What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-05 compared with 2023-02-28 · 89 added, 109 removed, 230 unchanged (46% of the section changed)

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We assume no obligation to update any of these forward-looking statements.

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 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.

We are a global manufacturing company serving the oil, natural gas, industrial and renewable energy industries.

With headquarters in Houston, Texas, FET provides value added solutions aimed at improving the safety, efficiency, and environmental impact of our customers’ operations.

Our highly engineered products include capital equipment and consumable products.

FET’s customers include oil and natural gas operators, land and offshore drilling contractors, oilfield service companies, pipeline and refinery operators, and renewable energy and new energy companies.

Consumable products are used by our customers in drilling, well construction and completion activities and at processing centers and refineries.

Our capital products are directed at drilling rig equipment for constructing new or 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 2023, over 60% 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.

We expect that the world’s long-term energy demand will continue to rise for many decades.

We also expect hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources develop to scale.

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 gas operators lower their current emissions while also deploying our existing product technologies in renewable energy applications and seeking to develop innovative equipment.

We are continuing to develop products to help oil and gas operators lower expenses, increase production, and reduce their emissions while also deploying our technologies in renewable energy applications.

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 and trenchers, submarine rescue vehicles, specialty components and tooling, and complementary subsea technical services.

This segment designs, manufactures and supplies products and solutions to the drilling, artificial lift and subsea markets, including applications in oil and natural gas, renewable energy, defense and communications.

The products and solutions consist primarily of:

(i) capital equipment and consumable products used in the drilling process;

(ii) products designed to safeguard artificial lift equipment and cables, and well construction casing and cementing equipment;

and (iii) ROVs and trenchers, submarine rescue vehicles, specialty components and tooling, and 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;

This segment designs, manufactures and supplies products and solutions to the coiled tubing, well stimulation and intervention markets.

The products and solutions consist primarily of:

(i) capital and consumable products sold to the pressure pumping market, 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:

This segment designs, manufactures and supplies products and solutions for the production and infrastructure markets.

The products and solutions 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.

and (ii) a wide range of industrial valves focused on oil and natural gas 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.

Demand for our products and services is directly related to our customers’ capital and operating budgets.

These budgets are heavily influenced by current and expected energy prices.

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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 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 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 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:

Oil and natural gas prices softened in the first half 2023 as a result of global recessionary fears, but rebounded somewhat during the second half of 2023 as supply tightened from further OPEC+ production cuts and growing geopolitical tensions in the Middle East.

These tensions could lead to a disruption to world energy markets and international supply chains.

Despite these near-term macroeconomic challenges, we expect that the world’s long-term energy demand will continue to rise and may outpace global supply as OPEC+ remains committed to maintaining stable oil prices.

We expect that hydrocarbons will continue to play a vital role in meeting the world’s long-term energy needs while renewable energy sources become increasingly prominent.

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

The spot prices for West Texas Intermediate (“WTI”) and United Kingdom Brent (“Brent”) crude oil 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 highs above $120.00 per barrel in March 2022 but have softened in 2023 to an average of $71.89 and $77.69 for WTI and Brent, respectively.

In addition, average natural gas prices were 60.8% lower in 2023 compared to 2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which increased 3.6% in 2023 compared to average global rig count in 2022.

The increase was driven by growth in international rig count in 2023 of 9.6% compared to 2022, while the average U.S.

rig count for 2023 was 5.0% lower than 2022.

International markets grew throughout 2023 and outpaced the U.S.

and are expected to continue to grow in 2024.

In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending while privately owned exploration and production companies fluctuate their activity in response to changes in oil and natural gas prices.

The table below shows average crude oil and natural gas prices for WTI, Brent, and Henry Hub:

Average global oil, $/bbl

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Henry Hub $ 2.53 $ 6.45

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.

The table below shows the average number of active drilling rigs operating by geographic area and drilling for different purposes based on the weekly rig count information published by Baker Hughes Company.

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Active Rigs 687 723

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 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 2022 at 779 rigs.

Despite this improvement, the U.S.

