1、Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549_FORM 10-K_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31,2018ORo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHAN
2、GE ACT OF 1934For the transition period from _ to _Commission File Number 001-35504FORUM ENERGY TECHNOLOGIES,INC.(Exact name of registrant as specified in its charter)Delaware 61-1488595(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)920 Memorial City
3、 Way,Suite 1000Houston,Texas 77024(Address of principal executive offices)Registrants telephone number,including area code:(281)949-2500Securities registered pursuant to Section 12(b)of the Act:Common stock,$0.01 par value New York Stock Exchange(Title of Each Class)(Name of Each Exchange on Which R
4、egistered)Securities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes o No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Se
5、ction 15(d)of the Act.Yes o No 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 12months(or for such shorter period that the registrant was required to file such reports),and(2
6、)has been subject to such filing requirements for the past 90 days.Yes No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months(or for such shorter period t
7、hat the registrant was required to submit such files).Yes No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrantsknowledge,in definitive proxy or information statements incorpora
8、ted by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer a smaller reporting company or an emerging growth company.See the definitions of“large accelerated
9、 filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act:Large accelerated filer Accelerated filer o Non-accelerated filer oSmaller reporting company o Emerging growth company o If an emerging growth company,indicate by check mark if the re
10、gistrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes
11、 o No The aggregate market value of Common Stock held by non-affiliates on June 29,2018,determined using the per share closing price on the New York Stock Exchange Compositetape of$12.35 on June 29,2018,was approximately$1.0 billion.For this purpose,our executive officers and directors and SCF Partn
12、ers L.P.and its affiliates are consideredaffiliates.As of February 22,2019,there were 109,896,858 common shares outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of our Proxy Statement for the 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.1Table
13、 of ContentsForum Energy Technologies,Inc.Index to Form 10-KPART IItem 1.Business3Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments28Item 2.Properties29Item 3.Legal Proceedings30Item 4.Mine Safety Disclosures30PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and I
14、ssuer Purchases of Equity Securities32Item 6.Selected Financial Data34Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations35Item 7A.Quantitative and Qualitative Disclosures About Market Risk56Item 8.Financial Statements and Supplementary Data57Item 9.Changes in
15、 and Disagreements with Accountants on Accounting and Financial Disclosure102Item 9A.Controls and Procedures102Item 9B.Other Information103PART IIIItem 10.Directors,Executive Officers and Corporate Governance103Item 11.Executive Compensation104Item 12.Security Ownership of Certain Beneficial Owners
16、and Management and Related Stockholder Matters104Item 13.Certain Relationships and Related Transactions,and Director Independence104Item 14.Principal Accounting Fees and Services104PART IVItem 15.Exhibits,Financial Statement Schedules104Item 16.Form 10-K Summary108SIGNATURES1092Table of ContentsPART
17、 IItem 1.BusinessForum Energy Technologies,Inc.,a Delaware corporation(“Forum,”the“Company,”“we”or“us”),is a global oilfield products company,serving thedrilling,subsea,completions,production and infrastructure sectors of the oil and natural gas industry.Our common shares are listed on the NewYork S
18、tock Exchange(“NYSE”)under the symbol“FET.”Our principal executive offices are located at 920 Memorial City Way,Suite 1000,Houston,Texas 77024,our telephone number is(281)949-2500,and our website is www.f-e-.Our Annual Reports on Form 10-K,quarterlyreports on Form 10-Q and current reports on Form 8-
19、K,and all amendments thereto,are available free of charge on our website as soon asreasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission(“SEC”).Thesereports are also available on the SECs website at www.sec.gov.Information cont
20、ained on or accessible from our website is not incorporated byreference into this Annual Report on Form 10-K and should not be considered part of this report or any other filing that we make with the SEC.OverviewWe are a global oilfield products company,serving the drilling,subsea,completions,produc
21、tion and infrastructure sectors of the oil and natural gasindustry.We design,manufacture and distribute products and engage in aftermarket services,parts supply and related services that complementour product offering.Our product offering includes a mix of frequently replaced consumable products and
22、 highly engineered capital products thatare used in the exploration,development,production and transportation of oil and natural gas.Our consumable products are used in drilling,wellconstruction and completions activities,within the supporting infrastructure,and at processing centers and refineries.
23、Our engineered capitalproducts are directed at:drilling rig equipment for new rigs,upgrades and refurbishment projects;subsea construction and development projects;the placement of production equipment on new producing wells;pressure pumping equipment;and downstream capital projects.In 2018,approxim
24、ately 80%of our revenue was derived from consumable products and activity-based equipment,while the balance was primarily derivedfrom capital products with a small amount from rental and other services.We seek to design,manufacture and supply reliable high quality products that create value for our
25、diverse customer base,which includes,amongothers,oil and natural gas operators,land and offshore drilling contractors,oilfield service companies,subsea construction and servicecompanies,and pipeline and refinery operators.We operate three business segments that cover all stages of the well cycle,Dri
26、lling&Subsea,Completions,and Production&Infrastructure.Weincorporate by reference the segment and geographic information for the last three years set forth in Note 16 Business Segments and theinformation with respect to acquisitions set forth in Note 4 Acquisitions&Dispositions.Drilling&Subsea segme
27、ntIn our Drilling&Subsea segment,we design,manufacture and supply products and provide related services to the drilling and subsea markets.Through this segment,we offer drilling technologies,including capital equipment and a broad line of products consumed in the drilling process;andsubsea technolog
28、ies,including robotic vehicles and other capital equipment,specialty components and tooling,a broad suite of complementarysubsea technical services,and products used in pipeline infrastructure.There are several factors that drive demand for our Drilling&Subsea segment.Our Drilling Technologies produ
29、ct line is influenced by global drillingactivity;the level of capital investment in drilling rigs;rig upgrades and equipment replacement as drilling contractors modify their existing rigs toincrease capability or improve efficiency and safety;and the number of rigs in use and the severity of the con
30、ditions under which they operate.Demand for our subsea products is impacted by global offshore activity,defense spending,subsea equipment and pipeline installation,repair andmaintenance spending,and growth in offshore resource development.Drilling Technologies.We provide both drilling capital equipm
31、ent and consumables,with a focus on products that enhance our customers handlingof tubulars and drilling fluids on the drilling rig.Our product offering includes powered and manual tubular handling equipment;customized offlinecrane systems;drilling data acquisition management systems;pumps,pump part
32、s,valves,and manifolds;drilling fluid end components;a broadline of items consumed in the drilling process;and digital monitoring products.Drilling capital equipment.We design and manufacture a range of powered and manual tubular handling tools used on onshore and offshore drillingrigs.Our Forum B+V
33、 Oil Tools and Wrangler branded tools reduce direct human involvement in the handling of pipe during drilling operations,improving safety,speed and efficiency of operations.3Table of ContentsOur tubular handling tools include elevators,clamps,slip handles,tong handles,powered slips,spiders and kelly
34、 spinners.Our hydraulic catwalksmechanize the lifting and lowering of tubulars to and from the drill floor,eliminating or reducing the need for traditional drill pipe and casing“pick-upand lay-down”operations with associated personnel.In addition,our make-up and break-out tools,called FloorhandTM an
35、d Wrangler Roughneck,automate a potentially dangerous rig floor task and improve rig drilling speed and safety.In addition,we design and manufacture a range of rig-based offline activity cranes and multi-purpose cranes.In addition to powered tubular handling equipment,we design and manufacture drill
36、ing manifold systems and high pressure piping packages.Finally,we repair and service drilling equipment for both land and offshore rigs.Many of our service employees work in the field to addressproblems at the rig site.Consumable products.We manufacture a range of consumable products used on drillin
37、g rigs,well servicing rigs,and hydraulic fracturing systems.Our consumable products include valves,centrifugal pumps,mud pump fluid end components,mud pump modules,rig sensors,inserts,and dies.We are also a supplier of oilfield bearings to original equipment manufacturers and repair businesses for u
38、se in drilling and well stimulationequipment.Subsea Technologies.We design and manufacture capital equipment and specialty components used in the subsea sector and provide a broadsuite of complementary subsea technical services.We have a core focus on the design and manufacture of remotely operated
39、vehicle(“ROV”)systems,other specialty subsea vehicles,and rescue submarines,as well as critical components of these vehicles.Many of our related technicalservices complement our vehicle offerings.Subsea vehicles.We are a leading designer and manufacturer of a wide range of ROVs that we supply to the
40、 offshore subsea construction,observation and related service markets.The market for subsea ROVs can be segmented into three broad classes of vehicles based on size andcategory of operations:(1)large work-class vehicles and trenchers for subsea construction and installation activities,(2)drilling-cl
41、ass vehiclesdeployed from and for use around an offshore rig and(3)observation-class vehicles for inspection and light manipulation.We are a leading providerof work-class and observation class vehicles.We design and manufacture large work-class ROVs through our Perry brand.These vehicles are princip
42、ally used in deepwater constructionapplications with the largest vehicles providing up to 200 horsepower,exceeding 1,200 pounds of payload capacity and having the capability towork in depths up to 4,000 meters.In addition to work-class ROVs,we design and manufacture large subsea trenchers that trave
43、l along the seafloor for digging,installation and burial operations.The largest of these subsea trenchers provides up to 1,500 horsepower and is able to cut overthree meters deep into the seafloor to lay pipelines,power cables or communications cables.Our Forum Sub-Atlantic branded observation-class
44、 vehicles are electrically powered and are principally used for inspection,survey and lightmanipulation,and serve a wide range of industries.Our subsea vehicle customers are primarily large offshore construction companies,including non-oil and natural gas entities,such as a range ofgovernmental orga
45、nizations including navies,maritime science and geoscience research organizations,offshore wind power companies,and otherindustries operating in marine environments.Subsea products and technical services.In addition to subsea vehicles,we are a leading manufacturer of subsea products and components.W
