FORUM ENERGY TECHNOLOGIES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included under Item 8 of this Annual Report on Form 10-K. This
discussion contains forward-looking statements based on our current
expectations, estimates and projections about our operations and the industry in
which we operate. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of a variety of
risks and uncertainties, including those described in "Risk Factors" and
"Cautionary note regarding forward-looking statements" and elsewhere in this
Annual Report on Form 10-K. We assume no obligation to update any of these
forward-looking statements.

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. In 2021, over 78% 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 gas operators lower their current emissions
while also deploying our existing product technologies in renewable energy
applications and seeking to develop innovative equipment.

Here is a summary of the products and services offered by each segment:

•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.

•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.

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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. 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.

Our revenues are highly correlated to the U.S. drilling rig count, which has
increased to 586 rigs as of the end of 2021 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.

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.

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:

                                                  2021         2020
Average global oil, $/bbl
West Texas Intermediate                         $ 68.13      $ 39.16
United Kingdom Brent                            $ 70.86      $ 41.96

Average North American Natural Gas, $/Mcf
Henry Hub                                       $  3.89      $  2.03


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. In addition, average natural
gas prices were 91.6% higher in 2021 compared to 2020.


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

                                                      2021        2020
                      Active Rigs by Location
                      United States                    478         433
                      Canada                           132          89
                      International                    755         825
                      Global Active Rigs             1,365       1,347

                      Land vs. Offshore Rigs
                      Land                           1,172       1,133
                      Offshore                         193         214
                      Global Active Rigs             1,365       1,347

                      U.S. Commodity Target
                      Oil/Gas                          379         345
                      Gas                               98          85
                      Unclassified                       1           3
                      Total U.S. Rigs                  478         433

                      U.S. Well Path
                      Horizontal                       431         384
                      Vertical                          22          21
                      Directional                       25          28
                      Total U.S. Active Rigs           478         433


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 2021 increased
10% as compared to 2020, while the international rig count decreased 8% compared
to 2020. 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 with 586 rigs as of December 31, 2021. Despite this
improvement, the U.S. drilling rig count remains significantly below
pre-pandemic levels.

The table below shows the total amount of incoming orders by segment for the years ended December 31, 2021 and 2020:

                     (in millions of dollars)        2021         2020
                     Orders:
                     Drilling & Downhole           $ 282.6      $ 208.5
                     Completions                     207.0        112.8
                     Production                      142.7        151.3
                     Total Orders                  $ 632.3      $ 472.6





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  Table of Contents
Results of operations

                                                        Year ended December 31,                          Change
(in thousands of dollars, except per share
information)                                            2021                2020                  $                  %
Revenue:
Drilling & Downhole                                $   239,895          $  216,836          $   23,059               10.6  %
Completions                                            185,018             118,685              66,333               55.9  %
Production                                             116,710             177,510             (60,800)             (34.3) %
Eliminations                                              (555)               (555)                  -                     *
Total revenue                                      $   541,068          $  512,476              28,592                5.6  %
Cost of sales:
Drilling & Downhole                                $   170,610          $  192,640          $  (22,030)             (11.4) %
Completions                                            146,240             165,098             (18,858)             (11.4) %
Production                                             101,432             166,314             (64,882)             (39.0) %
Eliminations                                              (555)               (555)                  -                     *
Total cost of sales                                $   417,727          $  523,497          $ (105,770)             (20.2) %
Gross profit:
Drilling & Downhole                                $    69,285          $   24,196          $   45,089              186.3  %
Completions                                             38,778             (46,413)             85,191              183.5  %
Production                                              15,278              11,196               4,082               36.5  %
Total gross profit                                 $   123,341          $  (11,021)         $  134,362            1,219.1  %
Selling, general and administrative expenses:
Drilling & Downhole                                $    64,536          $   72,160          $   (7,624)             (10.6) %
Completions                                             43,310              50,891              (7,581)             (14.9) %
Production                                              29,632              44,614             (14,982)             (33.6) %
Corporate                                               31,408              30,012               1,396                4.7  %

Total selling, general and administrative expenses $168,886 $197,677 ($28,791)

             (14.6) %
Segment operating income (loss):
Drilling & Downhole                                $     4,749          $  (47,964)         $   52,713              109.9  %
Operating margin %                                         2.0  %            (22.1) %
Completions                                             (4,532)            (97,304)             92,772               95.3  %
Operating margin %                                        (2.4) %            (82.0) %
Production                                             (14,354)            (33,418)             19,064               57.0  %
Operating margin %                                       (12.3) %            (18.8) %
Corporate                                              (31,408)            (30,012)             (1,396)              (4.7) %
Total segment operating loss                       $   (45,545)         $ (208,698)         $  163,153               78.2  %
Operating margin %                                        (8.4) %            (40.7) %
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  %
Interest expense                                        32,009              30,268               1,741                5.8  %
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  %

Weighted average shares outstanding
Basic                                                    5,643               5,577
Diluted                                                  5,643               5,577
Loss per share
Basic                                              $    (14.65)         $   (17.37)
Diluted                                            $    (14.65)         $   (17.37)
* not meaningful




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Income

Our revenue for the year ended December 31, 2021 was $541.1 million, an increase
of $28.6 million, or 5.6%, compared to the year ended December 31, 2020. 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.

