FORUM ENERGY TECHNOLOGIES, INC. 10-Q

Item 2. Management’s discussion and analysis of financial condition and results of operations CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 4, 2022, and elsewhere in this Quarterly Report on Form 10-Q. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Overview We are a global company serving the oil, natural gas, industrial and renewable energy industries. FET provides value added solutions aimed at improving the safety, efficiency and environmental impact of our customers' operations. We are an environmentally and socially responsible company headquartered in Houston, Texas with manufacturing, distribution and service facilities strategically located throughout the world. Our products include highly engineered capital equipment as well as consumable products. These consumable products are used in drilling, well construction and completions activities, within the supporting infrastructure, and at processing centers and refineries. Our engineered capital products are directed at drilling rig equipment for new rigs, upgrades and refurbishment projects, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects. For the nine months ended September 30, 2022, approximately 52% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services. We design, manufacture and supply high quality reliable products that create value for our diverse customer base, which includes, among others, oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, subsea construction and service companies, and pipeline and refinery operators. In addition, we offer some of our products to renewable energy and new energy companies. We expect that the world's long-term energy demand will continue to rise. We also expect hydrocarbons will continue to play a vital role in meeting the world's long-term energy needs while renewable energy sources continue to develop. As such, we remain focused on serving our customers in both oil and natural gas as well as renewable energy applications. We are also continuing to develop products to help oil and natural gas operators lower their emissions while also deploying our existing product technologies in renewable energy applications and seeking to develop innovative equipment. 16 A summary of the products and services offered by each segment is as follows: • Drilling & Downhole . This segment designs, manufactures and supplies products and provides related services to the drilling, well construction, artificial lift and subsea energy construction markets, including applications in oil and natural gas, renewable energy, defense, and communications. The products and related services consist primarily of: (i) capital equipment and a broad line of expendable products consumed in the drilling process; (ii) well construction casing and cementing equipment and protection products for artificial lift equipment and cables; and (iii) subsea remotely operated vehicles ("ROVs") and trenchers, submarine rescue vehicles, specialty components and tooling, and complementary subsea technical services. • Completions. This segment designs, manufactures and supplies products and provides related services to the coiled tubing, well stimulation and intervention markets. The products and related services consist primarily of: (i) capital and consumable products sold to the pressure pumping, hydraulic fracturing and flowback services markets, including hydraulic fracturing pumps, cooling systems, high-pressure flexible hoses and flow iron as well as wireline cable and pressure control equipment used in the well completion and intervention service markets; and (ii) coiled tubing strings and coiled line pipe and related services. • Production . This segment designs, manufactures and supplies products and provides related equipment and services for production and infrastructure markets. The products and related services consist primarily of: (i) engineered process systems, production equipment, as well as specialty separation equipment; and (ii) a wide range of industrial valves focused on serving oil and natural gas customers as well as power generation, renewable energy and other general industrial applications. Market Conditions Demand for our products and services is directly related to the capital and operating budgets of our customers. These budgets are heavily influenced by current and expected energy prices. In addition, demand for our capital products is driven by the utilization of service company equipment. Utilization is a function of equipment capacity and durability in demanding environments. In 2021, distribution of vaccines and reopening of certain economies led to an increase in demand for oil and natural gas following an unprecedented decline from the COVID-19 pandemic. At the same time, the supply of oil and natural gas was impacted by ongoing capacity constraints by OPEC+ and North American exploration and production companies. As a result of these supply and demand factors, commodity prices increased substantially in 2021. During the first nine months of 2022, the supply of oil and natural gas was further impacted by political and