(in thousands of dollars, except per share information)
Revenue:
Drilling & Subsea	$	848,474		$	679,482		$	168,992		24.9	%
Production & Infrastructure	453,640			452,845			795			0.2	%
Eliminations	(1,075		)	(1,249		)	174			(13.9	)%
Total revenue	$	1,301,039		$	1,131,078		$	169,961		15.0	%
Operating income:
Drilling & Subsea	$	155,330		$	110,630		$	44,700		40.4	%
Operating income margin %	18.3		%	16.3		%
Production & Infrastructure	80,260			65,600			14,660			22.3	%
Operating income margin %	17.7		%	14.5		%
Corporate	(29,711		)	(21,521		)	(8,190		)	(38.1	)%
Total segment operating income	$	205,879		$	154,709		$	51,170		33.1	%
Operating income margin %	15.8		%	13.7		%
Transaction expenses	2,326			2,191			(135		)	(6.2	)%
Loss (gain) on sale of assets and other	320			229			(91		)	*
Income from operations	203,233			152,289			50,944			33.5	%
Interest expense, net	23,174			10,847			(12,327		)	(113.6	)%
Foreign exchange (gains) losses and other, net	(616		)	1,863			2,479			*
Deferred loan costs written off	—			2,149			2,149			100.0	%
Other (income) expense, net	22,558			14,859			(7,699		)	*
Income before income taxes	180,675			137,430			43,245			31.5	%
Income tax expense	52,395			42,371			(10,024		)	(23.7	)%
Net income	128,280			95,059			33,221			34.9	%
Less: Income attributable to non-controlling interest	2			59			(57		)	*
Income attributable to common stockholders	$	128,278		$	95,000		$	33,278		35.0	%

Weighted average shares outstanding
Basic	92,728			90,347
Diluted	95,631			94,527
Earnings per share
Basic	$	1.38		$	1.05
Diluted	$	1.34		$	1.01
* not meaningful

Revenue

Our revenue for the nine months ended September 30, 2014 increased $170.0 million, or 15.0%, to $1,301.0 million compared to the nine months ended September 30, 2013. For the nine months ended September 30, 2014, our Drilling & Subsea segment and our Production & Infrastructure segment comprised 65.2% and 34.8% of our total revenue, respectively, which compared to 60.1% and 39.9% of total revenue, respectively, for the nine months ended September 30, 2013. The changes in revenue by operating segment consisted of the following:

Drilling & Subsea segment — Revenue increased $169.0 million, or 24.9%, to $848.5 million during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily attributable to increased market activity as reflected in the average rig counts. We have had particularly strong increases in sales of our pipe handling tools, other drilling and consumable products, downhole products and workclass remotely operated vehicles. A portion of the increase is attributable to acquisitions closed in the third quarter 2013 and in the second quarter 2014.

Production & Infrastructure segment — Revenue increased $0.8 million, or 0.2%, to $453.6 million during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to lower shipments of surface production equipment products and slower project activity in the first half of 2014 for valve products offset by a good recovery in the market for our flow equipment products.

Segment operating income and segment operating margin percentage

Segment operating income for the nine months ended September 30, 2014, increased $51.2 million, or 33.1%, to $205.9 million compared to the nine months ended September 30, 2013. The segment operating margin percentage is calculated by dividing segment operating income by revenue for the period. For the nine months ended September 30, 2014, the segment operating margin percentage of 15.8% represents an increase of 210 basis points from the 13.7% operating margin percentage for nine months ended September 30, 2013. The change in operating margin percentage for each segment is explained as follows:

Drilling & Subsea segment — The operating margin percentage increased 200 basis points to 18.3% for the nine months ended September 30, 2014, from 16.3% for the nine months ended September 30, 2013. Excluding severance and facility closure costs of $6.1 million incurred in the third quarter 2013 to bring our cost structure in line with activity levels at that time, the operating margin percentage is up 110 basis points for the nine months ended September 30, 2014. This increase is primarily attributable to higher volumes in certain higher margin drilling and downhole products, and overall lower selling, general and administrative costs as a percentage of revenue.

Production & Infrastructure segment — Operating margin percentage improved 320 basis points to 17.7% for the nine months ended September 30, 2014, from 14.5% for the nine months ended September 30, 2013. The improvement in operating margin percentage was attributable to improved margins in flow equipment on higher activity levels and equity earnings from the investment in Global Tubing, LLC joint venture acquired mid-year in 2013.

Corporate — Selling, general and administrative expenses for Corporate increased by $8.2 million, or 38.1%, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013, due to higher personnel costs and higher professional fees. Corporate costs include, among other items, payroll related costs for general management and management of finance and administration, legal, human resources, information technology, professional fees for legal, accounting and related services, and marketing costs.