46、edesign and manufacture a group of products that are used in and around the ROV.For example,we manufacture Dynacon branded ROV launchand recovery systems,Syntech branded syntactic foam buoyancy components,Sub-Atlantic branded ROV thrusters,and a wide range ofhydraulic power units and valve packs.We
47、design and manufacture these ROV components for incorporation into our own vehicles as well as forsale to other ROV manufacturers.We also provide a broad suite of subsea tooling,both industry standard and custom designed.In addition tovehicle-related subsea products,we provide a broad suite of subse
48、a technical services.Subsea rental.On January 3,2018,we contributed our Forum Subsea Rentals(“FSR”)business into Ashtead Technology,in exchange for a 40%interest in the combined business.The transaction created a market leading independent provider of subsea survey and ROV equipment rentalservices.O
49、ur interest in the combined business is presented in our consolidated financial statements as an equity method investment in theDrilling and Subsea segment,for post-closing periods.Completions segmentIn our Completions segment,we design,manufacture and supply products and provide related services to
50、 the well construction,completion,stimulation and intervention markets.Through this segment,we offer downhole technologies,4Table of Contentsincluding cementing and casing tools,completion products,and a range of downhole cable protection solutions;and we also offer stimulation andintervention techn
51、ologies,including pumps and well stimulation consumable products,premium industrial heat exchanger and cooling systems,and related recertification and refurbishment services.There are several factors driving demand for our Completions segment.Our Downhole Technologies product line is impacted by the
52、 level of wellcompletion activity and complexity of well construction and completion.Our Stimulation&Intervention and Coiled Tubing product lines areimpacted by the use of hydraulic fracturing to develop oil and natural gas reserves in shale or tight sand basins across North America and the levelof
53、workover and intervention activity.Downhole Technologies.We manufacture a broad line of downhole products that are consumed during the well construction,completion andproduction phases of a wells lifecycle.Downhole protection systems.We offer a full range of downhole protection solutions and artific
54、ial lift accessories products through our variousbrands such as Cannon Services and Multilift.The Cannon Services clamp,Forum cast clamp and protection products are used to shielddownhole control lines,cables and gauges during installation and to provide protection during production enhancement oper
55、ations.We design andmanufacture a full range of downhole protection solutions for electrical submersible pump(“ESP”)cabling,encapsulated control lines,sub-surfacesafety valves and permanent downhole gauges.We provide both standard and customized protection systems,and we utilize a range of materials
56、in our products for various downhole environments.SandGuard and Cyclone completion tools extend the useful life of an ESP by protecting itagainst sand and other solids after shutdown.Casing and cementing tools.Through our Davis-Lynch branded downhole well construction operations,we design and manufa
57、cture productsused in the construction of oil and natural gas wells.We design and manufacture a full range of centralizers,float equipment,stage cementingtools,inflatable packers,flotation collars,cementing plugs,mudline suspension and surge reduction equipment.Our products are used globally inthe c
58、onstruction of onshore and offshore wells.Completion products.We manufacture a line of downhole composite plugs,which are primarily used for zonal isolation during multi-stage hydraulicfracturing in horizontal and vertical wells.Our primary customers in this product line are oil and natural gas prod
59、ucers,and service companies providing completions,artificial lift and otherintervention services to producers.Stimulation and Intervention.We provide a broad range of high pressure pumps and flow equipment used by well stimulation,or pressure pumping,companies during stimulation,intervention(princip
60、ally plug and perforation activity)and flowback processes.We design and manufacture powerend and fluid end assemblies,industrial heat exchanger and cooling systems,manifolds and manifold trailers,and treating iron.Frequentrefurbishment and recertification of flow equipment is critical to ensuring th
61、e reliable and safe operation of a pressure pumping companys fleet.We perform these services at various locations as well as operating a fleet of mobile refurbishment and recertification tractor trailers,which can bedeployed to the customers yards.We serve many of the most active basins across North
62、 America and seek to position our stocking and servicelocations in proximity to our customers operations.We also manufacture pressure control products that are used for well intervention operations and sold to oilfield service companies and equipmentrental companies both domestically and internation
63、ally including blowout preventers for wireline units and our Hydraulic Latch Assembly.Inaddition,we manufacture state of the art electro-mechanical wireline cables as well as EnviroLite(greaseless)cables.We also conductaftermarket refurbishment and recertification services for pressure control equip
64、ment.Our primary customers in the Stimulation and Intervention product line are pressure pumping and flowback service companies,although we alsogenerate sales to original equipment manufacturers of pressure pumping units.Coiled Tubing.We manufacture Global Tubing branded coiled tubing strings and co
65、iled line pipe and provide related services.Coiled tubingstrings are consumable components of coiled tubing units that perform well completion and intervention activities.Our coiled line pipe offeringserves as an alternative to the conventional line pipe in onshore and subsea applications.We investe
66、d in Global Tubing,LLC(“Global Tubing”)with a joint venture partner(with Global Tubings management retaining a small interest)in2013.In the fourth quarter of 2017,we acquired the remaining membership interests in Global Tubing.Additional details about the acquisition areincluded in Note 4 Acquisitio
67、ns&Dispositions.Our primary customers in the Coiled Tubing product line are service companies that provide coiled tubing services globally.5Table of ContentsProduction&Infrastructure segmentIn our Production&Infrastructure segment,we design,manufacture and supply products and provide related equipme
68、nt and services to productionand infrastructure markets.Through this segment,we supply production equipment,including well site production and process equipment,and abroad range of industrial and process valves.The level of spending to bring new wells on production,including the related infrastructu
69、re,is the primary driver for our Production&Infrastructuresegment.Our Production Equipment product line also has exposure to the amount of spending on midstream and downstream projects,as it offersproducts that go from the well site to inside the refinery fence.Our Valve Solutions product line is im
70、pacted by the level of infrastructure additions,upgrades and maintenance activities across the oil and natural gas industry,including the upstream,midstream and downstream sectors.Inaddition,our valves are used in the power,process,petrochemical and mining industries.Production Equipment.Our Product
71、ion Equipment product line provides engineered process systems and field services for capital equipment usedat the wellsite and,for production processing,in the U.S.Once a well has been drilled,completed and brought on stream,we provide the welloperator or producer with the process equipment necessa
72、ry to make the oil or natural gas ready for transmission.We engineer,fabricate and installseparators,packaged production systems and American Society of Mechanical Engineers(“ASME”)and American Petroleum Institute(“API”)coded pressure vessels,skidded vessels with gas measurement,modular process plan
73、ts,header and manifold skids,process and flow controlequipment and separators to help clean and process oil or natural gas as it travels from the wellhead and along the transmission line to therefinery.Our customers are principally oil and natural gas operators or producers.We also design and provid
74、e process oil treatment equipment,including desalters and dehydrators,used in refineries worldwide.We have a team oftechnicians and field service engineers for repair and installation,and we supply a broad range of replacement parts for our equipment and othermanufacturers.This equipment removes san
75、d,water and suspended solids from hydrocarbons prior to their refining.Valve Solutions.We design,manufacture and provide a wide range of industrial valves that principally serve the upstream,midstream anddownstream markets of the oil and natural gas industry.To a lesser extent,our valves serve gener
76、al industrial,power and process industrycustomers as well as the mining industry.We provide ball,gate,globe,check and butterfly valves across a range of sizes and applications.We market our valves to our customers and end users through our recognized brands:PBV,DSI,Quadrant,Accuseal,Cooper AlloyTM,a
77、ndABZ.Much of our production is sold through distribution supply companies,with our marketing efforts targeting end users for pull through of ourvalve products.Our global sales force and representatives cover approximately 30 countries,with local sales and distribution in Canada.OurCanadian operatio
78、ns provide significant exposure to the heavy oil projects.Our manufacturing and supply chain systems enable us to design and produce high-quality engineered valves,as well as provide standardizedproducts,while maintaining competitive pricing and minimizing capital requirements.We also utilize our in
79、ternational manufacturing partners toproduce components and completed products for a number of our other valve brands.Depending on the product,we manufacture our valves to conform to the standards of one or more of the API,American National StandardsInstitute,American Bureau of Shipping,and Internat
80、ional Organization for Standardization and/or other relevant standards governing the designand manufacture of industrial valves.Through our Valve Solutions product line,we participate in the APIs standard-setting process.Business historyForum was incorporated in 2005 and formed through a series of a
81、cquisitions.In August 2010,Forum Oilfield Technologies,Inc.was renamedForum Energy Technologies,Inc.,when four other companies were merged into Forum.On April 17,2012,we completed our initial public offering.6Table of ContentsBacklogAs we provide a mix of consumable products,capital goods,repair par
82、ts,and rental services,a majority of our business does not require lengthylead times.The majority of the orders and commitments included in our backlog as of December 31,2018 were scheduled to be delivered withinsix months.Our backlog was approximately$276 million at December 31,2018 and approximate
83、ly$222 million at December 31,2017.Substantially all of the projects currently in our backlog are subject to change and/or termination at the option of the customer.In the case of achange or termination,the customer is generally required to pay us for work performed and other costs necessarily incur
84、red as a result of thechange or termination.It is difficult to predict how much of our current backlog will be delayed or terminated,or subject to changes,as well as ourability to collect termination or change fees.Our consumable and repair products are predominantly off-the-shelf items requiring sh
85、ort lead-times,generally less than six months,and ourrelated refurbishment or other services are also not contracted with significant lead time.The composition of our backlog is reflective of our mix ofcapital equipment,consumable products,aftermarket and other related items.Our bookings,which consi
86、st of written orders or commitments forour products or related services,during the years ended December 31,2018 and 2017 were approximately$1,116 million and$870 million,respectively.CustomersNo customer represented more than 10%of consolidated revenue in any of the last three years.SeasonalityA sub