social responses to the Russia and Ukraine war resulting in further increases in energy prices, especially in Europe. In addition, ongoing COVID-19 outbreaks, related work restrictions and other worldwide labor constraints continue to cause disruptions in global supply chains. These disruptions have led to inflationary pressures. In response, the Federal Reserve raised interest rates significantly in 2022 and further rate increases are expected. These macroeconomic conditions could lead to a global or regional recession, which may lower demand for commodities, such as oil and natural gas, and have a direct impact on commodity prices. Our revenues are highly correlated to the U.S. drilling rig count, which has increased to 765 rigs as of the end of the third quarter 2022 from a low of 244 rigs in August 2020. The level of active hydraulic fracturing fleets has also increased substantially in order to meet increasing oil and natural gas demand. Despite these improvements, drilling and completions activity remains below pre-pandemic levels. In addition, publicly owned exploration and production companies in North America remain under pressure by investors to constrain capital expenditures in order to generate positive cash flows. In contrast, privately owned exploration and production companies in North America have increased their drilling and completions activity in response to the higher oil and natural gas price environment. It is generally expected that public and private exploration and production companies will continue to make investments in a similar fashion for at least the next twelve months. Activity levels have also increased in international markets, as well as in global offshore and subsea activity. As a result, demand for our drilling and subsea offerings has increased due to an improved outlook for our international drilling and subsea customers. 17 The table below shows average crude oil and natural gas prices for West Texas Intermediate crude oil (“WTI”), United Kingdom Brent crude oil (“Brent”), and Henry Hub natural gas: Three Months Ended September 30, June 30, September 30, 2022 2022 2021 Average global oil, $/bbl West Texas Intermediate $ 93.06 $ 108.83 $ 70.54 United Kingdom Brent $ 100.71 $ 113.84 $ 73.51 Average North American Natural Gas, $/Mcf Henry Hub $ 8.03 $ 7.50 $ 4.35 The price of oil has varied dramatically over the last several years. The spot prices for WTI and Brent fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020. Since that time, oil prices rebounded to an average of $108.83 and $113.84, for WTI and Brent, respectively, in the second quarter 2022, and retreated to $93.06 and $100.71, respectively, in the third quarter 2022. In addition, natural gas prices have increased by 85% comparing the third quarter 2022 to the third quarter 2021. The table below shows the average number of active drilling rigs, based on the weekly Baker Hughes Incorporated rig count, operating by geographic area and drilling for different purposes. Three Months Ended September 30, June 30, September 30, 2022 2022 2021 Active Rigs by Location United States 761 713 496 Canada 199 113 151 International 857 812 772 Global Active Rigs 1,817 1,638 1,419 Land vs. Offshore Rigs Land 1,590 1,430 1,222 Offshore 227 208 197 Global Active Rigs 1,817 1,638 1,419 U.S. Commodity Target Oil/Gas 599 564 394 Gas 158 148 101 Unclassified 4 1 1 Total U.S. Active Rigs 761 713 496 U.S. Well Path Horizontal 692 652 451 Vertical 28 26 20 Directional 41 35 25 Total U.S. Active Rigs 761 713 496 A substantial portion of our revenue is impacted by the level of rig activity and the number of wells completed. The average U.S. rig count for the third quarter 2022 was 7% and 53% higher compared to the second quarter 2022 and third quarter 2021, respectively. The U.S. rig count started 2020 at 805 working rigs and fell 70% to a low of 244 rigs in August 2020. Since that time, the number of active rigs has partially recovered, ending the third quarter 2022 at 765 rigs. Despite this improvement, the U.S. drilling rig count remains below pre-pandemic levels. 18 The table below shows the amount of total inbound orders by segment: (in millions of dollars) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Drilling & Downhole $ 73.3 $ 74.4 $ 83.4 $ 218.6 $ 221.8 Completions 78.7 64.7 59.6 197.1 154.2 Production 45.7 63.8 32.8 149.9 96.6 Total Orders $ 197.7 $ 202.9 $ 175.8 $ 565.6 $ 472.6 19 Results of operations Three months ended September 30, 2022 compared with three months ended September 30, 2021 Three Months Ended September 30, Change (in thousands of dollars, except per share information) 2022 2021 $ % Revenue: Drilling & Downhole $ 75,723 $ 63,180 $ 12,543 19.9 % Completions 72,246 49,692 22,554 45.4 % Production 34,238 28,457 5,781 20.3 % Eliminations (372) (345) (27) (7.8) % Total revenue 181,835 140,984 40,851 29.0 % Operating income (loss): Drilling & Downhole 9,481 4,042 5,439 134.6 % Operating margin % 12.5 % 6.4 % Completions 5,915 250 5,665 * Operating margin % 8.2 % 0.5 % Production 665 (3,374) 4,039 119.7 % Operating margin % 1.9 % (11.9) % Corporate (8,411) (8,387) (24) (0.3) % Total