Other items not included in segment operating income

Several items are not included in segment operating income, but are included in total operating income. These items include transaction expenses, and gains and losses from the sale of assets. Transaction expenses relate to legal and other advisory costs incurred in acquiring businesses, including legal entity restructuring, and are not considered to be part of segment operating income. These costs were $2.3 million for the nine months ended September 30, 2014 and, including $0.8 million reported as part of equity in earnings from Global Tubing LLC, these costs were $3.0 million for the nine months ended September 30, 2013, primarily attributable to three acquisitions closed effective July 2, 2013. In the nine months ended September 30, 2014, we recognized a loss of $0.3 million on sales of assets, primarily from a loss of $0.8 million on the sale of our subsea pipe joint protective coatings business.

Other income and expense

Other income and expense includes interest expense, and foreign exchange gains and losses. We incurred $23.2 million of interest expense during the nine months ended September 30, 2014, an increase of $12.3 million from the nine months ended September 30, 2013. The increase in interest expense was attributable to the higher interest rate on our Senior Notes issued in the fourth quarter 2013 compared to the variable interest rate under our Credit Facility. The change in foreign exchange gains or losses is primarily the result of movements in the British pound relative to the U.S. dollar.

Taxes

Tax expense includes current income taxes expected to be due based on taxable income to be reported during the periods in the various jurisdictions in which we conduct business, and deferred income taxes based on changes in the tax effect of temporary differences between the bases 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 by income before income taxes, was 29.0% for the nine months ended September 30, 2014 and 30.8% for the nine months ended September 30, 2013. The tax provision is lower than the comparable period in 2013 primarily due to benefits received from certain domestic tax incentives and a higher proportion of our earnings being generated outside the United States in jurisdictions subject to lower tax rates. The effective tax rate can vary from period to period depending on our relative mix of U.S. and non-U.S. earnings.

Liquidity and capital resources

Sources and uses of liquidity

At September 30, 2014, we had cash and cash equivalents of $74.1 million and total debt of $421.3 million. We believe that cash on hand, cash generated from operations and amounts available under the Credit Facility will be sufficient to fund operations, working capital needs, capital expenditure requirements and financing obligations for the foreseeable future.

Capital expenditures for 2014 are expected to be approximately $55.0 million, which consists of, among other items, investments in constructing or expanding certain manufacturing facilities, purchases of machinery and equipment, expansion of our subsea rental fleet equipment, and general maintenance capital expenditures of approximately $25.0 million. This budget does not include possible expenditures for future business acquisitions.

Although we do not budget for acquisitions, pursuing growth through acquisitions is a significant part of our business strategy. We expanded and diversified our product portfolio with the acquisition of one business in the second quarter 2014 for total consideration of $38.3 million, and two businesses and an investment in a joint venture in 2013 for total consideration (net of cash acquired) of $230.0 million. We used cash on hand and borrowings under the Credit Facility to finance these acquisitions. We continue to actively review acquisition opportunities on an ongoing basis. Our ability to make significant additional acquisitions for cash may require us to obtain additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all.

In October 2014, our Board of Directors approved a share repurchase program for the repurchase of outstanding shares of our common stock with an aggregate purchase price of up to $150 million. Shares may be repurchased under the program from time to time, in amounts and at prices that we deem appropriate, subject to market and business conditions, applicable legal requirements and other considerations.

Our cash flows for the nine months ended September 30, 2014 and 2013 are presented below (in millions):



	Nine Months Ended September 30,
	2014			2013
Net cash provided by operating activities	$	179.8		$	164.1
Net cash used in investing activities	(69.5		)	(273.7		)
Net cash provided by (used in) financing activities	(75.5		)	99.3
Net increase (decrease) in cash and cash equivalents	$	34.5		$	(12.9	)

Cash flows provided by operating activities

Net cash provided by operating activities was $179.8 million and $164.1 million for the nine months ended September 30, 2014 and 2013, respectively. Cash provided by operations increased primarily as a result of higher earnings offset by incremental investments in working capital as a result of higher activity levels as compared to the prior year.

Cash flows used in investing activities

Net cash used in investing activities was $69.5 million and $273.7 million for the nine months ended September 30, 2014 and 2013, respectively. The decrease was primarily due to lower consideration paid for an acquisition in 2014 compared to the consideration paid for acquisitions and an investment in a joint venture closed in 2013. Capital expenditures for the nine months ended September 30, 2014 were $41.4 million as compared to $44.7 million for the comparable prior period.

Cash flows provided by (used in) financing activities

Net cash used in financing activities was $75.5 million for the nine months ended September 30, 2014, compared to cash provided by financing activities of $99.3 million for the nine months ended September 30, 2013. The cash used in financing activities for the nine months ended September 30, 2014 was primarily due to the pay down of long-term debt during the period. The cash provided by financing activities for the nine months ended September 30, 2013 consisted primarily of net borrowings of $110.2 million, related to acquisitions made during that period.

