What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-03-04 · 97 added, 126 removed, 242 unchanged (48% of the section changed)

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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.

These consumable products are used in drilling, well construction and completions activities and at processing centers and refineries.

Our engineered capital products are directed at drilling rig equipment for constructing new and upgrading existing rigs, 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.

In 2022, over 68% 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.

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Market Conditions

The level of demand for our products is directly related to the activity levels and the capital and operating budgets of our customers, which in turn are heavily influenced by energy prices and expectations as to future price trends.

In addition, the availability of existing capital equipment adequate to serve exploration and production requirements, or lack thereof, drives demand for our capital equipment products.

In 2020, the COVID-19 pandemic and associated actions taken around the world to mitigate the spread of COVID-19 caused unprecedented declines in economic activity, energy demand and oil and natural gas prices.

In response, OPEC+ implemented significant reductions in oil production and North American exploration and production companies aggressively reduced drilling and completion activities.

In response to the decline in demand for our products in 2020, we implemented significant cost reduction actions, including exiting facilities, lowering headcount, reducing salaries, temporarily suspending the Company’s matching contribution to the U.S.

and Canada defined contribution retirement plans, and furloughing select employee groups.

Certain facility closures and headcount reduction efforts continued into 2021.

During 2021, distribution of vaccines and reopening of certain economies resulted in increasing demand for oil and natural gas.

At the same time, the supply of oil and natural gas has been impacted by ongoing constraints by OPEC+ and North American exploration and production companies.

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.

In addition, ongoing COVID-19 outbreaks and worldwide labor constraints continue to cause disruptions in global supply chains, which have led to inflationary pressures for certain goods and services.

During 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, together with various governmental responses thereto, 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 779 rigs as of the end of 2022 from a low of 244 rigs in August 2020.

The level of active hydraulic fracturing fleets also increased substantially in 2021 in order to meet increasing oil demand.

Despite these improvements, drilling and completions activity remains significantly below pre-pandemic levels.

In addition, publicly owned exploration and production companies in North America remain under pressure to generate positive cash flows and constrain capital expenditures.

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.

Furthermore, consolidation of exploration and production and service companies continued in 2021.

The level of active hydraulic fracturing fleets also increased substantially in 2022 in order to meet increasing oil and natural gas demand.

Despite these improvements, drilling and completions activity remains below pre-pandemic levels.

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.

Privately owned exploration and production companies will fluctuate their drilling and completions activity in response to changes in oil and natural gas prices.

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 capital equipment offerings increased during 2021 due to an improved outlook for our international drilling customers and the diversification of our subsea product line outside of the oil and natural gas industry.

On December 31, 2020, we sold assets pertaining to our ABZ and Quadrant valve brands for total consideration of $104.6 million, and recognized a gain on disposition of $88.4 million.

The disposition of these brands resulted in a substantial decrease in our Valve Solutions product line’s revenue compared to the prior year.

As a result, demand for our drilling and subsea offerings increased during 2022 due to an improved outlook for our international drilling and subsea customers.

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:

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Henry Hub $ 6.45 $ 3.89

The price of oil has varied dramatically over the last two 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 have rebounded to an average of $68.13 and $70.86 for WTI and Brent, respectively, as of December 31, 2021.

The price of oil has varied dramatically over the last three years.

The spot prices for WTI and Brent fell to lows below $15.00 per barrel in April 2020 and rebounded to $48.35 and $51.22, respectively, by December 31, 2020.

Prices continued to rebound during 2021 and ended the year up more than 50%.

The first half of 2022 saw further increases with WTI and Brent prices reaching highs of $123.64 and $133.18, respectively, before retreating during the second half of 2022 and ending the year at $80.16 and $82.82 for WTI and Brent, respectively.

In addition, average natural gas prices were 65.8% higher in 2022 compared to 2021.

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Commodity Target

Oil/Gas 379 345

Unclassified 1 3

Active Rigs 723 478

Horizontal 659 431

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Active Rigs 723 478

A substantial portion of our revenue is impacted by the level of rig activity and the number of wells completed.

A substantial portion of our revenues is impacted by the level of rig activity and the number of wells completed.

The average U.S.

rig count for 2021 increased 10% as compared to 2020, while the international rig count decreased 8% compared to 2020.

rig count for 2022 increased 51% as compared to 2021, while the international rig count increased 13% compared to 2021.

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 with 586 rigs as of December 31, 2021.