87、stantial portion of our business is not significantly impacted by seasonality.We do,however,generally experience lower sales andprofitability in the fourth quarter due to a decrease in working days caused by calendar year-end holidays,and manufacturing and shipping delayscaused by weather.In additio
88、n,given the geographic proximity of a number of our facilities to the Gulf Coast,we are subject to businessinterruptions caused by hurricanes and tropical storms.A small portion of the revenue we generate from select Canadian operations often benefitsfrom higher first quarter activity levels,as oper
89、ators take advantage of the winter freeze to gain access to remote drilling and production areas.Revenue exposed to this type of seasonality,however,comprised less than 5%of our overall revenue in 2018.CompetitionThe markets in which we operate are highly competitive.We compete with a number of comp
90、anies,some of which have greater financial and otherresources than we do.The principal competitive factors in our markets are product quality and performance,price,breadth of product offering,availability of products and services,distribution capabilities,responsiveness to customer needs,reputation
91、for service and intellectual propertyrights.We believe our products and services in each segment are at least comparable in price,quality,performance and dependability with ourcompetitors offerings.We seek to differentiate ourselves from our competitors by providing a rapid response to the needs of
92、our customers,a highlevel of customer service,and innovative product development initiatives.Some of our competitors expend greater amounts of money on formalresearch and engineering efforts than we do.We believe,however,that our product development efforts are enhanced by the investment ofmanagemen
93、t time we make to improve our customer service and to work with our customers on their specific product needs and challenges.Although we have no single competitor across all of our product lines,the companies we compete with across the greatest number of our productlines include Cameron Internationa
94、l Corporation(a subsidiary of Schlumberger),Gardner Denver Holdings,Inc.,National Oilwell Varco,Inc.,TechnipFMC plc,Tenaris S.A.,Weatherford International,Ltd.,and Weir SPM,a subsidiary of The Weir Group.Patents,trademarks and other intellectual propertyWe currently hold multiple U.S.and internation
95、al patents and trademarks and have a number of pending patent and trademark applications.Although in the aggregate our patents,trademarks and licenses are important to us,we do not regard any single patent,trademark or license asmaterial to our business as a whole.Raw materialsWe acquire component p
96、arts,products and raw materials from suppliers,including foundries,forge shops,and original equipment manufacturers.The prices we pay for our raw materials may be affected by,among other things,energy,steel and other commodity prices,tariffs and duties onimported materials and foreign currency excha
97、nge rates.Certain of our component parts,products or raw materials,such as bearings,are onlyavailable from a limited number of suppliers.Please see“Risk factorsRisks related to our businessWe are subject to the risk of supplierconcentration.”7Table of ContentsWe may not be able to continue to purcha
98、se raw materials on a timely basis or at acceptable prices.We generally try to purchase raw materialsfrom multiple suppliers so that we are not dependent on any one supplier,but this is not always possible.Working capitalWe fund our business operations through a combination of available cash and cas
99、h equivalents,short-term investments,and cash flow generatedfrom operations.In addition,our senior secured revolving credit facility(the“Credit Facility”)is available for working capital needs.For a summaryof our Credit Facility,please read“Managements Discussion and Analysis of Financial Condition
100、and Results of OperationsLiquidity and CapitalResources.”InventoryAn important consideration for many of our customers in selecting a vendor is timely availability of the product.Customers may pay a premium forearlier or immediate availability because of the cost of delays in critical operations.We
101、stock our consumable products in regional warehousesaround the world so that these products are available for our customers when needed.This availability is especially critical for certain consumableproducts,causing us to carry substantial inventories for these products.For critical capital items in
102、 which demand is expected to be strong,weoften build certain items before we have a firm order.Our having such goods available on short notice can be of great value to our customers.Wealso stock raw materials and components in order to be in a position to build products in response to market demand.
103、We typically offer our customers payment terms of 30 days,although during downturns in activity such as our industry experienced in the fourthquarter of 2018,customers often take 60 days or more to settle accounts.For sales into certain countries or for select customers,we mightrequire payment upfro
104、nt or credit support through a letter of credit.For longer term projects,we typically require progress payments as importantmilestones are reached.On average,we collect our receivables in about 60 days from shipment resulting in a substantial investment in accountsreceivable.Likewise,standard terms
105、with our vendors are 60 days.For critical items sourced from significant vendors,we have settled accountsmore quickly,sometimes in exchange for early payment discounts.Environmental,transportation,health and safety regulationOur operations are subject to numerous stringent and complex laws and regul
106、ations governing the discharge of materials into the environment,health and safety aspects of our operations,or otherwise relating to human health and environmental protection.We also operate vehicles that aresubject to federal and state transportation regulations.Failure to comply with these laws o
107、r regulations or to obtain or comply with permits mayresult in the assessment of administrative,civil and criminal penalties,imposition of remedial or corrective action requirements,and the impositionof injunctions to prohibit certain activities or force future compliance.The trend in environmental
108、regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact theenvironment,and thus,any changes in environmental laws and regulations or in enforcement policies that result in more stringent and costly wastehandling,storage,transport,disposal,or re
109、mediation requirements could have a material adverse effect on our operations and financial position.Moreover,accidental releases or spills of regulated substances may occur in the course of our operations,and if so,we may incur significantcosts and liabilities as a result of such releases or spills
110、,including any third party claims for damage to property,natural resources or persons.The following is a summary of the more significant existing environmental,health and safety laws and regulations to which our business operationsare subject and for which compliance may have a material adverse impa
111、ct on our capital expenditures,results of operations or financial position.Hazardous substances and wasteThe Resource Conservation and Recovery Act(the“RCRA”)and comparable state statutes,regulate the generation,transportation,treatment,storage,disposal and cleanup of hazardous and non-hazardous was
112、tes.Under the auspices of the Environmental Protection Agency(the“EPA”),the individual states administer some or all of the provisions of the RCRA,sometimes in conjunction with their own,more stringent requirements.We are required to manage the transportation,storage and disposal of hazardous and no
113、n-hazardous wastes in compliance with the RCRA.8Table of ContentsThe Comprehensive Environmental Response,Compensation,and Liability Act(the“CERCLA”),also known as the Superfund law,imposes jointand several liability,without regard to fault or legality of conduct,on classes of persons who are consid
114、ered to be responsible for the release of ahazardous substance into the environment.These persons include the owner or operator of the site where the release occurred,and anyone whodisposed or arranged for the disposal of a hazardous substance released at the site.We currently own,lease,or operate n
115、umerous properties thathave been used for manufacturing and other operations for many years.We also contract with waste removal services and landfills.Theseproperties and the substances disposed or released on them may be subject to the CERCLA,RCRA and analogous state laws.Under such laws,we could b
116、e required to remove previously disposed substances and wastes,remediate contaminated property,or perform remedial operations toprevent future contamination.In addition,it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury andproperty damage alleged
117、ly caused by hazardous substances released into the environment.Water dischargesThe Federal Water Pollution Control Act(the“Clean Water Act”)and analogous state laws impose restrictions and strict controls with respect tothe discharge of pollutants,including spills and leaks of oil and other substan
118、ces,into waters of the U.S.The discharge of pollutants into regulatedwaters is prohibited,except in accordance with the terms of a permit issued by the EPA or an analogous state agency.A responsible partyincludes the owner or operator of a facility from which a discharge occurs.The Clean Water Act a
119、nd analogous state laws provide foradministrative,civil and criminal penalties for unauthorized discharges and,together with the Oil Pollution Act of 1990,impose rigorousrequirements for spill prevention and response planning,as well as substantial potential liability for the costs of removal,remedi
120、ation,anddamages in connection with any unauthorized discharges.Air emissionsThe Federal Clean Air Act(the“Clean Air Act”)and comparable state laws regulate emissions of various air pollutants through air emissionspermitting programs and the imposition of other emission control requirements.In addit
121、ion,the EPA has developed,and continues to develop,stringent regulations governing emissions of toxic air pollutants at specified sources.Non-compliance with air permits or other requirements of theClean Air Act and associated state laws and regulations can result in the imposition of administrative
122、,civil and criminal penalties,as well as theissuance of orders or injunctions limiting or prohibiting non-compliant operations.Climate changeIn December 2009,the EPA determined that emissions of carbon dioxide,methane and other“greenhouse gases”(“GHGs”)present anendangerment to public health and the
123、 environment because emissions of such gases are,according to the EPA,contributing to warming of theearths atmosphere and other climatic changes.Based on these findings,the EPA has begun adopting and implementing regulations to restrictemissions of greenhouse gases under existing provisions of the C
124、lean Air Act.In addition,the U.S.Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases and almost one-halfof the states have already taken legal measures to reduce emissions of greenhouse gases primarily through the planned development ofgreenhouse ga
125、s emission inventories and/or regional greenhouse gas cap and trade programs.Most of these cap and trade programs work byrequiring major sources of emissions,such as electric power plants,or major producers of fuels,such as refineries and gas processing plants,toacquire and surrender emission allowa
126、nces.The number of allowances available for purchase is reduced each year in an effort to achieve theoverall greenhouse gas emission reduction goal.In April 2016,the U.S.signed the Paris Agreement,which requires member countries to reviewand“represent a progression”in their nationally determined con
127、tributions,which set GHG emission reduction goals,every five years.In June 2017,President Trump announced that the U.S.will withdraw from the Paris Agreement unless it is renegotiated.The State Department informed theUnited Nations of the U.S.withdrawal in August 2017.However,the earliest effective
128、date of this withdrawal pursuant to the terms of the ParisAgreement is November 2020.The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs,such as costs to purchase and operate emissions control systems,to acqui