Senior Notes Due 2021

The Senior Notes bear interest at a rate of 6.250% per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021. The Senior Notes are senior unsecured obligations guaranteed on a senior unsecured basis by our subsidiaries that guarantee the Credit Facility and rank junior to, among other indebtedness, the Credit Facility to the extent of the value of the collateral securing the Credit Facility.

Credit Facility

We have a Credit Facility with Wells Fargo Bank, National Association, as administrative agent, and several financial institutions as lenders, which provides for a $600.0 million revolving credit line, with up to $75.0 million available for letters of credit and up to $25.0 million in swingline loans. Subject to terms of the Credit Facility, we have the ability to increase the revolving Credit Facility by an additional $300.0 million. Our revolving Credit Facility matures in November 2018. Weighted average interest rates under the Credit Facility at September 30, 2014 and December 31, 2013 were 1.91% and 2.17%, respectively.

Future borrowings under the Credit Facility will be available for working capital and other general corporate purposes, including permitted acquisitions. It is anticipated that the Credit Facility will be available to be drawn on and repaid during the term thereof as long as we are in compliance with the terms of the credit agreement, including certain financial covenants. As of September 30, 2014, we had $17.0 million of borrowings outstanding under our Credit Facility and $11.0 million of outstanding letters of credit and the capacity to borrow an additional $572.0 million under our Credit Facility.

There have been no changes to the Credit Facility financial covenants disclosed in Item 7 of our 2013 Annual Report on Form 10-K and we were in compliance with all financial covenants at September 30, 2014 and December 31, 2013.

Off-balance sheet arrangements

As of September 30, 2014, we had no off-balance sheet instruments or financial arrangements, other than operating leases entered into in the ordinary course of business.

Contractual obligations

Except for net repayments under the Credit Facility, as of September 30, 2014, there have been no material changes in our contractual obligations and commitments disclosed in the Annual Report.

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2014. For a detailed discussion of our critical accounting policies and estimates, refer to our 2013 Annual Report on Form 10-K.

Recent accounting pronouncements

In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statements - Going Concern. The new standard requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern for both annual and interim reporting periods. The guidance is effective for us for the fiscal year beginning January 1, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new standard is effective for reporting periods beginning after December 15, 2016 and early adoption is not permitted. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. We are currently evaluating the impacts of adoption and the implementation approach to be used.

In April 2014, the FASB issued ASU 2014-08 — Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance is effective for us for the fiscal year beginning January 1, 2015, and is not expected to have a material impact on our consolidated financial statements.

Item 3. Quantitative and qualitative disclosures about market risk

We are currently exposed to market risk from changes in foreign currency and changes in interest rates. From time to time, we may enter into derivative financial instrument transactions to manage or reduce our market risk, but we do not enter into derivative transactions for speculative purposes.

There have been no significant changes to our market risk since December 31, 2013. For a discussion of our exposure to market risk, refer to Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in our 2013 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of September 30, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2014 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Table of Contents

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 11, Commitments and Contingencies, in Part I, Item 1, Financial Statements, for a discussion of our legal proceedings, which is incorporated into this Item 1 of Part II by reference.

Item 1A. Risk Factors

For additional information about our risk factors, see "Risk Factors" in Item 1A of our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Shares of common stock purchased and placed in treasury during the three months ended September 30, 2014 were as follows:



Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plan or programs	Maximum number of shares that may yet be purchased under the plan or program (b)
July 1, 2014 - July 31, 2014	11,967	$	36.27	—	—
August 1, 2014 - August 31, 2014	—	$	—	—	—
September 1, 2014 - September 30, 2014	406	$	32.25	—	—
Total	12,373	$	36.14	—

(a) All of the 12,373 shares purchased during the three months ended September 30, 2014 were acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from the vesting of restricted stock grants. None of these shares were part of a publicly announced program to purchase common shares.

(b) In October 2014, our Board of Directors approved a share repurchase program for the repurchase of outstanding shares of our common stock with an aggregate purchase price of up to $150 million. Shares may be repurchased under the program from time to time, in amounts and at prices that we deem appropriate, subject to market and business conditions, applicable legal requirements and other considerations.

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Item 6. Exhibits



Exhibit
Number		DESCRIPTION

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.

* Filed herewith.

** Furnished herewith.

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SIGNATURES

As required by Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has authorized this report to be signed on its behalf by the undersigned authorized individuals.




		FORUM ENERGY TECHNOLOGIES, INC.
Date:	October 31, 2014	By:	/s/ James W. Harris
			James W. Harris
			Senior Vice President and Chief Financial Officer
			(As Duly Authorized Officer and Principal Financial Officer)

		By:	/s/ Tylar K. Schmitt
			Tylar K. Schmitt
			Vice President and Corporate Controller
			(As Duly Authorized Officer and Principal Accounting Officer)

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)