Since that time, the number of active rigs has partially recovered, ending 2022 at 779 rigs.

Despite this improvement, the U.S.

drilling rig count remains significantly below pre-pandemic levels.

drilling rig count remains below pre-pandemic levels.

The table below shows the amount of total inbound orders by segment for the years ended December 31, 2022 and 2021:

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Eliminations (1,122) (555) (567) *

Total revenue $ 541,068 $ 512,476 28,592 5.6 %

Total revenues $ 699,913 $ 541,068 $ 158,845 29.4 %

Cost of sales

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Total cost of sales $ 511,387 $ 417,727 $ 93,660 22.4 %

Gross profit:

Drilling & Downhole $ 97,589 $ 69,285 $ 28,304 40.9 %

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Corporate (34,268) (31,408) (2,860) (9.1) %

Total segment operating loss $ (45,545) $ (208,698) $ 163,153 78.2 %

Total segment operating income (loss) $ 9,055 $ (45,545) $ 54,600 119.9 %

Operating margin % 1.3 % (8.4) %

Impairments of intangible assets, property and equipment — 20,394 (20,394) *

Loss (gain) on disposal of assets and other (1,052) 2,531 (3,583) *

Operating loss (44,493) (231,623) 187,130 80.8 %

Gain on sale-leaseback transactions (7,000) — (7,000) *

Gain on disposal of assets and other (1,271) (1,052) (219) *

Operating income (loss) 17,326 (44,493) 61,819 138.9 %

Interest expense 31,525 32,009 (484) (1.5) %

Foreign exchange losses and other, net 217 6,470 (6,253) *

Loss (gain) on extinguishment of debt 5,290 (72,478) 77,768 *

Deferred loan costs written off — 2,262 (2,262) *

Gain on disposition of business — (88,375) 88,375 *

Total other (income) expense, net 37,516 (121,853) 159,369 *

Loss before income taxes (82,009) (109,770) 27,761 25.3 %

Income tax expense (benefit) 642 (12,881) 13,523 *

Net loss (82,651) (96,889) 14,238 14.7 %

Foreign exchange losses (gains) and other, net (24,548) 217 (24,765) *

Loss on extinguishment of debt — 5,290 (5,290) *

Total other expense 6,977 37,516 (30,539) *

Income (loss) before income taxes 10,349 (82,009) 92,358 112.6 %

Income tax expense 6,637 642 5,995 *

Net income (loss) $ 3,712 $ (82,651) $ 86,363 104.5 %

Weighted average shares outstanding

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Diluted 5,951 5,643

Loss per share

Earnings (loss) per share

Basic $ 0.65 $ (14.65)

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Our revenue for the year ended December 31, 2022 was $699.9 million, an increase of $158.8 million, or 29.4%, compared to the year ended December 31, 2021.

For the year ended December 31, 2021, our Drilling & Downhole segment, Completions segment, and Production segment comprised 44.3%, 34.1% and 21.6% of our total revenue, respectively, compared to 42.3%, 23.1% and 34.6%, respectively, for the year ended December 31, 2020.

The overall increase in revenue is primarily related to higher sales volumes in the Drilling and Downhole and Completions segments due to improving market conditions in 2021 compared to 2020, which was negatively impacted by the COVID 19 pandemic.

Offsetting the overall increase is a $41.1 million decrease from the fourth quarter 2020 divestiture of our ABZ and Quadrant valve brands within our Production segment.

The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was $239.9 million for the year ended December 31, 2021, an increase of $23.1 million, or 10.6%, compared to the year ended December 31, 2020.

This increase includes an $18.5 million, or 33.3%, increase in revenue for our Subsea Technologies product line primarily due to higher sales of Work Class ROVs into international markets.

Revenue for our Downhole Technologies product line increased by $5.1 million, or 8.0%, primarily due to higher sales volumes of casing and cementing tools as the number of wells drilled in 2021 recovered from the historically low activity levels in 2020 during the COVID 19 pandemic.

Revenue for our Drilling Technologies product line was comparable year-over-year as higher sales volumes of consumable products were offset by lower repair and service revenues.

Completions segment — Revenue was $185.0 million for the year ended December 31, 2021, an increase of $66.3 million, or 55.9%, compared to the year ended December 31, 2020.