129、re emissions allowances or comply with new regulatory or reportingrequirements.Any such legislation or regulatory programs could also increase the cost of consuming,and thereby reduce demand for,the oil andnatural gas produced by our customers.Consequently,legislation and regulatory programs to redu
130、ce emissions of greenhouse gases could havean adverse effect on our business,financial condition and results of operations.Finally,it should be noted that some scientists have concludedthat increasing concentrations of greenhouse gases in the earths atmosphere may produce climate changes that have s
131、ignificant physical effects,such as increased frequency and severity of storms,droughts,and9Table of Contentsfloods and other climatic events.If any such effects were to occur,they could have an adverse effect on our business,financial condition,resultsof operations and cash flow.For more informatio
132、n,please read“Risk Factors-Climate change legislation or regulations restricting emissions ofgreenhouse gases could increase our operating costs or reduce demand for our products.”Hydraulic fracturingA significant percentage of our customers oil and natural gas production is being developed from unc
133、onventional sources,such as hydrocarbonshales.These formations require hydraulic fracturing completion processes to release the oil or natural gas from the rock so that it can flowthrough the formations.Hydraulic fracturing involves the injection of water,sand and chemicals under pressure into the f
134、ormation to stimulateproduction.A number of federal agencies,including the EPA and the U.S.Department of Energy,are analyzing,or have been requested to review,a variety of environmental issues associated with shale development,including hydraulic fracturing.In addition,some states have adopted,andot
135、her states are considering adopting,regulations that could impose more stringent disclosure and/or well construction requirements on hydraulicfracturing operations.Local governments may also seek to adopt ordinances within their jurisdictions regulating the time,place and manner ofdrilling activitie
136、s in general or hydraulic fracturing activities in particular,in some cases banning hydraulic fracturing entirely.We cannot predictwhether any such legislation will ever be enacted and if so,what its provisions would be.If additional levels of regulation and permits were requiredthrough the adoption
137、 of new laws and regulations at the federal or state level,that could lead to delays,increased operating costs and processprohibitions for our customers that could reduce demand for our products and services,which would have a material adverse impact on ourrevenues,results of operations and cash flo
138、ws.For more information,please read“Risk Factors-Potential legislation or regulations restricting theuse of hydraulic fracturing could reduce demand for our products.”Employee health and safetyWe are subject to a number of federal and state laws and regulations,including the federal Occupational Saf
139、ety and Health Act(“OSHA”)andcomparable state statutes,establishing requirements to protect the health and safety of workers.In addition,the OSHA hazard communicationstandard,the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act andcom
140、parable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that thisinformation be provided to employees,state and local government authorities and the public.Substantial fines and penalties can be imposed andorders or injuncti
141、ons limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulationsrelating to worker health and safety.For more information,please read“Risk Factors-Potential legislation or regulations restricting the use ofhydraulic fracturing could redu
142、ce demand for our products.”Offshore regulationEvents in recent years have heightened environmental and regulatory concerns about the offshore oil and natural gas industry.From time to time,governing bodies may propose and have enacted legislation or regulations that may materially limit or prohibit
143、 offshore drilling in certain areas.Iflaws are enacted or other governmental actions are taken that delay,restrict or prohibit offshore operations in our customers expected areas ofoperation,our business could be materially adversely affected.New or newly interpreted regulations and other regulatory
144、 initiatives by U.S.governmental agencies have created significant uncertainty regarding the outlook for offshore activity in the U.S.Gulf of Mexico and possibleimplications for regions outside of the U.S.Gulf of Mexico.Third party challenges to industry operations in the U.S.Gulf of Mexico may also
145、 serveto further delay or restrict activities.If the new regulations,operating procedures and possibility of increased legal liability are viewed by our currentor future customers as a significant impairment to expected profitability on projects,then they could discontinue or curtail their offshore
146、operationsthereby reducing demand for our offshore products and services.We also operate in non-U.S.jurisdictions,which may impose similar regulations,prohibitions or liabilities.Operating risk and insuranceWe maintain insurance coverage of types and amounts that we believe to be customary and reaso
147、nable for companies of our size and with similaroperations.In accordance with industry practice,however,we do not maintain insurance coverage against all of the operating risks to which ourbusiness is exposed.Therefore,there is a risk our insurance program may not be sufficient to cover any particul
148、ar loss or all losses.Currently,ourinsurance program includes coverage for,among other things,general liability,umbrella liability,sudden and accidental pollution,personalproperty,vehicle,workers compensation,and employers liability coverage.10Table of ContentsEmployeesAs of December 31,2018,we had
149、approximately 2,500 employees.Of our total employees,approximately 2,000 were in the U.S.,200 were in theUnited Kingdom,100 were in Germany,100 were in Canada and 100 were in all other locations.We are not a party to any collective bargainingagreements,other than in our Hamburg,Germany and Monterrey
150、,Mexico facilities.We consider our relations with our employees to besatisfactory.11Table of ContentsItem 1A.Risk FactorsRisks related to our businessWe derive a substantial portion of our revenues from companies in or affiliated with the oil and natural gas industry,a historicallycyclical industry,
151、with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.As a result,this cyclicality has caused,and will continue to cause fluctuations in our revenues and results of our operations.We have experienced,and will continue to experience,fluctua
152、tions in revenues and operating results due to economic and business cycles.Thewillingness of oil and natural gas operators to make capital expenditures to explore for and produce oil and natural gas,the willingness of oilfieldservice companies to invest in capital equipment and the need of these cu
153、stomers to replenish consumable parts depends largely upon prevailingindustry conditions that are influenced by numerous factors over which we have no control.Such factors include:supply of and demand for oil and natural gas;prices,and expectations about future prices,of oil and natural gas;ability
154、or willingness of the members of the Organization of Petroleum Exporting Countries(“OPEC”)and other countries,such as Russia,toinfluence oil and natural gas prices through voluntary production limits;cost of exploring for,developing,producing and delivering oil andnatural gas;level of drilling and c
155、ompletions activity;expected decline in rates of current and future production,or faster than anticipated declines in production;discovery rates of new oil and natural gas reserves;ability of our customers to access new markets or areas of production or to continue to access current markets;weather
156、conditions,including hurricanes,that can affect oil and natural gas operations over a wide area;more stringent environmental regulations;moratoriums on drilling activity resulting in a cessation or disruption of operations;domestic and worldwide economic conditions;financial stability of our custome
157、rs and other industry participants;political instability in oil and natural gas producing countries;shareholder activism or activities by non-governmental organizations to restrict the exploration,development and production of oil and naturalgas;conservation measures and technological advances affec
158、ting energy consumption;price and availability of alternative energy resources;availability of alternative fuels;uncertainty in capital and commodities markets,and the ability of oil and natural gas companies to raise equity capital and debt financing;andmerger and divestiture activity among oil and
159、 natural gas producers,drilling contractors and oilfield service companies.In the second half of 2014,the oil and natural gas industry began to experience a prolonged reduction in the overall level of exploration anddevelopment activities as a result of the decline in commodity prices that continued
160、 into late 2016.As a result,many of our customers reduced ordelayed their oil and natural gas exploration and production spending,reducing the demand for our products and services and exerting downwardpressure on the prices that we charge.These conditions adversely impacted our business.The crude oi
161、l prices started to increase over the courseof 2017,and continued to strengthen in 2018,but declined again in the fourth quarter of 2018.Although we have experienced strong incrementaldemand growth over the last years,it is uncertain whether commodity prices and demand will maintain these levels or
162、increase materially in 2019.Furthermore,there can be no assurance that the demand or pricing for oil and natural gas will follow historic patterns or continue to recovermeaningfully in the near term.Declines in oil and natural gas prices and decreased levels of exploration,development,and production
163、 activityrelative to historical norms may negatively affect:revenues,cash flows,and profitability;12Table of Contentsthe ability to maintain or increase borrowing capacity;the ability to obtain additional capital to finance our business and the cost of that capital;the ability to collect outstanding
164、 amounts from our customers;andthe ability to attract and retain skilled personnel to maintain our business or that will be needed in the event of an upturn in the demand for ourproducts.The markets in which we operate are highly competitive,and some of our competitors hold substantial market share
165、and havesubstantially greater resources than we do.We may not be able to compete successfully in this environment and,in particular,against amuch larger competitor.The markets in which we operate are highly competitive and our products and services are subject to competition from significantly large
166、rbusinesses.One competitor in particular holds a substantially greater market share than us in one of our product lines and has substantiallygreater resources than we do.We also have several other competitors that are large national and multinational companies that have longeroperating histories,gre
167、ater financial,technical and other resources and greater name recognition than we do.Some of our competitors may be ableto respond more quickly to new or emerging technologies and services and changes in customer requirements.In addition,several of ourcompetitors provide a much broader array of serv
168、ices,and have a stronger presence in more geographic markets.Our larger competitors may beable to use their size and purchasing power to seek economies of scale and pricing concessions.Furthermore,some of our customers are alsoour competitors and they may cease buying from us.We also have competitor
169、s outside of the U.S.with lower structural costs due to labor and rawmaterial cost in and around their manufacturing centers,and prices based on foreign currencies.Accordingly,currency fluctuations may causeU.S.dollar-priced products to be less competitive than our competitors products that are pric