Segment operating profit (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. For
the year ended December 31, 2021, segment operating margin percentage was (8.4)%
compared to (40.7)% for the year ended December 31, 2020. 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. These
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improvements in operating results were partially offset by reduced operating profit resulting from the fourth quarter 2020 divestiture of our ABZ and Quadrant valve brands.

Corporate - Selling, general and administrative expenses for Corporate were
$31.4 million for the year ended December 31, 2021, a $1.4 million increase
compared to the year ended December 31, 2020. 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. 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 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 income and expenses

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

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.

Taxes

We recorded tax expense of $0.6 million for the year ended December 31, 2021
compared to a tax benefit of $12.9 million for the year ended December 31, 2020.
The estimated annual effective tax rates for the years ended December 31, 2021
and 2020 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.

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
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50% deductibility of adjusted taxable income for 2019 and 2020 and accelerated refunds for minimum tax credit carryovers, 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 more information.

Cash 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 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.

See Note 9 Debt for more details on the terms of our 2025 Notes and our Credit Facility.

As of December 31, 2021, we had cash and cash equivalents of $46.9 million and
$127.4 million of availability under our Credit Facility. 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 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 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. Remaining authorization under this program is $8.9 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. We may pursue 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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Our cash flows for the years ended December 31, 2021 and 2020 are presented
below (in thousands):

                                                                           Year ended December 31,
                                                                          2021                     2020
Net cash provided by (used in) operating activities               $     (15,775)              $     3,883
Net cash provided by investing activities                                10,698                   108,250
Net cash used in financing activities                                   (76,243)                  (41,765)
Effect of exchange rate changes on cash                                    (439)                      338

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                              $     (81,759)              $    70,706


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 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 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.

Off-balance sheet arrangements

As of December 31, 2021, we had no off-balance sheet instruments or financial
arrangements, other than letters of credit entered into in the ordinary course
of business. For additional information, refer to Note 13 Commitments and
Contingencies.

Additional financial information about the guarantor

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
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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.

The summarized financial information was as follows (in thousands):

                                                     Year ended December 

31,

(in thousands, except per share information)           2021               2020
Revenues                                       $     401,876           $ 393,704
Cost of sales                                        323,914             431,670
Operating loss                                       (46,827)           (238,608)
Net loss                                             (82,651)            (96,889)



                                                     Year ended December 31,
(in thousands, except per share information)           2021               2020
Current assets                                 $     327,281           $ 385,364
Noncurrent assets                                    298,172             332,486

Current liabilities                                  144,487             105,393
Payables to non-guarantor subsidiaries               125,281             102,885
Noncurrent liabilities                               259,622             324,954

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. In preparing our consolidated financial statements, we make
judgments, estimates and assumptions affecting the amounts reported. We base our
estimates on factors including historical experience and various assumptions
that we believe are reasonable under the circumstances. These factors form the
basis for making estimates about the carrying values of assets and liabilities
that are not readily apparent from other sources. Certain accounting policies
involve judgments and uncertainties to such an extent that there is a reasonable
likelihood that materially different amounts could have been reported under
different conditions, or if different assumptions had been used. We evaluate our
estimates and assumptions on a regular basis. Actual results may differ from
these estimates and assumptions used in preparation of our consolidated
financial statements.

In order to provide a better understanding of how we make judgments and develop estimates and assumptions about future events, we have described below our most critical accounting policies and estimates used in the preparation of our consolidated financial statements. .

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Revenue recognition

Revenue is recognized in accordance with Accounting Standards Codification Topic
606 ("ASC 606"), when control of the promised goods or services is transferred
to our customers, in an amount that reflects the consideration we expect to be
entitled to in exchange for those goods or services. For the year ended
December 31, 2021, approximately 91% of our revenue was recognized from goods
transferred to customers at a point in time while 9% of our revenue was
recognized from goods transferred to customers over time.