segment operating income (loss) 7,650 (7,469) 15,119 202.4 % Operating margin % 4.2 % (5.3) % Gain on disposal of assets and other (52) (93) 41 44.1 % Operating income (loss) 7,702 (7,376) 15,078 204.4 % Interest expense 8,143 7,128 1,015 14.2 % Foreign exchange gains and other, net (18,288) (3,962) (14,326) * Loss on extinguishment of debt — 196 (196) (100.0) % Total other (income) expense, net (10,145) 3,362 (13,507) (401.8) % Income (loss) before income taxes 17,847 (10,738) 28,585 266.2 % Income tax expense 1,370 849 521 61.4 % Net income (loss) $ 16,477 $ (11,587) $ 28,064 242.2 % Weighted average shares outstanding Basic 5,778 5,661 Diluted 10,552 5,661 Earnings (loss) per share Basic $ 2.85 $ (2.05) Diluted $ 1.82 $ (2.05) * not meaningful 20 Revenue Our revenue for the three months ended September 30, 2022 was $181.8 million, an increase of $40.9 million, or 29.0%, compared to the three months ended September 30, 2021. For the three months ended September 30, 2022, our Drilling & Downhole, Completions, and Production segments comprised 41.6%, 39.6%, and 18.8% of our total revenue, respectively, which compared to 44.8%, 35.0%, and 20.2% of our total revenue, respectively, for the three months ended September 30, 2021. The overall increase in revenue is primarily related to higher sales volumes due to higher drilling and completions activity levels in the third quarter 2022 compared to the third quarter 2021. The changes in revenue by operating segment consisted of the following: Drilling & Downhole segment — Revenue was $75.7 million for the three months ended September 30, 2022, an increase of $12.5 million, or 19.9%, compared to the three months ended September 30, 2021. This increase was led by a $14.9 million, or 64.4%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of consumable products and capital equipment from the 28% year-over-year increase in global rig count. Revenue for our Downhole Technologies product line increased by $4.3 million, or 24.4%, primarily due to higher sales volumes of artificial lift products due to the increase in the number of well completions and workover activity in the third quarter 2022 compared to the third quarter 2021. Revenue for our Subsea Technologies product line decreased by $6.7 million, or (30.0)%, from lower sales of Work Class ROVs into domestic and international markets. Completions segment — Revenue was $72.2 million for the three months ended September 30, 2022, an increase of $22.6 million, or 45.4%, compared to the three months ended September 30, 2021. This significant improvement includes a revenue increase of $18.1 million, or 70.7%, for our Stimulation & Intervention product line primarily due to higher capital equipment sales to pressure pumping customers and increasing service company demand of wireline cable to support hydraulic fracturing activity. Revenue for our Coiled Tubing product line increased by $4.5 million, or 18.5%, driven by increasing U.S. hydraulic fracturing activity levels in the third quarter 2022 compared to the third quarter 2021. Production segment — Revenue was $34.2 million for the three months ended September 30, 2022, an increase of $5.8 million, or 20.3%, compared to the three months ended September 30, 2021. This increase was driven by a $4.1 million, or 29.0%, increase in project revenue for our processing and treatment equipment within our Production Equipment product line and a $1.6 million, or 11.5%, increase in sales of our valve products, primarily due to higher sales volumes into the North America downstream market. Segment operating income (loss) and segment operating margin percentage Segment operating income for the three months ended September 30, 2022 was $7.7 million, a $15.1 million improvement compared to a loss of $7.5 million for the three months ended September 30, 2021. For the three months ended September 30, 2022, segment operating margin percentage was 4.2% compared to (5.3)% for the three months ended September 30, 2021. Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period. The change in operating income (loss) for each segment is explained as follows: Drilling & Downhole segment — Segment operating income was $9.5 million, or 12.5%, for the three months ended September 30, 2022 compared to operating income of $4.0 million, or 6.4%, for the three months ended September 30, 2021. The $5.4 million improvement in segment operating results is primarily attributable to higher gross profit from the 19.9% increase in segment revenues, partially offset by higher freight and employee related costs. Completions segment — Segment operating income was $5.9 million, or 8.2%, for the three months ended September 30, 2022 compared to segment operating income of $0.3 million, or 0.5%, for the three months ended September 30, 2021. The $5.7 million improvement in segment operating results was primarily due to higher gross profit from the 45.4% increase in revenues discussed above, partially offset by higher freight and employee related costs. Production segment — Segment operating income was $0.7 million, or 1.9%, for the three months ended September 30, 2022 compared to a loss of $3.4 million, or (11.9)%, for the three months ended September 30, 2021. The $4.0 million improvement in segment operating results was driven by the 20.3% increase in revenues discussed above as well as lower depreciation and other facility costs in connection with cost reductions implemented in 2021. These improvements were partially offset by higher freight and material costs as a result of inflationary pressures from global supply chains. Corporate — Selling, general and administrative expenses for Corporate remained flat at $8.4 million for the three months ended September 30, 2022 compared with the three months ended September 30, 2021. Corporate costs 21 include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. Other items not included in segment operating income (loss) Gain on the disposal of assets and other is not included in segment operating income (loss), but is included in total operating loss. Other income and expense Other income and expense includes interest expense, foreign exchange gains and other, and loss on extinguishment of debt. We incurred $8.1 million of interest expense during the three months ended September 30, 2022, an increase of $1.0 million compared to the three months ended September 30, 2021 due to higher interest rates on borrowings under the credit facility. The foreign exchange gains are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar. During the three months ended September 30, 2021, we repurchased an aggregate $1.9 million principal amount of our 2025 Notes at approximately par value. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $1.7 million, resulting in a $0.2 million loss on extinguishment of debt. Taxes We recorded tax expense of $1.4 million and $0.8 million for the three months ended September 30, 2022 and September 30, 2021, respectively. The estimated annual effective tax rates for the three months ended September 30, 2022 and 2021 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction. 22 Nine months ended September 30, 2022 compared with nine months ended September 30, 2021 Nine Months Ended September 30, Change 2022 2021 $ % (in thousands of dollars, except per share information) Revenue: Drilling & Downhole $ 223,476 $ 173,406 $ 50,070 28.9 % Completions 190,867 134,051 56,816 42.4 % Production 95,622 85,825 9,797 11.4 % Eliminations (710) (361) (349) (96.7) % Total revenue 509,255 392,921 116,334 29.6 % Operating income (loss): Drilling & Downhole 23,995 2,237 21,758 972.6 % Operating margin % 10.7 % 1.3 % Completions 8,787 (52) 8,839 * Operating margin % 4.6 % — % Production (1,241) (11,256) 10,015 89.0 % Operating margin % (1.3) % (13.1) % Corporate (24,501) (23,667) (834) (3.5) % Total segment operating income (loss) 7,040 (32,738) 39,778 121.5 % Operating margin % 1.4 % (8.3) % Gain on disposal of assets and other (938) (1,362) 424 31.1 % Operating income (loss) 7,978 (31,376) 39,354 125.4 % Interest expense 23,609 24,065 (456) (1.9) % Foreign exchange gains and other, net (37,112) (1,431) (35,681) * Loss on extinguishment of debt — 5,290 (5,290) (100.0) % Total other (income) expense (13,503) 27,924 (41,427) (148.4) % Income (loss) before income taxes 21,481 (59,300) 80,781 136.2 % Income tax expense 4,939 3,756 1,183 31.5 % Net income (loss) $ 16,542 $ (63,056) $ 79,598 126.2 % Weighted average shares outstanding Basic 5,736 5,637 Diluted 10,489 5,637 Earnings (loss) per share Basic $ 2.88 $ (11.19) Diluted $ 2.37 $ (11.19) * not meaningful 23 Revenue Our revenue for the nine months ended September 30, 2022 was $509.3 million, an increase of $116.3 million, or 29.6%, compared to the nine months ended September 30, 2021. For the nine months ended September 30, 2022, our Drilling & Downhole, Completions, and Production segments comprised 43.9%, 37.3%, and 18.8% of our total revenue, respectively, which compared to 44.1%, 34.1%, and 21.8% of our total revenue, respectively, for the nine months ended September 30, 2021. The overall increase in revenue is related to higher sales volumes due to improving market conditions in the first nine months of 2022 compared to the first nine months of 2021 as a result of higher drilling and completions activity levels to support increasing global energy demand. The changes in revenue by operating segment consisted of the following: Drilling & Downhole segment — Revenue was $223.5 million for the nine months ended September 30, 2022, an increase of $50.1 million, or 28.9%, compared to the nine months ended September 30, 2021. This increase was led by revenue growth of $31.6 million, or 45.5%, in our Drilling Technologies product line from higher sales of capital equipment and consumable products from the 29% year-over-year increase in global rig count. Revenue for our Downhole Technologies product line increased by $13.6 million, or 27.5%, primarily due to higher sales of artificial lift products as a result of higher well completions activity levels. Revenue for our Subsea Technologies product line increased by $4.9 million, or 9.0%, primarily due to higher sales of Observation Class ROVs and cable management systems into domestic and