170、ed in other currencies.Moreover,our competitorsmay utilize available capacity during a period of depressed energy prices to gain market share.New competitors have also entered the markets in which we compete.We consider product quality,price,breadth of product offering,availabilityof products and se
171、rvices,performance,distribution capabilities,responsiveness to customer needs and reputation for service to be the primarycompetitive factors.Competitors may be able to offer more attractive pricing,duplicate strategies,or develop enhancements to products that couldoffer performance features that ar
172、e superior to our products.In addition,we may not be able to retain key employees of entities that we acquire inthe future and those employees may choose to compete against us.Competitive pressures,including those described above,and other factorscould adversely affect our competitive position,resul
173、ting in a loss of market share or decreases in prices.For more information about ourcompetitors,please read“Business-Competition.”Given the uncertainty related to long-term commodity prices and associated customer demand,we may hold excess or obsoleteinventory and experience a reduction in gross mar
174、gins and financial results.We cannot accurately predict what or how many products our customers will need in the future.Orders are placed with our suppliers based onforecasts of customer demand and,in some instances,we may establish buffer inventories to accommodate anticipated demand.At certain tim
175、eswe have built capital equipment before receiving customer orders,and we have kept our standardized downhole protection systems and certain ofour flow iron products in stock and readily available for delivery on short notice from customers.Our forecasts of customer demand are based onmultiple assum
176、ptions,each of which may introduce errors into the estimates.In addition,many of our suppliers,such as those for certain of ourstandardized valves,require a longer lead time to provide products than our customers demand for delivery of our finished products.If weunderestimate customer demand or if i
177、nsufficient manufacturing capacity is available,we would miss revenue opportunities and potentially losemarket share and damage our customer relationships.Conversely,if we overestimate customer demand,we may allocate resources to thepurchase of material or manufactured products that we may not be ab
178、le to sell when we expect to,if at all.As a result,we would hold excess orobsolete inventory,which would reduce gross margin and adversely affect financial results upon writing down the value of inventory.For example,during 2018 we recognized$36.6 million of inventory write downs.In addition,any fut
179、ure significant cancellations or deferrals of product orders orthe return of previously sold products could materially and adversely affect profit margins,increase product obsolescence and restrict our ability tofund our operations.13Table of ContentsWe may not realize revenue on our current backlog
180、 due to customer order reductions,cancellations or acceptance delays,which maynegatively impact our financial results.Decreases in oil and natural gas prices and the resulting uncertainty regarding demand for our customers services have resulted in orderreductions,cancellations and acceptance delays
181、 in the past,and we may experience more of these in the future.We may be unable to collectrevenue for all of the orders reflected in our backlog,or we may be unable to collect cancellation penalties,to the extent we have the right toimpose them,or the revenues may be pushed into future periods.In ad
182、dition,customers who are more highly leveraged or otherwise unable to paytheir creditors in the ordinary course of business may become insolvent or be unable to operate as a going concern.We may be unable to collectamounts due or damages we are awarded from these customers,and our efforts to collect
183、 such amounts may damage our customer relationships.Our results of operations and overall financial condition may be negatively impacted by a reduction in revenue as a result of these circumstances.Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditi
184、ons.We currently have a substantial amount of indebtedness,including$400.0 million of 6.25%senior unsecured notes due October 2021,and$119.0million outstanding under our$300.0 million Credit Facility.Our level of indebtedness may adversely affect our operations and limit our growth,andwe may have di
185、fficulty making debt service payments on our indebtedness as such payments become due.Our level of indebtedness may affectour operations in several ways,including the following:our indebtedness may increase our vulnerability to general adverse economic and industry conditions;the covenants contained
186、 in the agreements that govern our indebtedness limit our ability to borrow funds,dispose of assets,pay dividendsand make certain investments;our debt covenants also affect our flexibility in planning for,and reacting to,changes in the economy and in its industry;any failure to comply with the finan
187、cial or other covenants of our indebtedness could result in an event of default,which could result in some orall of our indebtedness becoming immediately due and payable;our indebtedness could impair our ability to obtain additional financing in the future for working capital,capital expenditures,ac
188、quisitions orother general corporate purposes;andour business may not generate sufficient cash flow from operations to enable us to meet our debt obligations.Tariffs imposed by the United States government could continue to adversely affect our results of operations.The President of the United State
189、s has issued proclamations imposing tariffs on imports of selected products,including those sourced from China.In particular,the U.S.government has imposed global tariffs on certain imported steel and aluminum products pursuant to Section 232 of theTrade Expansion Act of 1962,as well as tariffs on$2
190、50 billion worth of Chinese imports pursuant to Section 301 of the Trade Act of 1974.Inresponse,China and other countries have imposed retaliatory tariffs on a wide range of U.S.products,including those containing steel andaluminum.Our efforts to mitigate the impact of these tariffs on raw materials
191、 through the diversification of our supply chain may not be sufficientlysuccessful.Furthermore,a prolonged imposition of tariffs on our goods could have a significant adverse effect on our results of operations.Facility consolidations or expansions may subject us to risks of operating inefficiencies
192、,construction delays and cost overruns.We have consolidated and may continue to consolidate facilities to achieve operating efficiencies and reduce costs.These facility consolidationsmay be delayed and cause us to incur increased costs,product or service delivery delays,decreased responsiveness to c
193、ustomer needs,liabilities under terms and conditions of sale or other operational inefficiencies,or may not provide the benefits we anticipate.We may lose keypersonnel and operational knowledge that might lead to quality issues or delays in production.In the future,we may grow our businesses through
194、 the construction of new facilities and expansions of our existing facilities.These projects,andany other capital asset construction projects that we may commence,are subject to similar risks of delay or cost overruns inherent in anyconstruction project resulting from numerous factors,including the
195、following:difficulties or delays in obtaining land;shortages of key equipment,materials or skilled labor;unscheduled delays in the delivery of ordered materials and equipment;14Table of Contentsunanticipated cost increases;weather interferences;anddifficulties in obtaining necessary permits or in me
196、eting permit conditions.The industry in which we operate is undergoing continuing consolidation that may impact our results of operations.Some of our largest customers have consolidated and are using their size and purchasing power to achieve economies of scale and pricingconcessions.This consolidat
197、ion could result in reduced capital spending by such customers or decreased demand for our products and services.If we cannot maintain sales levels for customers that have consolidated or replace such revenues with increased business activities from othercustomers,this consolidation activity could h
198、ave a significant negative impact on our results of operations or financial condition.We are unable topredict what effect consolidations in the industry may have on prices,capital spending by customers,selling strategies,competitive position,customer retention or our ability to negotiate favorable a
199、greements with customers.A portion of our business is driven by our customers spending on capital equipment such as drilling rigs.As a result of a greater focusby our customers on maintaining capital discipline,spending may decline or remain at a low level despite an increase in commodityprices.Lead
200、ing up to 2014,in various segments of the energy industry,high levels of investment in capital intensive equipment were typically linked withhigh commodity prices.Following 2014,as commodity prices and activity levels declined,there was an oversupply of capital equipment andcorresponding reduction i
201、n the demand for construction of these products.More recently,our customers and their investors have adopted businessstrategies placing significant emphasis on capital discipline that may limit the level of their future spending.As a result,we cannot provide anyassurance that our capital equipment s
202、ales will increase if there is an increase in commodity prices.Technological advances have rendered drilling more efficient,reducing the amount of capital equipment required to drill the samenumber of wells and the demand for our products.New techniques and technological advances have reduced the nu
203、mber of days required to drill wells.The number of days required for a drilling rigto be on a site to drill a well has in many areas been reduced by at least half over the last several years.This has exacerbated the oversupply ofdrilling rigs and may lengthen the time until significant capital inves
204、tment is required by our drilling company customers.These advances may alsoresult in a lower overall level of capital investment when the current generation of drilling rigs is required to be replaced.We may be impacted by disruptions in the political,regulatory,economic and social conditions of the
205、 foreign countries in which we areexpected to conduct business.Instability and unforeseen changes in the international markets in which we conduct business,including economically and politically volatile areassuch as North Africa,the Middle East,Latin America and the Asia Pacific region,could cause
206、or contribute to factors that could have an adverseeffect on the demand for the products and services we provide.For example,we have previously transferred management and operations fromcertain Latin American countries,due to the presence of political turmoil,to other countries in the region that ar
207、e more politically stable.In addition,worldwide political,economic,and military events have contributed to oil and natural gas price volatility and are likely to continue to doso in the future.Depending on the market prices of oil and natural gas,oil and natural gas exploration and development compa
208、nies may cancel orcurtail their drilling programs,thereby reducing demand for our products and services.Our common stock price has been volatile,and we expect it to continue to remain volatile in the future.The market price of common stock of companies engaged in the oil and natural gas equipment ma
209、nufacturing and services industry has beenvolatile.Likewise,the market price of our common stock has varied significantly in the past.For example,in 2018,the market price of ourcommon stock reached a high of$17.95 per share on January 23,2018 and a low of$3.51 per share on December 26,2018.We expect
210、 it tocontinue to remain volatile given the cyclical nature of our industry.15Table of ContentsGiven the historically cyclical nature of the oil and natural gas industry,our operating history may not be sufficient for investors toevaluate our business and prospects.Relative to many of our competitor
211、s,we have a relatively short operating history as a public company.In addition,we have completed sixteenacquisitions since our initial public offering.Furthermore,the oil and natural gas industry is historically cyclical,which may cause analystsevaluation of our business,in our view,to be inaccurate
212、.These factors may make it more difficult for investors to evaluate our business andprospects,and to forecast our future operating results.As a result,historical financial data may not provide an accurate indication of what ouractual results would have been if subsequent acquisitions had been comple
213、ted at the beginning of the periods presented or what our future resultsof operations are likely to be.Our future results will depend on our ability to efficiently manage our combined operations and execute our businessstrategy.We are subject to the risk of supplier concentration.Certain of our prod
214、uct lines depend on a limited number of third party suppliers.In some cases,the suppliers own the intellectual property rights tothe products we sell,or possess the technology or specialized tooling required to manufacture them.As a result of this concentration in part of oursupply chain,our busines
215、s and operations that have been negatively affected if our key suppliers were to experience significant disruptionsaffecting the price,quality,availability or timely delivery of their products,or if they were to decide to terminate their relationships with us.Forexample,we have a limited number of s
216、uppliers for our bearings product lines and certain of our valve product lines.The limited number of thesesuppliers restricted the quantity and timeliness of customer deliveries.The partial or complete loss of any one of our key suppliers,or a significantadverse change in the relationship with any o
217、f these suppliers,through consolidation or otherwise,would limit our ability to manufacture and sellcertain of our products.Our business depends upon our ability to obtain key raw materials and specialized equipment from suppliers.Increased costs of rawmaterials and other components may result in in
218、creased operating expenses.Should our suppliers be unable to provide the necessary raw materials or finished products or otherwise fail to deliver such materials and productstimely and in the quantities required,resulting delays in the provision of products or services to customers could have a mate
219、rial adverse effect onour business.In particular,because many of our products are manufactured out of steel,we are particularly susceptible to fluctuations in steelprices.Our results of operations may be adversely affected by our inability to manage the rising costs and availability of raw materials
220、 andcomponents used in our products.If suppliers cannot provide adequate quantities of materials to meet customers demands on a timely basis or if the quality of thematerials provided does not meet established standards,we may lose customers or experience lower profitability.Some of our customer con
221、tracts require us to compensate customers if we do not meet specified delivery obligations.We rely on suppliers toprovide required materials and in many instances these materials must meet certain specifications.Managing a geographically diverse supplybase poses inherently significant logistical cha
222、llenges.Furthermore,the ability of third party suppliers to deliver materials to our specifications maybe affected by events beyond our control.As a result,there is a risk that we could experience diminished supplier performance resulting in longerthan expected lead times and/or product quality issu
223、es.For example,in the past,we have experienced issues with the quality of certain forgingsused to produce materials utilized in our products.As a result,we were required to seek alternative suppliers for those forgings,which resulted inincreased costs and a disruption in our supply chain.We have als
224、o been required in certain circumstances to provide better economic terms tosome of our suppliers in exchange for their agreement to increase their capacity to satisfy our supply needs.The occurrence of any of theforegoing factors could have a negative impact on our ability to deliver products to cu
225、stomers within committed time frames.A failure or breach of our information technology infrastructure,including as a result of cyber attacks or failures of data protectionmeasures,could adversely impact our business and results of operations and expose us to potential liabilities.The efficient opera
226、tion of our business is dependent on our information technology(“IT”)systems.Accordingly,we rely upon the capacity,reliability and security of our IT hardware and software infrastructure and our ability to expand and update this infrastructure in response to ourchanging needs.Despite our implementat
227、ion of security measures,our IT systems are vulnerable to computer viruses,natural disasters,incursions by intruders or hackers,failures in hardware or software,power fluctuations,cyber terrorists and other similar disruptions.The failure ofour IT systems to perform as anticipated for any reason or
228、any significant breach of security could disrupt our business and result in numerousadverse consequences,including reduced effectiveness and efficiency of our operations and that of our customers,inappropriate disclosure ofconfidential information,increased overhead costs,and loss of intellectual pr
229、operty,which16Table of Contentscould lead to liability to third parties or otherwise and have a material adverse effect on our business and results of operations.In addition,we maybe required to incur significant costs to prevent damage caused by these disruptions or security breaches in the future.
230、In addition,recent laws and regulations governing data privacy and the unauthorized disclosure of confidential information,including the EuropeanUnion General Data Protection Regulation and laws enacted in certain U.S.jurisdictions,pose increasingly complex compliance challenges andpotentially eleva
231、te our costs.Any failure by us to comply with these laws and regulations,including as a result of a security or privacybreach,could result in significant penalties and liabilities for us.Additionally,if we acquire a company that has violated or is not in compliance withapplicable data protection law
232、s,we may incur significant liabilities and penalties as a result.Our success depends on our ability to implement new technologies and services more efficiently and quickly than our competitors.Our success depends on our ability to develop and implement new product designs and improvements that meet
233、our customers needs in amanner equal to or more effective than those offered by our competitors.If we are not able to continue to provide new and innovative services andtechnologies in a manner that allows us to meet evolving industry requirements at prices acceptable to our customers,our financial
234、results may benegatively affected.In addition,some of our competitors are large national and multinational companies that may be able to devote greaterfinancial,technical,manufacturing and marketing resources to research and develop more or better systems,services and technologies than weare able to
235、 do.Moreover,as a result of the currently depressed levels of customer activity,we may be unable to allocate material amounts ofcapital to research and new product development activities,which may limit our ability to compete in the market and generate revenue.Our success will be affected by the use
236、 and protection of our proprietary technology.Due to the limitations of our intellectual propertyrights,our ability to exclude others from the use of our proprietary technology may be reduced.Our success will be affected by our development and implementation of new product designs and improvements a
237、nd by our ability to protect andmaintain intellectual property assets related to these developments.Although in many cases our products are not protected by any registeredintellectual property rights,in some cases we rely on a combination of patents and trade secret laws to establish and protect thi
238、s proprietarytechnology.We currently hold multiple U.S.and international patents and have several pending patent applications associated with our products andprocesses.Patent rights give the owner of a patent the right to exclude third parties from making,using,selling,and offering for sale theinven
239、tions claimed in the patents in the applicable country.Patent rights do not necessarily grant the owner of a patent the right to practice theinvention claimed in a patent,but merely the right to exclude others from practicing the invention claimed in the patent.It may also be possible fora third par
240、ty to design around our patents.Furthermore,patent rights have strict territorial limits.Some of our work will be conducted ininternational waters and may,therefore,not fall within the scope of any countrys patent jurisdiction.We may not be able to enforce our patentsagainst infringement occurring i
241、n international waters and other“non-covered”territories.Also,we do not have patents in every jurisdiction in whichwe conduct business and our patent portfolio will not protect all aspects of our business and may relate to obsolete or unusual methods,whichwould not prevent third parties from enterin
242、g the same market.In addition,by customarily entering into confidentiality and/or license agreements with our employees,customers and potential customers andsuppliers,we attempt to limit access to and distribution of our technology.Our efforts to maintain information as trade secrets or proprietaryt
243、echnology are subject to determination by the judicial system and may not be successful.Furthermore,our rights in our confidential information,trade secrets,and confidential know-how will not prevent third parties from independently developing similar information.Publicly availableinformation,includ
244、ing information in expired issued patents,published patent applications,and scientific literature,can also be used by thirdparties to independently develop technology.We cannot provide assurance that this independently developed technology will not be equivalent orsuperior to our proprietary technol
245、ogy.Our competitors may infringe upon,misappropriate,violate or challenge the validity or enforceability of our intellectual property and we may notable to adequately protect or enforce our intellectual property rights in the future.We may be adversely affected by disputes regarding intellectual pro
246、perty rights and the value of our intellectual property rights isuncertain.As discussed above,we may become involved in legal proceedings from time to time to protect and enforce our intellectual property rights.Thirdparties from time to time may initiate litigation against us by asserting that the
247、conduct of our business infringes,misappropriates or otherwiseviolates intellectual property rights.We may not prevail in any such legal proceedings related to such claims,and our products and services maybe found to infringe,impair,17Table of Contentsmisappropriate,dilute or otherwise violate the i
248、ntellectual property rights of others.Any legal proceeding concerning intellectual property is likely tobe protracted and costly and is inherently unpredictable,and could have a material adverse effect on our business,regardless of its outcome.Further,our intellectual property rights may not have th
249、e value expected and such value may change over time as new products are designed andimproved.Our executive officers and certain key personnel are critical to our business and these officers and key personnel may not remain withus in the future.Our future success depends in substantial part on our a
250、bility to hire and retain our executive officers and other key personnel.In particular,we arehighly dependent on certain of our executive officers.These individuals possess extensive expertise,talent and leadership,and they are critical toour success.The diminution or loss of the services of these i
251、ndividuals,or other integral key personnel affiliated with entities that we acquire in thefuture,could have a material adverse effect on our business.Furthermore,we may not be able to enforce all of the provisions in the agreementswe have entered into with our executive officers and such employment
252、agreements may not otherwise be effective in retaining such individuals.During the years ended December 31,2018 and 2017 we incurred impairment charges,and we may incur additional impairment chargesin the future.For goodwill and intangible assets with indefinite lives,an assessment for impairment is
253、 performed annually or when there is an indication animpairment may have occurred.Goodwill is reviewed for impairment by comparing the carrying value of each reporting units net assets,includingallocated goodwill,to the estimated fair value of the reporting unit.We determine the fair value of each o
254、f our seven reporting units using adiscounted cash flow approach.Determining the fair value of a reporting unit requires the use of estimates and assumptions.If the reporting unitscarrying value is greater than its calculated fair value,we recognize a goodwill impairment charge for the amount by whi
255、ch the carrying value ofgoodwill exceeds its fair value.For the years ended December 31,2018 and 2017,we recognized goodwill impairment charges totaling$298.8 million and$68.0 million,respectively,which are included in“Goodwill and intangible asset impairments”in the consolidated statement of compre
256、hensive loss.See Note 7Goodwill and Intangible Assets for further information related to these charges.There was no impairment of goodwill during the year endedDecember 31,2016.There are significant inherent uncertainties and management judgment in estimating the fair value of each reporting unit.Wh
257、ile we believe we havemade reasonable estimates and assumptions to estimate the fair value of our reporting units,it is possible that a material change could occur.Ifactual results are not consistent with our current estimates and assumptions,or if changes in macroeconomic conditions outside the con
258、trol ofmanagement change such that it results in a significant negative impact to our estimated fair values,the fair value of these reporting units maydecrease below their net carrying value,which could result in a material impairment of our goodwill.We evaluate our long-lived assets,including prope
259、rty and equipment and intangible assets with definite lives,for potential impairment wheneverevents or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.In performing our review forimpairment,future cash flows expected to result from the use of t
260、he asset and its eventual value upon disposal are estimated.If the undiscountedfuture cash flows are less than the carrying amount of the assets,there is an indication that the asset may be impaired.The amount of theimpairment is measured as the difference between the carrying value and the estimate
261、d fair value of the asset.The fair value is determined eitherthrough the use of an external valuation,or by means of an analysis of discounted future cash flows based on expected utilization.For the years ended December 31,2018 and 2017,we recognized intangible asset impairment charges totaling$64.7
262、 million and$1.1 million,respectively,which are included in“Goodwill and intangible asset impairments”in the consolidated statement of comprehensive loss.See Note 7Goodwill and Intangible Assets for further information related to these charges.There were no impairments of intangible assets during th
263、e yearended December 31,2016.If we determine that the carrying value of our long-lived assets,goodwill or intangible assets is less than their fair value,we may be required torecord additional charges in the future,which could adversely affect our financial condition and results of operations.The in
264、denture governing our notes and our Credit Facility contains operating and financial restrictions that may restrict our businessand financing activities.Our indenture and Credit Facility contain,and any future indebtedness we incur may contain,a number of restrictive covenants that will imposesignif
265、icant operating and financial restrictions on us,including restrictions on our ability to,among other things:pay dividends on,purchase or redeem our common stock;18Table of Contentsmake certain investments;incur or guarantee additional indebtedness or issue certain types of equity securities;create
266、certain liens;sell assets,including equity interests in our restricted subsidiaries;redeem or prepay subordinated debt;restrict dividends or other payments of our restricted subsidiaries;consolidate,merge or transfer all or substantially all of our assets;engage in transactions with affiliates;creat
267、e unrestricted subsidiaries;orexecute our acquisition strategy.Our Credit Facility also contains covenants,which,among other things,require us in certain circumstances,on a consolidated basis,to maintainspecified financial ratios or conditions.As a result of these covenants,we may be limited in the
268、manner in which we conduct our business,and wemay be unable to engage in favorable business activities or finance future operations or capital needs.Our ability to borrow under the CreditFacility and comply with some of the covenants,ratios or tests contained in our indenture and Credit Facility may
269、 be affected by events beyondour control.If market or other economic conditions deteriorate,and there is a decrease in our accounts receivable and inventory,our ability toborrow under our Credit Facility will be reduced and our ability to comply with these covenants,ratios or tests may be impaired.A
270、 failure to complywith the covenants,ratios or tests or any future indebtedness could result in an event of default,which,if not cured or waived,could have amaterial adverse effect on our business,financial condition and results of operations.A downgrade in our credit ratings could negatively impact
271、 our cost of and ability to access capital.Our ability to access capital markets or to otherwise obtain sufficient financing is enhanced by our senior unsecured debt ratings as provided bymajor U.S.credit rating agencies.Factors that may impact our credit ratings include debt levels,liquidity,asset
272、quality,cost structure,commoditypricing levels and other considerations.A ratings downgrade could adversely impact our ability in the future to access debt markets,increase thecost of future debt,and potentially require us to post letters of credit for certain obligations.Our exposure to currency ex
273、change rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect on ourresults of operations.Fluctuations in currency exchange rates could be material to us depending upon,among other things,our manufacturing locations and the sourcingfor our raw materials and c
274、omponents.In particular,we are sensitive to fluctuations in currency exchange rates between the U.S.dollar and eachof the Canadian dollar,the British pound sterling,the Euro,and,to a lesser degree,the Mexican peso,the Chinese yuan,the Singapore dollar,andthe Saudi riyal.There may be instances in whi
275、ch costs and revenue will not be matched with respect to currency denomination.As a result,to theextent that we continue our expansion on a global basis,management expects that increasing portions of revenue,costs,assets and liabilities willbe subject to fluctuations in foreign currency valuations.W
276、e may experience economic loss and a negative impact on earnings or net assetssolely as a result of foreign currency exchange rate fluctuations.Further,the markets in which we operate could restrict the removal or conversionof the local currency,resulting in our inability to hedge against these risk
277、s.Our ability to access capital markets could be limited.From time to time,we may need to access capital markets to obtain financing.Our ability to access capital markets for financing could be limitedby,among other things,oil and natural gas prices,our existing capital structure,our credit ratings,
278、the state of the economy,the health of thedrilling and overall oil and natural gas industry,and the liquidity of the capital markets.Many of the factors that affect our ability to access capitalmarkets are outside of our control.No assurance can be given that we will be able to access capital market
279、s on terms acceptable to us whenrequired to do so,which could have a material adverse impact on our business,financial condition and results of operations.During periods of high market activity,if we cannot continue operating our manufacturing facilities at adequate levels,our results ofoperations c
280、ould be adversely affected.We operate a number of manufacturing facilities.The equipment and management systems necessary for such operations may break down,perform poorly or fail,resulting in fluctuations in manufacturing efficiencies.Such fluctuations may affect our ability to deliver quality prod
281、ucts toour customers on a timely basis.19Table of ContentsIf we are unable to continue operating successfully overseas or to successfully expand into new international markets,our revenues maydecrease.For the year ended December 31,2018,we derived approximately 24%of our revenue from sales outside t
282、he U.S.(based on product destination).In addition,one of our key growth strategies is to market products in international markets.We may not succeed in selling,marketing,branding,and distributing products to generate revenues in these new international markets.If we fail to maintain an effective sys
283、tem of internal controls,we may not be able to accurately report our financial results or preventfraud.Effective internal control over financial processes and reporting are necessary for us to provide reliable financial reports that effectively preventfraud and operate successfully.Our efforts to ma
284、intain internal control systems may not be successful.The existence of a material weakness or afailure of our internal controls could affect our ability to obtain financing or increase the cost of any such financing.The identification of a materialweakness could also cause investors to lose confiden
285、ce in the reliability of our financial statements and could result in a decrease in the value ofour common stock.In addition,the entities that we acquire in the future may not maintain effective systems of internal control or we mayencounter difficulties integrating our system of internal controls w
286、ith those of acquired entities.If we are unable to maintain effective internalcontrols and,as a result,fail to provide reliable financial reports and effectively prevent fraud,our reputation and operating results would beharmed.Our operations and our customers operations are subject to a variety of
287、governmental laws and regulations that may increase our andour customers costs,prohibit or curtail our customers operations in certain areas,limit the demand for our products and services orrestrict our operations.Our business and our customers businesses may be significantly affected by:federal,sta
288、te and local U.S.and non-U.S.laws and other regulations relating to oilfield operations,worker safety and protection of theenvironment;changes in these laws and regulations;andthe level of enforcement of these laws and regulations.In addition,we depend on the demand for our products and services fro
289、m the oil and natural gas industry.This demand is affected by changingtaxes,price controls and other laws and regulations relating to the oil and natural gas industry in general.For example,the adoption of laws andregulations curtailing exploration and development drilling for oil and natural gas fo
290、r economic or other policy reasons could adversely affect ouroperations by limiting demand for our products.In addition,some non-U.S.countries may adopt regulations or practices that provide an advantageto local oil companies in bidding for oil leases,or require local companies to perform oilfield s
291、ervices currently supplied by international servicecompanies.To the extent that such companies are not our customers,or we are unable to develop relationships with them,our business maysuffer.We cannot determine the extent to which our future operations and earnings may be affected by new legislatio
292、n,new regulations or changesin existing regulations.Because of our non-U.S.operations and sales,we are also subject to changes in non-U.S.laws and regulations that may encourage or requirehiring of local contractors or require non-U.S.contractors to employ citizens of,or purchase supplies from,a par