Although terms of our contracts may vary considerably, the 9% of revenues
recognized over time relate to certain contracts in our Subsea and Production
Equipment product lines which are typically based on a fixed amount for the
entire contract. Recognition over time for these contracts is supported by our
assessment of the products supplied as having no alternative use to us and by
clauses in the contracts that provide us with an enforceable right to payment
for performance completed to date. We use the cost-to-cost method to measure
progress for these contracts because it best depicts the transfer of assets to
the customer which occurs as costs are incurred on the contract. The amount of
revenue recognized is calculated based on the ratio of costs incurred to date
compared to total estimated costs which requires management to calculate
reasonably dependable estimates of total contract costs. Whenever revisions of
estimated contract costs and contract values indicate that the contract costs
will exceed estimated revenues, thus creating a loss, a provision for the total
estimated loss is recorded in that period. We recognize revenue and cost of
sales each period based upon the advancement of the work-in-progress unless the
stage of completion is insufficient to enable a reasonably certain forecast of
profit to be established. In such cases, no profit is recognized during the
period.

Accounting estimates during the course of projects may change. The effect of
such a change, which can be upward as well as downward, is accounted for in the
period of change, and the cumulative income recognized to date is adjusted to
reflect the latest estimates. These revisions to estimates are accounted for on
a prospective basis.

Contracts are sometimes modified to account for changes in product
specifications or requirements. Most of our contract modifications are for goods
and services that are not distinct from the existing contract. 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.

Inventories

Inventory, consisting of finished goods and materials and supplies held for
resale, is 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.
While we have policies for calculating and recording reserves against inventory
carrying values, we exercise judgment in establishing and applying these
policies.

As of December 31, 2021 and 2020, our inventory reserve balances were $62.9
million and $144.9 million, respectively. For the years ended December 31, 2021
and 2020, we recognized inventory write downs totaling $8.1 million and $100.8
million, respectively. These charges are all included in "Cost of sales" in the
consolidated statements of comprehensive loss. See Note 5 Inventories for
further information related to these charges.

Long-lived assets

As of December 31, 2021, our long-lived assets included property and equipment,
definite lived intangibles, and operating lease right of use assets with
balances of $94.0 million, $217.4 million and $25.4 million, respectively. Key
estimates related to long-lived assets include useful lives and recoverability
of carrying values and changes in such estimates could have a significant impact
on financial results.

We review long-lived assets for potential impairment whenever events or changes
in circumstances indicate that the carrying amount of a long-lived asset may not
be recoverable. In performing the review for impairment, future cash flows
expected to result from the use of the asset and its eventual disposal are
estimated. If the undiscounted future cash flows are less than the carrying
amount of the assets, there is an indication that the asset may be impaired. The
amount of the impairment is measured as the difference between the carrying
value and the estimated fair value of the asset. The fair value is determined
either through the use of an external valuation, or by means of an analysis of
discounted future cash flows based on expected utilization. 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.

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Income taxes

We follow the liability method of accounting for income taxes. Under this
method, deferred income tax assets and liabilities are determined based upon
temporary differences between the carrying amounts and tax bases of our assets
and liabilities at the balance sheet date, and are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. We recognize deferred tax assets to the extent that we believe these
assets are more likely than not to be realized. In making such a determination,
we consider all available positive and negative evidence, including future
reversals of existing temporary differences, projected future taxable income,
tax-planning and recent operating results. Any changes in our judgment as to the
realizability of our deferred tax assets are recorded as an adjustment to the
deferred tax asset valuation allowance in the period the change occurs. For the
year ended December 31, 2020, we recognized tax expense for valuation allowances
totaling $25.3 million. See Note 11 Income Taxes for further information related
to these charges.

The accounting guidance for income taxes requires that we recognize the
financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following
an audit. If a tax position meets the "more likely than not" recognition
criteria, the accounting guidance requires the tax position be measured at the
largest amount of benefit greater than 50% likely of being realized upon
ultimate settlement. If management determines that likelihood of sustaining the
realization of the tax benefit is less than or equal to 50%, then the tax
benefit is not recognized in the consolidated financial statements.

We have operations in countries other than the U.S. Consequently, we are subject
to the jurisdiction of a number of taxing authorities. The final determination
of tax liabilities involves the interpretation of local tax laws, tax treaties,
and related authorities in each jurisdiction. Changes in the operating
environment, including changes in tax law or interpretation of tax law and
currency repatriation controls, could impact the determination of our tax
liabilities for a given tax year.

Recent accounting statements

From time to time, new accounting pronouncements are issued by the Financial
Accounting Standards Board ("FASB"), which we adopt as of the specified
effective date. Refer to Note 2 Summary of Significant Accounting Policies for
information related to recent accounting pronouncements.

Caution 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").
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 Annual Report on Form
10-K 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 Annual Report on
Form 10-K, 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 Annual Report
on Form 10-K. 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. 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.

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