international markets. Completions segment — Revenue was $190.9 million for the nine months ended September 30, 2022, an increase of $56.8 million, or 42.4%, compared to the nine months ended September 30, 2021. This increase includes a $42.5 million, or 62.0%, increase in sales volumes for our Stimulation and Intervention product line and a $14.3 million, or 21.8%, increase in sales volumes for our Coiled Tubing product line. These higher revenue levels were driven by increasing U.S. hydraulic fracturing and well intervention service activity levels in the first nine months of 2022 compared to the same period of 2021 in response to higher energy demand. Production segment — Revenue was $95.6 million for the nine months ended September 30, 2022, an increase of $9.8 million, or 11.4%, compared to the nine months ended September 30, 2021. This increase is driven by higher sales volumes of valves, primarily in the North America downstream market, and higher project revenue for our processing and treatment equipment within our Production Equipment product line as demand continues to recover from the COVID 19 pandemic. Segment operating income (loss) and segment operating margin percentage Segment operating income for the nine months ended September 30, 2022 was $7.0 million, a $39.8 million improvement compared to a loss of $32.7 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2022, segment operating margin percentage was 1.4% compared to (8.3)% for the nine months ended September 30, 2021. Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period. The change in operating income (loss) for each segment is explained as follows: Drilling & Downhole segment — Segment operating income was $24.0 million, or 10.7%, for the nine months ended September 30, 2022 compared to $2.2 million, or 1.3%, for the nine months ended September 30, 2021. The $21.8 million improvement in segment operating results is primarily attributable to higher gross profit from the 28.9% increase in revenue discussed above. In addition, segment operating results also improved due to a $3.9 million reduction in inventory write downs and lower restructuring related costs in connection with cost reductions executed in early 2021. Completions segment — Segment operating income was $8.8 million, or 4.6%, for the nine months ended September 30, 2022 compared to a loss of $0.1 million for the nine months ended September 30, 2021. The $8.8 million improvement in segment operating results is primarily attributable to higher gross profit from the 42.4% increase in revenues discussed above, partially offset by higher freight and employee related costs. 24 Production segment — Segment operating loss was $1.2 million, or (1.3)%, for the nine months ended September 30, 2022 compared to a loss of $11.3 million, or (13.1)%, for the nine months ended September 30, 2021. The $10.0 million improvement is primarily attributable to higher gross margin from the 11.4% revenue growth discussed above as well as lower depreciation and other facility costs in connection with cost reductions implemented in 2021. These improvements were partially offset by higher freight and material costs as a result of inflationary pressures from global supply chains. Corporate — Selling, general and administrative expenses for Corporate were $24.5 million for the nine months ended September 30, 2022, a $0.8 million increase compared to the nine months ended September 30, 2021. This increase was primarily related to higher professional fees. Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel; professional fees for legal, accounting and related services; and marketing costs. Other items not included in segment operating income (loss) Gain on the disposal of assets and other is not included in segment operating income (loss), but is included in total operating loss. Other expense Other expense includes interest expense, foreign exchange (gains) losses and other, and loss on extinguishment of debt. We incurred $23.6 million of interest expense during the nine months ended September 30, 2022, a decrease of $0.5 million from the nine months ended September 30, 2021 primarily due to the lower average outstanding balance on our 2025 Notes in the nine months ending September 30, 2022. The foreign exchange (gains) losses are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S. dollar. These movements in exchange rates create foreign exchange gains or losses when applied to monetary assets or liabilities denominated in currencies other than the location’s functional currency, primarily U.S. dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S. dollar. During the nine months ended September 30, 2021, we repurchased an aggregate $59.9 million of principal amount of our 2025 Notes for $58.6 million. The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $53.3 million, resulting in a $5.3 million loss on extinguishment of debt. Taxes We recorded a tax expense of $4.9 million and expense of $3.8 million for the nine months ended September 30, 2022 September 30, 2021, respectively. The estimated annual effective tax rates for the nine months ended September 30, 2022 and 2021 were impacted by losses in jurisdictions where the recording of a tax benefit is not available. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction. Liquidity and capital resources Sources and uses of liquidity Our internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility and the 2025 Notes. Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, and debt repayments. We continually monitor other potential capital sources, including equity and debt financing, to meet our investment and target liquidity requirements. Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital. As of September 30, 2022, we had $257.0 million principal amount of 2025 Notes outstanding and $10.7 million of borrowings outstanding under our revolving Credit Facility. The 2025 Notes mature in August 2025 and subject to certain exceptions, the Credit Facility matures in September 2026. See Note 7 Debt for further details related to the terms for our 2025 Notes and Credit Facility. As of September 30, 2022, we had cash and cash equivalents of $19.8 million and $127.2 million of availability under the Credit Facility. We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues. Furthermore, availability under the Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits. In addition, we continue to 25 expect total 2022 capital expenditures to be less than $10.0 million, consisting of, among other items, replacing end of life machinery and equipment. We expect our available cash on-hand, cash generated by operations, and estimated availability under the Credit Facility to be adequate to fund current operations during the next 12 months. In addition, based on existing market conditions and our expected liquidity needs, among other factors, we may use a portion of our cash flows from operations, proceeds from divestitures, securities offerings or other eligible capital to reduce the principal amount of our 2025 Notes outstanding or repurchase shares of our common stock under our repurchase program. In November 2021, our board of directors approved a program for the repurchase of outstanding shares of our common stock with an aggregate purchase amount of up to $10.0 million. Shares may be repurchased under the program from time to time, in amounts and at prices that the company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations. As of the end of the third quarter 2022, we repurchased approximately 56,000 shares of our common stock for aggregate consideration of approximately $1.1 million with remaining authorization under this program of $8.9 million. In the fourth quarter of 2021, we completed the acquisition of Hawker for total cash consideration of $5.1 million, of which, $3.4 million was paid in the fourth quarter of 2021 with the balance expected to be paid over the next five years, including $0.5 million paid in the first nine months of 2022. For additional information, see Note 4 Acquisitions. We may pursue other acquisitions in the future, which may be funded with cash and/or equity. Our ability to make significant acquisitions for cash may require us to pursue additional equity or debt financing, which we may not be able to obtain on terms acceptable to us or at all. Our cash flows for the nine months ended September 30, 2022 and 2021 are presented below (in millions): Nine Months Ended September 30, 2022 2021 Net cash used in operating activities $ (32.1) $ (8.1) Net cash provided by (used in) investing activities (2.6) 4.5 Net cash provided by (used in) financing activities 9.2 (74.6) Effect of exchange rate changes on cash (1.6) (0.4) Net decrease in cash, cash equivalents and restricted cash $ (27.1) $ (78.6) Net cash used in operating activities Net cash used in operating activities was $32.1 million for the nine months ended September 30, 2022 compared to $8.1 million for the nine months ended September 30, 2021. This decline in operating cash flows is primarily attributable to net increases in working capital, primarily inventory and accounts receivable, which used cash of $85.6 million for the nine months ended September 30, 2022 compared to providing cash of $2.8 million for the nine months ended September 30, 2021. This decline was partially offset by an improvement in net income adjusted for non-cash items, which provided $53.4 million of cash for the nine months ended September 30, 2022 compared to using $10.9 million for the nine months ended September 30, 2021. Net cash provided by (used in) investing activities Net cash used in investing activities was $2.6 million for the nine months ended September 30, 2022, including $4.8 million of capital expenditures, partially offset by $2.7 million of proceeds from the sale of property and equipment. Net cash provided by investing activities was $4.5 million for the nine months ended September 30, 2021, including $6.8 million of proceeds from the sale of property and equipment, partially offset by $1.3 million of cash paid for the net working capital settlement related to the disposition of our ABZ and QVA valve brands and $1.0 million of capital expenditures. Net cash provided by (used in) financing activities Net cash provided by financing activities was $9.2 million for the nine months ended September 30, 2022 compared to $74.6 million of cash used in financing activities for the nine months ended September 30, 2021, respectively. The change in net cash provided by (used in) financing activities primarily resulted from $10.7 million of net borrowings on the revolving Credit Facility for the nine months ended September 30, 2022 compared to a net $58.6 million of cash used to repurchase 2025 Notes and $13.1 million of repayments on the revolving Credit Facility during the nine months ended September 30, 2021. 26 Supplemental Guarantor Financial Information The Company’s 2025 Notes are guaranteed by our domestic subsidiaries which are 100% owned, directly or indirectly, by the Company. The guarantees are full and unconditional, joint and several. The guarantees of the 2025 Notes are (i) pari passu in right of payment with all existing and future senior indebtedness of such guarantor, including all obligations under our Credit Facility; (ii) secured by certain collateral of such guarantor, subject to permitted liens under the indenture governing the 2025 Notes; (iii) effectively senior to all unsecured indebtedness of that guarantor, to the extent of the value of the collateral securing the 2025 Notes (after giving effect to the liens securing our Credit Facility and any other senior liens on the collateral); and (v) senior in right of payment to any future subordinated indebtedness of that guarantor. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries of the 2025 Notes, the non-guarantor subsidiaries of such notes will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company or to any guarantors. The 2025 Notes guarantees shall each be released upon (i) any sale or other disposition of all or substantially all of the assets of such guarantor (by merger, consolidation or otherwise) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary, if the sale or other disposition does not violate the applicable provisions of the indenture governing such notes; (ii) any sale, exchange or transfer (by merger, consolidation or otherwise) of the equity interests of such guarantor after which the applicable guarantor is no longer a subsidiary, which sale, exchange or transfer does not violate the applicable provisions of the indenture governing such notes; (iii) legal or covenant defeasance or satisfaction and discharge of the indenture governing such notes; or (iv) dissolution of such guarantor, provided no default or event of default has occurred that is continuing. The obligations of each guarantor of the 2025 Notes under its guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such guarantor (including, without limitation, any guarantees under the Credit Facility) and any collections from or payments made by or on behalf of any other guarantor in respect of the obligations of such other guarantor under its guarantee or pursuant to its contribution obligations under the applicable indenture, result in the obligations of such guarantor under its guarantee not constituting a fraudulent conveyance, fraudulent preference or fraudulent transfer or otherwise reviewable transaction under applicable law. Nonetheless, in the event of the bankruptcy, insolvency or financial difficulty of a guarantor, such guarantor’s obligations under its guarantee may be subject to review and avoidance under applicable fraudulent conveyance, fraudulent preference, fraudulent transfer and insolvency laws. We are presenting the following summarized financial information for the Company and the subsidiary guarantors (collectively referred to as the "Obligated Group") pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Company and the subsidiary guarantors, presented on a combined basis, have been eliminated and information for the non-guarantor subsidiaries have been excluded. Amounts due to the non-guarantor subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information below. 27 Summarized financial information for the year-to-date interim period and the most recent annual period was as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Summarized Statements of Operations 2022 2021 2022 2021 Revenue $ 145,028 $ 108,099 $ 398,412 $ 287,336 Cost of sales 108,175 86,495 299,714 229,143 Operating income (loss) 19,013 (3,998) 39,096 (31,892) Net income (loss) 16,477 (11,587) 16,542 (63,056) September 30, 2022 December 31, 2021 Summarized Balance Sheet Current assets $ 361,048 $ 327,281 Non-current assets 276,435 298,172 Current liabilities $ 166,770 $ 144,487 Payables to non-guarantor subsidiaries 132,073 125,281 Non-current liabilities 268,622 259,622 Critical accounting policies and estimates There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2022. For a detailed discussion of our critical accounting policies and estimates, refer to our 2021 Annual Report on Form 10-K. For recent accounting pronouncements, refer to Note 2 Recent Accounting Pronouncements . Item 3. Quantitative and qualitative disclosures about market risk Not required under Regulation S-K for “smaller reporting companies.”