This increase includes a $40.3 million, or 71.3%, increase in sales volumes for our Stimulation and Intervention product line and a $26.1 million, or 42%, 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 2021 compared to a rapidly declining market in 2020 when service companies were idling equipment in response to historically low levels of oil demand as a result of the COVID 19 pandemic.

Production segment — Revenue was $116.7 million for the year ended December 31, 2021, a decrease of $60.8 million, or 34.3%, compared to the year ended December 31, 2020.

This decrease includes a $41.1 million decline from the divestiture of our ABZ and Quadrant valve brands in the fourth quarter 2020.

The remaining decrease was driven by a $15.0 million decline in sales volumes of our valve products, particularly sales into the North America downstream and midstream markets, and a $4.8 million decrease in revenue for our Production Equipment product line from lower sales volumes of our surface production equipment, partially offset by higher sales volumes for our process oil treatment equipment due to increased project activity with international downstream customers.

For the year ended December 31, 2022, our Drilling & Downhole segment, Completions segment, and Production segment comprised 43.5%, 37.7% and 18.8% of our total revenues, respectively, compared to 44.3%, 34.1% and 21.6%, respectively, for the year ended December 31, 2021.

The overall increase in revenues is primarily related to higher sales volumes due to improving market conditions in 2022 compared to 2021 as a result of higher drilling and completions activity levels to support increasing global energy demand.

The changes in revenues by operating segment consisted of the following:

Drilling & Downhole segment — Revenues were $304.6 million for the year ended December 31, 2022, an increase of $64.7 million, or 27.0%, compared to the year ended December 31, 2021.

This increase includes a $46.7 million, or 48.3%, increase in revenues for our Drilling Technologies product line primarily due to higher sales volumes of consumable products and capital equipment from the 28.1% year-over-year increase in global rig count.

Revenues for our Downhole Technologies product line increased by $15.8 million, or 22.8%, primarily due to higher sales volumes of artificial lift products due to the increase in the number of well completions and workovers in the current year compared to prior year.

Revenues for our Subsea Technologies product line were comparable with the prior year.

Completions segment — Revenues were $265.0 million for the year ended December 31, 2022, an increase of $79.9 million, or 43.2%, compared to the year ended December 31, 2021.

This increase includes a $59.6 million, or 61.6%, increase in revenues for our Stimulation and Intervention product line and a $20.3 million, or 23%, increase in revenues for our Coiled Tubing product line.

The increase of revenues in our Simulation and Intervention product line was primarily due to the higher capital equipment sales to pressure pumping customers and increasing service company demand of wireline cable to support hydraulic fracturing activity.

The increase in revenues for our Coiled Tubing product line was driven by increasing U.S.

hydraulic fracturing activity levels.

Production segment — Revenues were $131.5 million for the year ended December 31, 2022, an increase of $14.8 million, or 12.7%, compared to the year ended December 31, 2021.

Of the total segment’s increase in revenues, $8.9 million or 14.6% was due to higher project revenues for our processing and treatment equipment within our Production Equipment product line.

The remaining $5.9 million or 10.5% of the increase is from our Valve Solutions product line due to higher sales volumes in the North America downstream market.

Segment operating income (loss) and segment operating margin percentage

Segment operating loss for the year ended December 31, 2021 was $45.5 million compared to a loss of $208.7 million for the year ended December 31, 2020.

Segment operating income for the year ended December 31, 2022 was $9.1 million compared to a loss of $45.5 million for the year ended December 31, 2021.

For the year ended December 31, 2022, segment operating margin percentage was 1.3% compared to (8.4)% for the year ended December 31, 2021.

Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period.

The change in operating loss and segment operating margin percentage for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $4.7 million, or 2.0%, for the year ended December 31, 2021 compared to a loss of $48.0 million, or (22.1)%, for the year ended December 31, 2020.

The $52.7 million improvement in segment operating results includes higher gross profit from the 10.6% increase in revenues discussed above.

In addition, operating results improved due to a $20.4 million decrease in inventory write downs, a $5.3 million decrease in impairments of operating lease right of use assets and reductions in restructuring and employee related costs due to headcount, salary and other cost reductions implemented in 2020.

Completions segment — Segment operating loss was $4.5 million, or (2.4)%, for the year ended December 31, 2021 compared to a loss of $97.3 million, or (82.0)% for the year ended December 31, 2020.

The $92.8 million improvement in segment operating results includes higher gross profit from the 55.9% increase in revenues discussed above.

