FORUM ENERGY TECHNOLOGIES, INC.FET
FORUM ENERGY TECHNOLOGIES, INC. Income Taxes Disclosure
Income Taxes
The components of income (loss) before income taxes were as follows (in thousands):
| Year ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| U.S. | $ | (43,169) | $ | (170,901) | ||||||||||
| Non-U.S. | 59,756 | 42,475 | ||||||||||||
| Income (loss) before income taxes | $ | 16,587 | $ | (128,426) | ||||||||||
The components of income tax expense (benefit) were as follows (in thousands):
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Current | ||||||||
| U.S. federal | $ | — | ||||||
| U.S. state and local | 435 | |||||||
| Non-U.S. | 20,477 | |||||||
| Total current | 20,912 | |||||||
| Deferred | ||||||||
| U.S. federal | — | |||||||
| U.S. state and local | — | |||||||
| Non-U.S. | 5,335 | |||||||
| Total deferred | 5,335 | |||||||
| Income tax expense | $ | 26,247 | ||||||
As previously disclosed prior to the adoption of ASU 2023-09, the components of income tax expense (benefit) were as follows (in thousands):
| Year ended December 31, | ||||||||
| 2024 | ||||||||
| Current | ||||||||
| U.S. | $ | 1,545 | ||||||
| Non-U.S. | 22,929 | |||||||
| Total current | 24,474 | |||||||
| Deferred | ||||||||
| U.S. | (752) | |||||||
| Non-U.S. | (16,822) | |||||||
| Total deferred | (17,574) | |||||||
| Income tax expense | $ | 6,900 | ||||||
The reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to income (loss) before income taxes are outlined below based on the updated requirements of ASU 2023-09 for 2025 (in thousands, except percentages):
| Year ended December 31, | |||||||||||
| 2025 | |||||||||||
| Provision for income taxes at U.S. federal statutory rate | $ | 3,483 | 21.0 | % | |||||||
| State and local income taxes, net of federal income tax effect | 449 | 2.7 | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| U.S. tax on foreign earnings | 6,630 | 40.0 | % | ||||||||
| Changes in U.S. valuation allowances | 1,467 | 8.8 | % | ||||||||
| U.S. nontaxable or nondeductible items | |||||||||||
| Executive compensation and share-based payments | 1,073 | 6.5 | % | ||||||||
| Other U.S. adjustments | |||||||||||
| Return to provision | (219) | (1.3) | % | ||||||||
| Other | 103 | 0.6 | % | ||||||||
| Foreign tax effects | |||||||||||
| Canada | |||||||||||
| Capital gain exclusion | (1,410) | (8.5) | % | ||||||||
| Provincial tax | 2,418 | 14.6 | % | ||||||||
| Foreign tax rate differential | (1,690) | (10.2) | % | ||||||||
| Interest and other | 437 | 2.6 | % | ||||||||
| Valuation allowance | (1,754) | (10.6) | % | ||||||||
| Germany | |||||||||||
| Tax settlement and other | 3,242 | 19.5 | % | ||||||||
| Change in federal tax rate | 637 | 3.8 | % | ||||||||
| Municipal tax | 418 | 2.5 | % | ||||||||
| Foreign tax rate differential | 401 | 2.4 | % | ||||||||
| Return to provision and other | 1,114 | 6.7 | % | ||||||||
| United Kingdom | |||||||||||
| Foreign exchange gain (loss) | 627 | 3.8 | % | ||||||||
| Foreign tax rate differential | 522 | 3.1 | % | ||||||||
| Interest and other | 1,471 | 8.9 | % | ||||||||
| Foreign tax credit adjustment | 647 | 3.9 | % | ||||||||
| Return to provision | 495 | 3.0 | % | ||||||||
| Tax credits | (264) | (1.6) | % | ||||||||
| Valuation allowance | 4,363 | 26.3 | % | ||||||||
| Ireland | |||||||||||
| Interest and other | 473 | 2.9 | % | ||||||||
| Barbados | |||||||||||
| Return to provision | 395 | 2.4 | % | ||||||||
| Other foreign jurisdictions | 519 | 3.1 | % | ||||||||
| Changes in global unrecognized tax benefits | 200 | 1.2 | % | ||||||||
| Effective tax rate | $ | 26,247 | 158.2 | % | |||||||
As previously disclosed prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands, except percentages):
| Year ended December 31, | |||||||||||
| 2024 | |||||||||||
| Income tax benefit at the statutory rate | $ | (26,970) | (21.0) | % | |||||||
| State taxes, net of federal tax benefit | (115) | (0.1) | % | ||||||||
| Non-U.S. operations | 3,143 | 2.4 | % | ||||||||
| Domestic incentives | (402) | (0.3) | % | ||||||||
| Prior year federal, non-U.S. and state tax | 3,488 | 2.7 | % | ||||||||
| Nondeductible expenses | 2,124 | 1.7 | % | ||||||||
| Valuation allowance | 25,137 | 19.6 | % | ||||||||
| Other | 495 | 0.4 | % | ||||||||
| Income tax expense | $ | 6,900 | 5.4 | % | |||||||
The Organization for Economic Co-operation and Development introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. As of January 1, 2024, numerous countries, including European Union member states, have enacted a global minimum tax and more countries are expected to enact similar minimum tax regimes in 2026. Based on current enacted legislation, we do not expect a material impact on our future effective tax rate.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary components of deferred taxes include (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets | ||||||||||||||
| Reserves and accruals | $ | 3,256 | $ | 5,579 | ||||||||||
| Operating lease liabilities | 23,121 | 20,086 | ||||||||||||
| Inventories | 5,588 | 8,894 | ||||||||||||
| Stock awards | 1,511 | 935 | ||||||||||||
| Net operating loss and other tax carryforwards | 216,428 | 186,118 | ||||||||||||
| Goodwill and intangible assets | 19,786 | 19,513 | ||||||||||||
| Fair value discount on 2025 Notes | — | 12,188 | ||||||||||||
| Other | 7,704 | 10,114 | ||||||||||||
| Gross deferred tax assets | 277,394 | 263,427 | ||||||||||||
| Valuation allowance | (267,516) | (254,515) | ||||||||||||
| Total deferred tax assets | $ | 9,878 | $ | 8,912 | ||||||||||
| Deferred tax liabilities | ||||||||||||||
| Property and equipment | (2,335) | (3,771) | ||||||||||||
| Operating lease assets | (19,570) | (16,924) | ||||||||||||
| Prepaid expenses and other | (511) | (450) | ||||||||||||
| Total deferred tax liabilities | (22,416) | (21,145) | ||||||||||||
| Net deferred tax liabilities | $ | (12,538) | $ | (12,233) | ||||||||||
Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by the Company and the respective sellers at the time of acquisition.
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.
At December 31, 2025, we had $417.8 million of gross U.S. net operating loss carryforwards and $10.6 million of state net operating losses. Of these losses, $33.2 million will expire no later than 2038 if they are not utilized prior to that date. The remaining $384.6 million will not expire. We also had $41.2 million of gross non-U.S. net operating loss carryforwards with indefinite expiration dates. In addition to our net operating loss carryforwards, we also had gross U.S. interest limitation carryforwards of $249.3 million and gross non-U.S. interest limitation carryforwards of $210.3 million, all with indefinite expiration dates. The ultimate realization of income tax benefits for these net operating loss and interest limitation carryforwards depends on our ability to generate sufficient taxable income in the respective taxing jurisdictions. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic net operating losses may be limited in future periods depending upon future changes in ownership. Where we have unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income to offset such losses. We do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S, United Kingdom, Singapore and China.
During 2025, we recognized $4.3 million of tax expense related to the net increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable. We increased our valuation allowance related to our U.S. deferred tax assets by $1.5 million along with a $2.8 million net increase to certain non-U.S. deferred tax assets in the United Kingdom, Singapore and Canada.
Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiaries, referred to as outside basis differences, have not been provided for U.S. income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S. taxable income with regard to our investment in these foreign subsidiaries. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences is not practicable at this time.
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 to income tax examination by tax authorities in these jurisdictions prior to 2018.
We account for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):
| 2025 Activity | Amount | |||||||
| Balance at January 1, 2025 | $ | 12,754 | ||||||
| Additional based on tax positions related to prior years | 557 | |||||||
| Settlements | (632) | |||||||
| Balance at December 31, 2025 | $ | 12,679 | ||||||
The total amount of unrecognized tax benefits at December 31, 2025 was $12.7 million, of which it is reasonably possible that $0.2 million could be 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 statute of limitations. We estimate that $6.3 million of the unrecognized tax benefits at December 31, 2025, excluding consideration of valuation allowance, would impact our future effective income tax rate, if recognized.
We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive loss. As of December 31, 2025 and 2024, we had accrued approximately $0.8 million and $0.6 million in interest and penalties, respectively. During the years ended December 31, 2025 and 2024, we recognized no material change in the interest and penalties related to uncertain tax positions.
The following is a supplemental schedule of income taxes paid (in thousands):
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| U.S. federal | $ | 1,882 | ||||||
| U.S. state and local | 650 | |||||||
| Non-U.S. | 23,458 | |||||||
| Income taxes paid, net of refunds | $ | 25,990 | ||||||
Income taxes paid, net of refunds, exceeds 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Federal | ||||||||
| United States | $ | 1,882 | ||||||
| Non-U.S. | ||||||||
| Canada | 9,942 | |||||||
| United Kingdom | 3,878 | |||||||
| Barbados | 3,398 | |||||||
| Germany | 2,932 | |||||||
| Saudi Arabia | 1,862 | |||||||
| Ireland | 1,396 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 2, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.