293、ticular jurisdiction.If we fail tocomply with any applicable law or regulation,our business,results of operations or financial condition may be adversely affected.Potential legislation or regulations restricting the use of hydraulic fracturing could reduce demand for our products.Hydraulic fracturin
294、g is an important and common practice in the oil and natural gas industry which involves the injection of water,sand andchemicals under pressure into a formation to fracture the surrounding rock and stimulate production of hydrocarbons.Certain environmentaladvocacy groups have suggested that additio
295、nal federal,state and local laws and regulations may be needed to more closely regulate thehydraulic fracturing process,and have made claims that hydraulic fracturing techniques are harmful to surface water and drinking water resources.Various governmental entities(within and outside the U.S.)are in
296、 the process of studying,restricting,regulating or preparing to regulate hydraulicfracturing,directly or indirectlyFor example,the EPA released the final results of its comprehensive research study on the potential adverse impacts that hydraulic fracturingmay have on drinking water resources in Dece
297、mber 2016.The EPA concluded that hydraulic fracturing activities can impact drinking waterresources under some circumstances,including large volume spills and inadequate mechanical integrity of wells.In May 2016,the EPA issuedfinal new source performance standard requirements that impose more string
298、ent controls on methane and volatile organic compounds emissionsfrom oil and20Table of Contentsnatural gas development and production operations,including hydraulic fracturing and other well completion activity.The EPA finalizedamendments to some requirements in these standards in March 2018 and pro
299、posed additional amendments in October,including rescission ofcertain requirements and revisions to other requirements such as fugitive emissions monitoring frequency.The EPA has also issued the federalSafe Drinking Water Act(“SDWA”)permitting guidance for hydraulic fracturing operations involving t
300、he use of diesel fuel in fracturing fluids in thosestates where the EPA is the permitting authority.Additionally,the BLM issued final rules to regulate hydraulic fracturing on federal lands in March2015.These rules were struck down by a federal court in Wyoming in June 2016,but reinstated on appeal
301、by the Tenth Circuit in September 2017.While this appeal was pending,BLM proposed a rulemaking in July 2017 to rescind these rules in their entirety.BLM published a final rulerescinding the 2015 rules on December 29,2017.Several states filed judicial challenges to the BLMs proposed rescission;howeve
302、r,thesechallenges were stayed by a federal court in April 2018 pending the finalization or withdrawal of the BLMs February 2018 proposal.In September2018,BLM published a final rule that largely adopted the February 2018 proposal and rescinded several requirements.The September 2018 rulewas challenge
303、d in the U.S.District Court for the Northern District of California almost immediately after issuance.The challenge is still pending.In past sessions,Congress has considered,but not passed,the adoption of legislation to provide for federal regulation of hydraulic fracturing underthe SDWA and to requ
304、ire disclosure of the chemicals used in the hydraulic fracturing process.Some states have adopted,and other states areconsidering adopting,legal requirements that could impose more stringent permitting,public disclosure or well construction requirements onhydraulic fracturing activities.Local govern
305、ments also may seek to adopt ordinances within their jurisdictions regulating the time,place andmanner of drilling activities in general or hydraulic fracturing activities in particular,in some cases banning hydraulic fracturing entirely.Forexample,in February 2018,the Oklahoma Corporation Commissio
306、n released a protocol that requires operators to suspend hydraulic fracturing wellcompletion operations in response to certain levels of seismic activity.If new or more stringent federal,state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where our oil
307、 andnatural gas exploration and production customers operate,they could incur potentially significant added costs to comply with such requirements,experience delays or curtailment in the pursuit of exploration,development,and production activities,and perhaps even be precluded from drillingwells,som
308、e or all of which could adversely affect demand for our products and services from those customers.Our tax position may be adversely affected by changes in tax laws relating to multinational corporations,or increased scrutiny by taxauthorities.We have operations in multiple countries which are subje
309、ct to the jurisdiction of a significant number of taxing authorities.The final determinationof our income tax liabilities involves the interpretation of local tax laws,tax treaties and related authorities in each jurisdiction,as well as thesignificant use of estimates and assumptions.The U.S.Congres
310、s and government agencies in non-U.S.jurisdictions where we,and our affiliates,do business have recently focused on issues related to the taxation of multinational corporations.Additionally,we are impacted by U.S.legislation enacted in December 2017,known as the Tax Cuts and Jobs Act of 2017(“the Ac
311、t”).The Actmade substantial changes in the taxation of U.S.and multinational corporations,which included,among other things,reducing the U.S.corporateincome tax rate to 21%starting in 2018 and creating a quasi-territorial tax system with a one-time mandatory tax on previously deferred earningsof non
312、-U.S.subsidiaries.As a result of the enactment of the Act,we recognized a$10.1 million tax expense in the fourth quarter of 2017 and a$15.6 million tax benefit in 2018.We cannot predict whether any additional legislation or any regulatory or other administrative guidance couldmaterially adversely af
313、fect us.Our operations are subject to environmental and operational safety laws and regulations that may expose us to significant costs andliabilities.Our operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment,health an
314、d safety aspects of our operations,or otherwise relating to human health and environmental protection.These laws and regulations may,among other things,regulate the management and disposal of hazardous and nonhazardous wastes;require acquisition of environmental permitsrelated to our operations;rest
315、rict the types,quantities,and concentrations of various materials that can be released into the environment;limit orprohibit operational activities in certain ecologically sensitive and other protected areas;regulate specific health and safety criteria addressingworker protection;require compliance
316、with operational and equipment standards;impose testing,reporting and recordkeeping requirements;andrequire remedial measures to mitigate pollution from former and ongoing operations.Failure to comply with these laws and regulations or to obtainor comply with permits may result in the assessment of
317、administrative,civil and criminal penalties,imposition of remedial or corrective actionrequirements and the imposition of injunctions to prohibit certain activities or force future compliance.Certain environmental laws may impose jointand several liability,without regard to fault or legality of cond
318、uct,on classes of persons who are considered21Table of Contentsto be responsible for the release of a hazardous substance into the environment.In addition,these risks may be greater for us because thecompanies we acquire or have acquired may not have allocated sufficient resources and management foc
319、us to environmental compliance,potentially requiring rehabilitative efforts during the integration process or exposing us to liability before such rehabilitation occurs.The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may
320、 impact theenvironment.The implementation of new laws and regulations could result in materially increased costs,stricter standards and enforcement,largerfines and liability and increased capital expenditures and operating costs,particularly for our customers.We may incur liabilities,fines,penalties
321、 or additional costs,or we may be unable to sell to certain customers if we do not maintain safeoperations.If we fail to comply with safety regulations or maintain an acceptable level of safety at our facilities,we may incur fines,penalties or otherliabilities,or we may be held criminally liable.In
322、addition,a substantial portion of our work force is made up of newer employees who are lessexperienced and therefore more prone to injury.As a result,new employees require ongoing training and a higher degree of oversight.We mayincur additional costs to encourage training and ensure proper oversight
323、 of these shorter service employees.Moreover,we may incur costs inconnection with equipment upgrades,or other costs to facilitate our compliance with safety regulations.Failure to maintain safe operations orachieve certain safety performance metrics could disqualify us from doing business with certa
324、in customers,particularly major oil companies.Our non-U.S.operations will subject us to special risks.We are subject to various risks inherent in conducting business operations in locations outside of the U.S.These risks may include changes inregional,political or economic conditions,local laws and
325、policies,including taxes,trade protection measures,and unexpected changes inregulatory requirements governing the operations of companies that operate outside of the U.S.In addition,if a dispute arises from internationaloperations,courts outside of the U.S.may have exclusive jurisdiction over the di
326、spute,or we may not be able to subject persons outside of theU.S.to the jurisdiction of U.S.courts.Our business operations worldwide are subject to a number of U.S.federal laws and regulations,including restrictions imposed by theU.S.Foreign Corrupt Practices Act(“FCPA”)as well as trade sanctions ad
327、ministered by the Office of Foreign Assets Control and theCommerce Department,as well as similar laws in non-U.S.jurisdictions that govern our operations by virtue of our presence or activitiesthere.We rely on a large number of agents in non-U.S.countries that have been identified as posing a high r
328、isk of corrupt activities and whose local lawsand customs differ significantly from those in the U.S.In many countries,particularly in those with developing economies,it is common to engagein business practices that are prohibited by the regulations applicable to us.The U.S.Foreign Corrupt Practices
329、 Act and similar anti-corruptionlaws in other jurisdictions,including the UK Bribery Act 2010,(“anti-corruption laws”)prohibit corporations and individuals from engaging in certainactivities to obtain or retain business or to influence a person working in an official capacity.We may be held responsi
330、ble for violations by ouremployees,contractors and agents for violations of anti-corruption laws.We may also be held responsible for violations by an acquired companythat occurs prior to an acquisition,or subsequent to an acquisition but before we are able to institute our compliance procedures.In a
331、ddition,ournon-U.S.competitors that are not subject to the FCPA or similar anti-corruption laws may be able to secure business or other preferentialtreatment in such countries by means that such laws prohibit with respect to us.The UK Bribery Act 2010 is broader in scope than the FCPA andapplies to
332、public and private sector corruption and contains no facilitating payments exception.A violation of any of these laws,even if prohibitedby our policies,could have a material adverse effect on our business.Actual or alleged violations could damage our reputation,be expensive todefend,impair our abili
333、ty to do business,and cause us to incur civil and criminal fines,penalties and sanctions.Compliance with regulations relating to export controls,trade sanctions and embargoes administered by the countries in which we operate,including the U.S.Department of the Treasurys Office of Foreign Assets Control(“OFAC”)and similar regulations in non-U.S.jurisdictions alsopose a risk to us.We cannot provide
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