In addition, operating results improved due to a $51.4 million decrease in inventory write downs, a $6.1 million decrease in impairments of operating lease right of use assets and reductions in restructuring and employee related costs due to headcount, salary and other cost reductions implemented in 2020.

Production segment — Segment operating loss was $14.4 million, or (12.3)%, for the year ended December 31, 2021 compared to a loss of $33.4 million, or (18.8)% for the year ended December 31, 2020.

The $19.1 million improvement in segment operating results is primarily attributable to a $20.9 million decrease in inventory write downs, a $2.2 million decrease in impairments of operating lease right of use assets and reductions in restructuring and employee related costs due to headcount, salary and other cost reductions implemented in 2020.

improvements in operating results were partially offset by the reduction in operating income from the fourth quarter 2020 disposition of our ABZ and Quadrant valve brands.

Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenues for the period.

The change in operating income (loss) and segment operating margin percentage for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $32.2 million, or 10.6%, for the year ended December 31, 2022 compared to $4.7 million, or 2.0%, for the year ended December 31, 2021.

The $27.5 million improvement in segment operating results includes higher gross profit from the 27.0% increase in revenues discussed above, partially offset by higher freight and employee related costs.

Completions segment — Segment operating income was $11.6 million, or 4.4%, for the year ended December 31, 2022 compared to a loss of $4.5 million, or (2.4)% for the year ended December 31, 2021.

The $16.1 million improvement in segment operating results includes higher gross profit from the 43.2% increase in revenues discussed above, partially offset by higher freight and employee related costs.

Production segment — Segment operating loss was $0.4 million, or (0.3)%, for the year ended December 31, 2022 compared to $14.4 million, or (12.3)% for the year ended December 31, 2021.

The $13.9 million improvement in segment operating results included the higher gross profit from the 12.7% increase in revenues discussed above, 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 $34.3 million for the year ended December 31, 2022, a $2.9 million increase compared to the year ended December 31, 2021.

This increase was primarily related to higher variable compensation costs, partially offset by a $1.5 million decrease in impairments of operating lease right of use assets and a decrease in professional fees.

This increase was primarily related to higher variable compensation costs.

Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel;

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and marketing costs.

Other items not included in segment operating loss

Several items are not included in segment operating loss, but are included in the total operating loss.

These items include impairments of intangible assets, property and equipment, and loss (gain) on disposal of assets and other.

For further information related to impairments of intangible assets, property and equipment, see Note 8 Impairments of Long-Lived Assets .

Other items not included in segment operating income (loss)

Several items are not included in segment operating income (loss), but are included in the total operating income (loss).

These items include Gain on sale-leaseback transactions and Gain on disposal of assets and other.

For further information related to Gain on sale-leaseback transactions, see Notes 6 Property and Equipment and 9 Leases.

Other income and expense

Other income and expense includes interest expense, loss (gain) on extinguishment of debt, deferred loan costs written off, foreign exchange losses and other, net, and gain on disposition of business.

We incurred $32.0 million of interest expense during the year ended December 31, 2021, an increase of $1.7 million compared to the year ended December 31, 2020 due to higher non-cash amortization of debt discount and debt issuance costs associated with our 2025 Notes as well as a higher interest rate on our 2025 Notes compared to our previous 2021 Notes.

These increases were partially offset by lower average debt balances outstanding in 2021 compared to 2020.

The foreign exchange losses are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S.

Other income and expense includes interest expense, loss on extinguishment of debt and foreign exchange losses.

We incurred $31.5 million of interest expense during the year ended December 31, 2022, which is comparable to the year ended December 31, 2021.

The foreign exchange gains and losses are primarily the result of movements in the British pound, Euro and Canadian dollar relative to the U.S.

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.

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The net carrying value of the extinguished debt, including unamortized debt discount and debt issuance costs, was $53.3 million.

During the year ended December 31, 2020, we recognized $72.5 million of gains on extinguishment of debt, including a $43.8 million gain from the repurchase of notes in the first half of 2020 and a $28.7 million gain from the exchange of notes in the third quarter of 2020.

During the first half of 2020, we repurchased an aggregate $71.9 million of principal amount of our 6.25% unsecured notes due 2021 (the “2021 Notes”) for $27.7 million and recognized a net gain of $43.8 million reflecting the difference in the amount paid and the net carrying value of the extinguished debt, including debt issuance costs and unamortized debt premium.

In the third quarter of 2020, we exchanged $315.5 million principal amount of 2021 Notes for new 2025 Notes.