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, 2023 and 2022:

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Eliminations (2,204) (1,122) (1,082) *

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

Total revenue $ 738,864 $ 699,913 $ 38,951 5.6 %

Cost of sales

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Corporate (27,253) (34,268) 7,015 20.5 %

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

Total segment operating income $ 23,764 $ 9,055 $ 14,709 162.4 %

Operating margin % 3.2 % 1.3 %

Transaction expenses 2,892 — 2,892 *

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 %

Loss (gain) on disposal of assets and other 156 (1,271) 1,427 *

Operating income 20,716 17,326 3,390 19.6 %

Interest expense 18,297 31,525 (13,228) (42.0) %

Foreign exchange losses (gains) and other, net 10,233 (24,548) 34,781 *

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

Total other expense 28,530 6,977 21,553 *

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For the year ended December 31, 2023, our Drilling & Downhole segment, Completions segment, and Production segment comprised 44.6%, 35.7% and 19.7% of our total revenues, respectively, compared to 43.5%, 37.7% and 18.8%, respectively, for the year ended December 31, 2022.

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 overall increase in revenues is primarily related to increases in the global rig count, with the increase in international rig count more than offsetting a decline in U.S.

rig count in 2023 compared to 2022.

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

Drilling & Downhole segment — Revenues were $329.6 million for the year ended December 31, 2023, an increase of $25.0 million, or 8.2%, compared to the year ended December 31, 2022.

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.

This increase includes a $27.3 million, or 19.0%, increase in revenues for our Drilling Technologies product line primarily due to higher sales volumes of both consumable products and capital equipment driven by increased international market activity.

Revenues for our Downhole Technologies product line increased by $5.5 million, or 6.4%, primarily due to higher sales volumes of artificial lift products in 2023 compared to 2022.

Revenues for our Subsea Technologies product line decreased by $7.7 million, or 10.1%, from lower project revenue recognized from ROVs and cable management systems, partially offset by an increase in part sales.

Completions segment — Revenues were $265.6 million for the year ended December 31, 2023, an increase of $0.7 million, or 0.3%, compared to the year ended December 31, 2022.

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.

This change includes a revenue increase of $2.0 million, or 1.3%, for our Stimulation and Intervention product line primarily due to higher demand of radiators, wireline cable and high-pressure hoses, partially offset by lower sales volumes in power ends.

Production segment — Revenues were $145.9 million for the year ended December 31, 2023, an increase of $14.3 million, or 10.9%, compared to the year ended December 31, 2022.

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.

The increase of $12.1 million or 17.3%, was primarily due to the project revenue recognized from our process oil treatment equipment within our Production Equipment product line, and a $2.3 million or 3.7%, increase in sales of our valve products.

Segment operating income (loss) and segment operating margin percentage

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.

Segment operating income for the year ended December 31, 2023 was $23.8 million compared to an income of $9.1 million for the year ended December 31, 2022.

For the year ended December 31, 2023, segment operating margin percentage was 3.2% compared to 1.3% for the year ended December 31, 2022.

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.

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

Drilling & Downhole segment — Segment operating income was $33.8 million, or 10.2%, for the year ended December 31, 2023 compared to segment operating income of $32.2 million, or 10.6%, for the year ended December 31, 2022.

The $1.6 million increase in segment operating results was primarily attributable to increased operating leverage on higher revenues for our Drilling Technologies and Downhole Technologies product lines.

Completions segment — Segment operating income of $10.8 million, or 4.1%, for the year ended December 31, 2023 was comparable to segment operating income of $11.6 million, or 4.4% for the year ended December 31, 2022.

The slight decline in operating income is attributed to unfavorable sales mix.

Production segment — Segment operating income was $6.5 million, or 4.4%, for the year ended December 31, 2023 compared to segment operating loss of $0.4 million, or 0.3% for the year ended December 31, 2022.

The $6.9 million increase in segment operating results was driven by the increase in revenues, lower freight costs, as well as increased operating leverage.

Corporate — Selling, general and administrative expenses for Corporate were $27.3 million for the year ended December 31, 2023, a $7.0 million decrease compared to the year ended December 31, 2022.

This decrease was primarily related to lower 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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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.

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

These items include Transaction expenses, Gain on sale-leaseback transactions and Loss (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 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.

Other income and expense includes interest expense and foreign exchange gains and losses.

We incurred $18.3 million of interest expense during the year ended December 31, 2023, a decrease of $13.2 million compared to the year ended December 31, 2022 due to the decline in the balance of our 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

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

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.

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dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S.

During the year ended December 31, 2021, we recognized a $5.3 million loss on extinguishment of debt from the repurchase of 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.

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.

We recorded tax expense of $11.1 million for the year ended December 31, 2023 compared to a tax expense of $6.6 million for the year ended December 31, 2022.

The estimated annual effective tax rates for the years ended December 31, 2023 and 2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

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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 internal sources of liquidity are cash on hand and cash flows from operations, while our primary external sources include trade credit, the Credit Facility, the 2025 Notes and the Seller Term Loan.

Our primary uses of capital have been for inventory, sales on credit to our customers, maintenance and growth capital expenditures, and debt repayments.

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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.

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.

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.

We had outstanding $134.2 million principal amount of 2025 Notes and no borrowings under our Credit Facility as of December 31, 2023.

The 2025 Notes mature in August 2025 and, subject to certain exceptions, the Credit Facility matures in September 2028.

In January 2024, we entered into the Seller Term Loan in connection with the closing of the Variperm Acquisition, which has an initial principal amount of $60.0 million and matures in December 2026.

We also borrowed $90.0 million under the Credit Facility to fund a portion of the purchase price of the Variperm Acquisition.

See Notes 8 Debt and 18 Subsequent Events for further details related to the terms for our debt agreements.

As of December 31, 2023, we had cash and cash equivalents of $46.2 million and $147.1 million of availability under our Credit Facility.

Upon closing of the Variperm Acquisition on January 4, 2024, our net availability under our Credit Facility was approximately $73.1 million.

We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues.

Furthermore, availability under our Credit Facility will fluctuate directionally based on the level of our eligible accounts receivable and inventory subject to applicable sublimits.

In addition, we expect total 2023 capital expenditures to be less than $15.0 million, consisting of, among other items, replacing end of life machinery and equipment.

In addition, we expect total 2024 capital expenditures to be approximately $10 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 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 or repurchase shares of our common stock under our repurchase program.

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 outstanding debt 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.

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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.

During 2023, we repurchased approximately 139 thousand shares of our common stock for aggregate consideration of approximately $3.5 million.

Remaining authorization under this program is $2.4 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.

For additional information, see Note 4 Acquisition .

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

In January 2024, we completed the Variperm Acquisition for consideration of $150.0 million of cash (subject to customary purchase price adjustments) and 2.0 million shares of our common stock.

We may pursue additional 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.

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Year ended December 31,

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

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

Net cash provided by (used in) operating activities $ 8,183 $ (17,054)

Net cash provided by (used in) investing activities (6,573) 27,139

Net cash used in financing activities (7,582) (5,076)

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Net increase (decrease) in cash, cash equivalents and restricted cash $ (4,864) $ 4,171

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.

Net cash provided by (used in) operating activities

Net cash provided by operating activities was $8.2 million for the year ended December 31, 2023 compared to net cash used in $17.1 million for the year ended December 31, 2022.

During the year ended December 31, 2023, net working capital cash usage was $21.5 million, primarily attributed to an increase in inventory to meet customer demand, compared to net working capital cash usage of $65.1 million for the year ended December 31, 2022.

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 $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.

This improvement was partially offset by a decline in net income adjusted for non-cash items which provided $29.6 million of cash for the year ended December 31, 2023 compared to provided $48.1 million of cash for the year ended December 31, 2022.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $6.6 million for the year ended December 31, 2023 including $7.9 million of capital expenditures, partially offset by $1.4 million of proceeds from the sale of property and equipment.

Net cash provided by investing activities 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 used in financing activities

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.

Net cash used in financing activities was $7.6 million for the year ended December 31, 2023 including $6.0 million of cash used to repurchase of our common stock and $1.3 million of repayments of debt.

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

Off-balance sheet arrangements

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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;

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 and the Seller Term Loan;

(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.

and (iv) 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.

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Cautionary note regarding forward-looking statements

This Annual Report on Form 10-K 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”).

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of 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.

7 unchanged sentences

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