This transaction was accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date, resulting in a $28.7 million gain on extinguishment of debt.

See Note 9 Debt for further information.

During the year ended December 31, 2020, we wrote-off $2.3 million of deferred loan costs including $2.0 million for the termination of previous discussions related to a potential exchange offer for our 2021 Notes and $0.3 million related to amending our Credit Facility.

In the fourth quarter of 2020, we sold certain assets of our ABZ and Quadrant valve brands and recognized a gain on disposition totaling $88.4 million.

See Note 4 Acquisitions & Dispositions for further information related to this transaction.

We recorded tax expense of $6.6 million for the year ended December 31, 2022 compared to a tax benefit of $0.6 million for the year ended December 31, 2021.

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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.

The tax benefit for the year ended December 31, 2020 included a $16.6 million benefit related to a carryback claim for U.S.

federal tax losses based on provisions in the U.S.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020.

The CARES Act provided relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, increased the 30% limitation on interest expense

deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerated refunds for minimum tax credit carryforwards, among other provisions.

The tax effects of changes in tax laws are recognized in the period in which the law is enacted.

See Note 11 Income Taxes for additional information.

Liquidity and capital resources

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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 December 31, 2020, we had $316.9 million principal amount of 2025 Notes outstanding and $13.1 million outstanding under our revolving Credit Facility.

During the year ended December 31, 2021, we repurchased $59.9 million principal amount of our 2025 Notes and repaid the $13.1 million outstanding under our revolving Credit Facility.

Following these transactions, we had $257.0 million principal amount of 2025 Notes and no borrowings outstanding under our Credit Facility as of December 31, 2021.

In September 2021, we amended our Credit Facility to, among other things, extend the maturity date to September 2026, reduce the aggregate amount of the commitment under the Credit Facility to $179.0 million, and change the interest rate applicable to outstanding loans.

We had outstanding $257.0 million principal amount of 2025 Notes and no borrowings under our Credit Facility as of December 31, 2022 and 2021.

Subsequently in January 2023, $122.8 million principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of our common stock.

See Note 8 Debt for further details related to the terms for our 2025 Notes and Credit Facility.

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We expect our available cash on-hand, cash generated by operations, and estimated availability under our 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.

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.

In the fourth quarter of 2021, we repurchased approximately 56,000 shares of our common stock for aggregate consideration of approximately $1.1 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.

In the fourth quarter of 2022, we repurchased approximately 103 thousand shares of our common stock for aggregate consideration of approximately $3.0 million.

Remaining authorization under this program is $5.9 million.

In the fourth quarter of 2021, we completed the acquisition of Hawker Equipment Solutions, LLC (“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.

In 2020, we completed the disposition of our ABZ and Quadrant valve brands for total cash consideration of $103.4 million.

For additional information, see Note 4 Acquisitions & Dispositions.

For additional information, see Note 4 Acquisition .

We may pursue acquisitions in the future, which may be funded with cash and/or equity.

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Year ended December 31,

Net cash provided by (used in) operating activities $ (15,775) $ 3,883

Net cash used in operating activities $ (17,054) $ (15,775)

Net cash provided by investing activities 27,139 10,698

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Net increase (decrease) in cash, cash equivalents and restricted cash $ 4,171 $ (81,759)

Net cash provided by (used in) operating activities

Net cash used in operating activities was $15.8 million for the year ended December 31, 2021 compared to $3.9 million of cash provided by operating activities for the year ended December 31, 2020.

The decline in operating cash flows is primarily attributable to changes in working capital which provided cash of $6.7 million for the year ended December 31, 2021 compared to providing $57.3 million for the year ended December 31, 2020.

This decline was partially offset by an improvement in net income adjusted for non-cash items which used $9.1 million of cash for the year ended December 31, 2021 compared to using $53.5 million of cash for the year ended December 31, 2020.

Net cash used in operating activities

Net cash used in operating activities was $17.1 million for the year ended December 31, 2022 compared to $15.8 million for the year ended December 31, 2021.

During the year ended December 31, 2022, net working capital cash usage was $65.1 million, primarily attributed to an increase in inventory to meet customer demand, compared to net working capital cash usage of $6.7 million for the year ended December 31, 2021.

This decline was partially offset by an improvement in net income adjusted for non-cash items which provided $48.1 million of cash for the year ended December 31, 2022 compared to using $9.1 million of cash for the year ended December 31, 2021.

Net cash provided by investing activities

Net cash provided by investing activities was $10.7 million for the year ended December 31, 2021 including $10.8 million of cash received to settle a note receivable from the 2019 sale of our equity interest in Ashtead Technology and $7.0 million of proceeds from the sale of property and equipment.

These cash inflows were partially offset by $3.4 million of cash paid for the acquisition of Hawker and $2.4 million of capital expenditures.

Net cash provided by investing activities was $108.3 million for the year ended December 31, 2020 including $104.6 million from the sale of certain assets of our ABZ and Quadrant brands of valve products and $5.3 million of proceeds from the sale of property and equipment, partially offset by $2.2 million of capital expenditures.

Net cash provided by investing activities was $27.1 million for the year ended December 31, 2022 including $32.1 million of cash proceeds from sale of land and buildings that were subsequently leased back, partially offset by $7.5 million of capital expenditures.

Net cash provided by investing activities for the year ended December 31, 2021 includes $10.8 million of cash received to settle a note receivable from the 2019 sale of our equity interest in Ashtead Technology and $7.0 million of proceeds from the sale of property and equipment, partially offset by $3.4 million of cash paid for the acquisition of Hawker and $2.4 million of capital expenditures.

Net cash used in financing activities

Net cash used in financing activities was $76.2 million for the year ended December 31, 2021 including $58.6 million of cash used to repurchase 2025 Notes and $13.1 of repayments on the revolving Credit Facility.

Net cash used in financing activities was $41.8 million for the year ended December 31, 2020 including $40.3 million of cash used to repurchase 2021 Notes, $9.7 million paid for deferred financing costs and a $3.5 million early participation payment for the bond exchange.

These cash outflows were partially offset by $13.1 million of net borrowings on our Credit Facility in 2020.

Net cash used in financing activities was $5.1 million for the year ended December 31, 2022 including $3.8 million of repurchase of our common stock and $1.3 million of repayments of debt.

Net cash used in financing activities was $76.2 million for the year ended December 31, 2021 including $58.6 million of cash used to repurchase 2025 Notes and $13.1 million of repayments of the revolving Credit Facility.

Off-balance sheet arrangements

9 unchanged sentences

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;

8 unchanged sentences

Year ended December 31,

(in thousands, except per share information) 2021 2020

(in thousands) 2022 2021

Revenues $ 547,256 $ 401,876

Cost of sales 417,131 323,914

Operating loss (46,827) (238,608)

Net loss (82,651) (96,889)

Operating income (loss) 35,321 (46,827)

Net income (loss) 3,712 (82,651)

Year ended December 31,

(in thousands, except per share information) 2021 2020

(in thousands) 2022 2021

Current assets $ 378,812 $ 327,281

28 unchanged sentences

As such, these modifications are accounted for as if they were part of the existing contract, and therefore, the effect of the modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis.

Inventory, consisting of finished goods and materials and supplies held for resale, is carried at the lower of cost or net realizable value.

Inventories, consisting of finished goods and materials and supplies held for resale, are carried at the lower of cost or net realizable value.

We evaluate our inventories based on an analysis of stocking levels, historical sales levels and future sales forecasts, to determine obsolete, slow-moving and excess inventory.

2 unchanged sentences

For the years ended December 31, 2022 and 2021, we recognized inventory write downs totaling $2.7 million and $8.1 million, respectively.

These charges are all included in “ Cost of sales ” in the consolidated statements of comprehensive loss.

These charges are all included in “ Cost of sales ” in the consolidated statements of comprehensive income (loss).

See Note 5 Inventories for further information related to these charges.

8 unchanged sentences

The impairment loss recognized represents the excess of an assets’ carrying value as compared to its estimated fair value.

For the year ended December 31, 2021, we did not recognize any impairment charges.

For the year ended December 31, 2020, we recognized impairment charges for property and equipment, intangible assets and operating lease right of use assets totaling $15.1 million, $5.3 million and $15.4 million, respectively.

See Note 8 Impairments of Long-Lived Assets for further information related to these charges.

We follow the liability method of accounting for income taxes.

22 unchanged sentences

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 Annual Report on Form 10-K are reasonable, forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from our plans, intentions or expectations.

Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on Form 10-K are reasonable, forward-

looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from our plans, intentions or expectations.

This may be the result of various factors, including, but not limited to, those factors discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis