Document
false0001723089 0001723089 2020-10-28 2020-10-28


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

October 28, 2020
Date of Report (Date of earliest event reported)

ChampionX Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
001-38441
 
82-3066826
 
 
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
2445 Technology Forest Blvd
Building 4, 12th Floor
The Woodlands, Texas 77381
(Address of principal executive offices and zip code)
(281) 403-5772
(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value
CHX
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  





Item 2.02    Results of Operations and Financial Condition.

On October 28, 2020, ChampionX Corporation issued a news release announcing its preliminary financial results for the fiscal quarter ended September 30, 2020. A copy of the news release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

The information furnished pursuant to this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, (“Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing made by ChampionX Corporation under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.


Item 9.01    Financial Statements and Exhibits.

(d) Exhibits
Exhibit
No.
  
Description
 
 
  






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
ChampionX Corporation
 
 
 
 
 
 
 
Date:
October 28, 2020
 
By:
/s/ JAY A. NUTT
 
 
 
 
 
Jay A. Nutt
 
 
 
 
 
Senior Vice President and Chief Financial Officer
 



Exhibit


Exhibit 99.1

https://cdn.kscope.io/49f218f1ba54dd8de7d1f066148dc33d-championxlogo.jpg


ChampionX Reports Third Quarter 2020 Results

Revenue of $633.5 million
Net loss attributable to ChampionX of $7.9 million; adjusted net income of $5.5 million
Adjusted EBITDA of $86.8 million
Cash from operating activities of $111.4 million and free cash flow of $98.6 million (16% of revenue); free cash flow of $132.0 million excluding $33.4 million of cash payments for transaction and integration expenses
Repaid $82 million of debt
Increasing our annualized run-rate cost synergies target to $125 million (versus prior $75 million)

THE WOODLANDS, TX, October 28, 2020 - ChampionX Corporation (“ChampionX”) (NYSE: CHX) (“the Company”) today announced third quarter of 2020 results, our first full quarter following the June 3, 2020 combination of the Company with the legacy ChampionX business.

For the third quarter of 2020, revenue was $633.5 million, net loss attributable to ChampionX was $7.9 million, and adjusted EBITDA was $86.8 million, including an incremental $12 million of estimated synergies realized on a sequential basis and $6.0 million of isolated benefits. The isolated benefits primarily include gains on dispositions of facilities, and collections of previously reserved customer receivables. Loss before income taxes margin was (1.8)%, and adjusted EBITDA margin was 13.7%. Cash provided by operating activities was $111.4 million, an increase of $62.6 million sequentially, and free cash flow was $98.6 million. Cash flow figures include payment of $33.4 million for final transaction expenses, and for integration expenses in the quarter.

Results on a pro forma basis for ChampionX for prior periods are provided supplementary to the actual results of the Company and represent results on a nine month to-date basis as if legacy ChampionX was combined with the Company for the entire period. Pro forma results are presented in the section titled “ChampionX Pro Forma Results.” For additional information on the pro forma results see note titled “Results on a Pro Forma Basis” below and the tables included in this release.i

CEO Commentary

“The health and safety of our employees remains our highest priority, and we continue in our commitment to take all necessary steps to protect them as we navigate through this global pandemic“ ChampionX’s President and Chief Executive Officer Sivasankaran “Soma” Somasundaram said. “I thank all our employees for their continued dedication as they continue to demonstrate outstanding adaptability and flexibility during these uncertain and challenging times. It is a privilege and an honor for me to lead such a high-performing team.”

“The third quarter marked our first full quarter as a new company. Our strong results demonstrate the power of our strengthened portfolio, expanded global scale, as well as meaningful synergy opportunities, all of which we identified as key reasons to bring together our two organizations. While our third quarter pro forma revenue increased a modest 3% sequentially, our adjusted EBITDA of $87 million represented a pro forma sequential increase of 38%. This speaks to our organization’s laser focus on achieving our targeted cost synergies, as well as the future operating leverage of our combined company’s fit-for-purpose cost structure as we prepare for the eventual global energy industry recovery.

“Amid this severe industry downturn, we further demonstrated the strong positive free cash flow profile of our company as we generated free cash flow of $99 million in the third quarter and we further strengthened our balance sheet by repaying $82 million of debt during the quarter. We ended the quarter with $527 million of liquidity, including $171 million of cash and $355 million of available capacity on our revolver. We remain focused on our free cash flow generation and we intend to continue paying down debt in coming quarters.


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“We are proud of how our team is executing on our merger integration plans. Our execution and realization of cost synergies is accelerating and given our progress to date, we now expect to exit 2020 at an annualized run rate of $70 - $80 million. Given this performance and the pipeline of opportunities ahead of us, we are increasing our targeted cost synergies to $125 million (previously $75 million), which we still anticipate fully capturing within 24 months of the merger closing. In addition to the strong performance in cost synergies, we are starting to see early wins in revenue synergies. During the quarter, we secured a multi-year international contract for artificial lift in Eastern Europe, leveraging our Chemical Technologies footprint and relationships.

“Our performance is underpinned by our relentless focus on helping our customers succeed. In the recent supplier performance report on Artificial Lift published by Kimberlite, ChampionX was again ranked as the leader in customer loyalty, as measured by Net Promoter Score, based on feedback from 400+ customers from 200+ oil & gas companies globally. We have earned this honor five years in a row.

“As we look at the fourth quarter, while visibility continues to remain challenging due to the uncertainty caused by the COVID pandemic, combined with seasonal impacts of holidays and year end E&P budget exhaustion, we are encouraged by the stabilization in the price of oil and the October activity so far. On a consolidated basis, in the fourth quarter we expect revenue to be between $635 million and $650 million, driven by improvement in international Production Chemical Technologies revenue and Drilling Technologies activity, and we expect adjusted EBITDA, adjusting for approximately $6 million of favorable items in the third quarter which will not recur in the fourth quarter, of $80 million to $90 million.

“We are even more excited today about the possibilities for our combined company than we were at the closing of the merger. Our disciplined operating model, differentiated products and technology, strong free cash flow, and enhanced production-focused portfolio, combined with a strong and motivated team, will enable us to be a long-term winner in the evolving global oil & gas industry.”

ChampionX Actual Results
 
 
Three Months Ended
 
Variance
(dollars in thousands, except per share amounts)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Revenue
 
$
633,526

 
$
298,914

 
$
276,839

 
N/M
 
N/M
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to ChampionX
 
$
(7,914
)
 
$
(109,645
)
 
$
11,394

 
N/M
 
N/M
Diluted earnings (loss) per share attributable to ChampionX
 
$
(0.04
)
 
$
(0.95
)
 
$
0.15

 
N/M
 
N/M
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income (loss) attributable to ChampionX
 
$
5,451

 
$
(49,234
)
 
$
18,621

 
N/M
 
(71)%
Adjusted diluted earnings (loss) per share attributable to ChampionX
 
$
0.03

 
$
(0.43
)
 
$
0.24

 
N/M
 
(88)%
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
$
(11,294
)
 
$
(110,001
)
 
$
15,013

 
N/M
 
N/M
Income (loss) before income taxes margin
 
(1.8
)%
 
(36.8
)%
 
5.4
%
 
N/M
 
N/M
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
86,822

 
$
34,461

 
$
63,648

 
152%
 
36%
Adjusted EBITDA margin
 
13.7
 %
 
11.5
 %
 
23.0
%
 
220 bps
 
(930) bps
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
111,399

 
$
48,811

 
$
64,089

 
$62,588
 
$47,310
Capital expenditures
 
$
12,847

 
$
11,855

 
$
8,901

 
$992
 
$3,946
N/M - not meaningful



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ChampionX consolidated actual results in the third quarter of 2020 include the results of operations of the legacy Apergy businesses and results from legacy ChampionX for the entire period. ChampionX consolidated actual results in the second quarter of 2020 include the results of operations of the legacy Apergy businesses for the entire period, and results from legacy ChampionX for June 2020. Third quarter 2019 results represent the results of operations of the legacy Apergy businesses.

Third quarter 2020 consolidated revenue includes $49.5 million of chemical sales to Ecolab Inc. As part of the Merger, the Company entered into a Cross Supply and Product Transfer Agreement with Ecolab in which certain products will be manufactured by one party for the other and sold at cost over a period of no longer than three years from the merger date. Revenue associated with these sales is reported in Corporate and Other within our financial statements.

Production Chemical Technologies - Actual Results
 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sequential
Revenue
 
$
410,151

 
$
136,002

 
N/M
Operating profit
 
$
35,172

 
$
9,922

 
N/M
Operating profit margin
 
8.6
%
 
7.3
%
 
130 bps
Adjusted segment EBITDA
 
$
71,505

 
$
22,431

 
N/M
Adjusted segment EBITDA margin
 
17.4
%
 
16.5
%
 
90 bps

Actual results for Production Chemical Technologies for the second quarter of 2020 only includes the month of June, which makes sequential comparisons for the third quarter of 2020 not meaningful.

Production & Automation Technologies - Actual Results

 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Revenue
 
$
136,921

 
$
114,741

 
$
221,962

 
19%
 
(38)%
Operating profit (loss)
 
$
(7,454
)
 
$
(37,168
)
 
$
18,917

 
N/M
 
N/M
Operating profit (loss) margin
 
(5.4
)%
 
(32.4
)%
 
8.5
%
 
2700 bps
 
(1390) bps
Adjusted segment EBITDA
 
$
24,995

 
$
14,492

 
$
50,462

 
72%
 
(50)%
Adjusted segment EBITDA margin
 
18.3
 %
 
12.6
 %
 
22.7
%
 
570 bps
 
(440) bps
N/M - not meaningful


In the third quarter of 2020, Production & Automation Technologies revenue increased $22.2 million, or 19%, sequentially, due to higher volumes as E&P capital spending began to recover from the rapid reduction experienced earlier in 2020. Sequentially, North America revenue increased 22% and international revenue increased 10%.

Revenue from digital products was $18.6 million in the third quarter of 2020, a decrease of $4.5 million, or 20%, compared to $23.1 million in the second quarter of 2020. The sequential decline in digital revenue was driven by reduced hardware sales due to reductions in E&P capital budgets, however, production and artificial lift related digital revenue increased modestly on a sequential basis.

In the third quarter of 2020, segment operating loss was $7.5 million. Segment adjusted EBITDA was $25.0 million, which increased $10.5 million sequentially, or 72%, primarily due to higher volume and the benefits of cost reduction actions and $2.8 million of isolated benefits, including gains on dispositions of facilities.


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Drilling Technologies - Actual Results

 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Revenue
 
$
15,715

 
$
20,948

 
$
54,877

 
(25)%
 
(71)%
Operating profit (loss)
 
$
(5,127
)
 
$
(3,811
)
 
$
13,797

 
N/M
 
N/M
Operating profit (loss) margin
 
(32.6
)%
 
(18.2
)%
 
25.1
%
 
(1440) bps
 
(5770) bps
Adjusted segment EBITDA
 
$
(2,782
)
 
$
1,800

 
$
16,567

 
N/M
 
N/M
Adjusted segment EBITDA margin
 
(17.7
)%
 
8.6
 %
 
30.2
%
 
(2630) bps
 
(4790) bps
N/M - not meaningful

In the third quarter of 2020, Drilling Technologies revenue decreased by $5.2 million, or 25%, sequentially, driven by the continued decline in worldwide drilling activity, customer destocking of polycrystalline diamond cutter inventories, a product shift mix toward lower price diamond cutters, and lower diamond bearings revenue.

Diamond bearings revenue in the third quarter of 2020 was $2.0 million, down $0.3 million, or 12%, sequentially.

In the third quarter of 2020, segment operating loss was $5.1 million, and segment adjusted EBITDA was a negative $2.8 million. Sequentially, segment adjusted EBITDA decreased by $4.6 million, due to the lower volumes and shift in product mix, partially offset by the benefits of cost reduction actions.

Sequentially, the average worldwide and U.S. rig counts declined 18% and 36%, respectively. On a year-over-year basis, the average worldwide and U.S. rig counts declined 53% and 72%, respectively.
 
Reservoir Chemical Technologies - Actual Results

 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sequential
Revenue
 
$
21,264

 
$
9,306

 
N/M
Operating loss
 
$
(3,819
)
 
$
(2,811
)
 
N/M
Operating loss margin
 
(18.0
)%
 
(30.2
)%
 
1220 bps
Adjusted segment EBITDA
 
$
(1,432
)
 
$
(314
)
 
N/M
Adjusted segment EBITDA margin
 
(6.7
)%
 
(3.4
)%
 
(330) bps

Actual results for Reservoir Chemical Technologies for the second quarter of 2020 only includes the month of June, which makes sequential comparisons for third quarter of 2020 not meaningful.


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ChampionX Pro Forma Results

Results on a pro forma basis for ChampionX are provided supplementary to the actual results of the Company and represent results as if legacy ChampionX was combined with the Company for the entire period.
 
 
 
Three Months Ended
 
Variance
(dollars in thousands, except per share amounts)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Pro forma revenue
 
$
633,526

 
$
614,684

 
$
866,506

 
3%
 
(27)%
 
 
 
 
 
 
 
 
 
 
 
Pro forma net income (loss) attributable to ChampionX
 
$
4,667

 
$
(60,100
)
 
$
53,251

 
N/M
 
(91)%
 
 
 
 
 
 
 
 
 
 
 
Pro forma income (loss) before income taxes
 
$
4,998

 
$
(45,089
)
 
$
77,197

 
N/M
 
(94)%
Pro forma Income (loss) before income taxes margin
 
0.8
%
 
(7.3
)%
 
8.9
%
 
810 bps
 
(810) bps
 
 
 
 
 
 
 
 
 
 
 
Pro forma adjusted EBITDA
 
$
86,822

 
$
62,754

 
$
167,343

 
38%
 
(48)%
Pro forma adjusted EBITDA margin
 
13.7
%
 
10.2
 %
 
19.3
%
 
350 bps
 
(560) bps
N/M - not meaningful

Third quarter of 2020 consolidated revenue includes $49.5 million of chemical sales to Ecolab under the Cross Supply and Product Transfer Agreement with Ecolab.

Revenue for the full third quarter of 2020 was $633.5 million, representing a sequential increase of $18.8 million. Income before income taxes for the full third quarter was $5.0 million. Adjusted EBITDA was $86.8 million, representing an $24.1 million sequential increase from second quarter of 2020 pro forma adjusted EBITDA.

Production Chemical Technologies - Pro Forma Results

 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Revenue
 
$
410,151

 
$
433,128

 
$
514,189

 
(5)%
 
(20)%
Operating profit
 
$
42,793

 
$
37,154

 
$
69,536

 
15%
 
(38)%
Operating profit margin
 
10.4
%
 
8.6
%
 
13.5
%
 
180 bps
 
(310) bps
Adjusted segment EBITDA
 
$
71,505

 
$
58,466

 
$
90,953

 
22%
 
(21)%
Adjusted segment EBITDA margin
 
17.4
%
 
13.5
%
 
17.7
%
 
390 bps
 
(30) bps

Results on a pro forma basis for the Production Chemical Technologies segment are provided supplementary to the results of the segment included in the actual results for the Company. See note titled “Results on a Pro Forma Basis” below and the tables included in this release.

Production Chemical Technologies revenue for the full third quarter of 2020 decreased $23.0 million, or 5%, sequentially, due to lower international volumes driven by the continued curtailment of oil production and pricing concessions. Sequentially, North America revenue was flat and international revenue declined 9%.

Operating profit for the full third quarter of 2020 was $42.8 million. Segment adjusted EBITDA for the full quarter was $71.5 million, which increased $13.0 million sequentially, or 22%, due to cost reduction actions taken and favorable supply chain management, as well as $0.7 million of isolated benefits, including gains on dispositions of fixed assets and other benefits.


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Reservoir Chemical Technologies - Pro Forma Results

 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sep 30,
2020
 
Jun 30,
2020
 
Sep 30,
2019
 
Sequential
 
Year-over-year
Revenue
 
$
21,264

 
$
27,950

 
$
75,441

 
(24)%
 
(72)%
Operating profit
 
$
(3,562
)
 
$
(16,072
)
 
$
3,130

 
N/M
 
N/M
Operating profit margin
 
(16.8
)%
 
(57.5
)%
 
4.1
%
 
4070 bps
 
(2090) bps
Adjusted segment EBITDA
 
$
(1,432
)
 
$
(9,573
)
 
$
9,657

 
N/M
 
N/M
Adjusted segment EBITDA margin
 
(6.7
)%
 
(34.3
)%
 
12.8
%
 
2760 bps
 
(1950) bps
N/M - not meaningful

Results on a pro forma basis for the Reservoir Chemical Technologies segment are provided supplementary to the results of the segment included in the actual results for the Company. See note titled “Results on a Pro Forma Basis” below and the tables included in this release.

Reservoir Chemical Technologies revenue for the full third quarter for 2020 decreased by $6.7 million, or 24%, sequentially, driven by the decline in drilling and completion activity.

For the full third quarter for 2020, segment operating loss was $3.6 million, and segment adjusted EBITDA was a negative $1.4 million, increasing sequentially by $8.1 million. Third quarter results included $2.5 million of isolated benefits, including collections of previously reserved customer receivables, and other benefits.

Other Business Highlights

In the third quarter, ChampionX and its employees were actively involved in hurricane relief efforts along the Louisiana and Texas Gulf Coast.
Production Chemical Technologies secured a sole-source contract with a leading E&P operator.
Production & Automation Technologies secured a multi-year international artificial lift contract, which resulted directly from our Better Together (production chemicals and artificial lift systems) joint sales efforts.
Our Digital team shipped an order for our Spotlight edge hardware (for monitoring and analysis of online compressors and engines) with a leading E&P operator in Latin America
Successful Drilling Technologies bearings tests continue for non-oilfield applications (e.g., power generation, industrial mixers, pumps and motors).
Drilling Technologies has been issued 29 patents year-to-date.

Conference Call Details

ChampionX Corporation will host a conference call on Thursday, October 29, 2020, to discuss its third quarter 2020 financial results. The call will begin at 10:00 a.m. Eastern Time. Presentation materials that supplement the conference call are available on ChampionX’s website at investors.championx.com.

To listen to the call via a live webcast, please visit ChampionX’s website at investor.championx.com. The call will also be available by dialing 1-888-424-8151 in the United States and Canada or 1-847-585-4422 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference ChampionX conference call number 6310 375.

A replay of the conference call will be available on ChampionX’s website or at https://onlineexperiences.com/Launch/QReg/ShowUUID=A91BE40C-0628-492F-9708-DB6FE4F6676D&LangLocaleID=1033. Enter passcode 49983378.



###



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Results on a Pro Forma Basis

On June 3, 2020, Apergy Corporation closed on the acquisition of ChampionX Holding, Inc. (“the Transaction”) and assumed the name ChampionX Corporation (“ChampionX”). Actual results reflect the respective contributions from each company based on the close of the Transaction. For comparative purposes, management has also presented herein certain unaudited pro forma financial information as if the Transaction was completed on January 1, 2019, including results on a pro forma basis for revenue, income before income taxes, income before income taxes margin, adjusted EBITDA, adjusted EBITDA margin, segment revenue, segment operating profit (loss), adjusted segment EBITDA, adjusted segment EBITDA margin for the quarterly periods ended September 30, 2020, June 30, 2020, and September 30, 2019. The financial results on a pro forma basis are provided to assist investors in assessing ChampionX’s performance on a basis that includes the combined results of operations of both Apergy Corporation and ChampionX Holding, Inc. for the full reporting period. ChampionX management believes this unaudited pro forma historical financial information helps investors understand the long-term profitability trends of its newly combined business giving effect to the Transaction and facilitates comparisons of our profitability to prior and future periods and to our peers. The historical financial results on a pro forma basis herein may not be comparable to similarly titled measures reported by other companies.

About Non-GAAP Measures

In addition to financial results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), this news release presents non-GAAP financial measures. Management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted segment EBITDA, adjusted segment EBITDA margin, adjusted net income attributable to ChampionX, adjusted diluted earnings per share attributable to ChampionX, pro forma adjusted EBITDA, pro forma adjusted EBITDA margin, pro forma segment revenue, pro forma segment operating profit (loss), and pro forma adjusted segment EBITDA reflect the core operating results of our businesses and help facilitate comparisons of operating performance across periods. In addition, free cash flow and free cash flow to revenue ratio are used by management to measure our ability to generate positive cash flow for debt reduction and to support our strategic objectives, while adjusted working capital provides a meaningful measure of operational results by showing changes caused by revenue or our operational initiatives. The foregoing non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the accompanying financial tables.

This press release also contains certain forward-looking non-GAAP financial measures, including adjusted EBITDA. Due to the forward-looking nature of the aforementioned non-GAAP financial measure, management cannot reliably or reasonably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as net income. Accordingly, we are unable to present a quantitative reconciliation of such forward looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures. Amounts excluded from these non-GAAP measures in future periods could be significant. Management believes the aforementioned non-GAAP financial measures are good tools for internal use and the investment community in evaluating ChampionX’s overall financial performance.

About ChampionX

ChampionX (formerly known as Apergy Corporation) is a global leader in chemistry solutions and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. ChampionX’s products provide efficient functioning throughout the lifecycle of a well with a focus on the production phase of wells.To learn more about ChampionX, visit our website at www.championX.com.
 
Forward-Looking Statements
This news release contains statements relating to future actions and results, which are "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, ChampionX's market position and growth opportunities.  Forward-looking statements include, statements related to ChampionX’s expectations regarding the performance of the business, financial results, liquidity and capital resources of ChampionX. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, (1) demand for our products and services, which is affected by the

7



price and demand for crude oil and natural gas, (2) our ability to successfully compete in our industry, (3) our ability to develop and implement new products and technologies, and protect and maintain critical intellectual property assets, (4) cost inflation and availability of raw materials, (5) evolving legal, regulatory, tax and tariff policies and regimes, (6) potential liabilities arising out of the installation and use of our products, (7) continuing consolidation within our customers’ industry, (8) a failure of our information technology infrastructure or any significant breach of cyber security, (9) risks relating to our international operations and expansion into new geographic markets, including disruptions in the political, regulatory, economic and social conditions of those countries, (10) failure to attract, retain and develop key management, (11) credit risks, including bankruptcies among our customer base or the loss of significant customers, (12) dependence on joint venture and other local partners, (13) deterioration in future expected profitability or cash flows and its effect on our goodwill, (14) risks relating to improper conduct by any of our employees, agents or business partners, (15) fluctuations in currency markets, (16) the impact of natural disasters and pandemics, (17) changes in industry-specific conditions, including changes in production by OPEC, (18) the level of our indebtedness, (19) our ability to remediate the material weaknesses in internal control over financial reporting, (20) our ability to realize the anticipated cost synergies and growth opportunities from the Merger, (21) challenges in integrating the businesses of legacy Apergy and legacy ChampionX, (22) tax liabilities that could arise as a result of the Merger, (23) our ability to successfully replace the corporate services and financial strength legacy ChampionX received from Ecolab, (24) limitations on our ability to engage in certain transactions and certain activities competitive with Ecolab, and (25) other risk factors detailed from time to time in ChampionX’s reports filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on ChampionX’s forward-looking statements. Forward-looking statements speak only as of the day they are made and ChampionX undertakes no obligation to update any forward-looking statement, except as required by applicable law.
    
Investor Contact: Byron Pope
byron.pope@championx.com
281-602-0094

Media Contact: John Breed
john.breed@championx.com
281-403-5751

                                                     
i Adjusted net income attributable to ChampionX, adjusted EBITDA, adjusted EBITDA margin, adjusted segment EBITDA, adjusted segment EBITDA margin, pro forma revenue, pro forma adjusted EBITDA, pro forma adjusted EBITDA margin, pro forma adjusted segment EBITDA pro forma adjusted segment EBITDA margin, free cash flow, and free cash flow to revenue, are non-GAAP measures. See section titled “About Non-GAAP Measures” below for details on the non-GAAP measures used in this release.




8



CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands, except per share amounts)
2020
 
2020
 
2019
 
2020
 
2019
Revenue
$
633,526

 
$
298,914

 
$
276,839

 
$
1,193,874

 
$
883,503

Cost of goods and services
505,066

 
266,684

 
184,140

 
950,845

 
579,033

Gross profit
128,460

 
32,230

 
92,699

 
243,029

 
304,470

Selling, general and administrative expense
122,156

 
130,657

 
68,405

 
330,956

 
199,221

Goodwill and long-lived asset impairment

 

 

 
657,251

 
1,746

Interest expense, net
15,935

 
11,262

 
9,590

 
36,236

 
30,226

Other (income) expense, net
1,663

 
312

 
(309
)
 
342

 
3,469

Income (loss) before income taxes
(11,294
)
 
(110,001
)
 
15,013

 
(781,756
)
 
69,808

Provision for (benefit from) income taxes
(3,962
)
 
(954
)
 
3,425

 
(31,922
)
 
15,274

Net income (loss)
(7,332
)
 
(109,047
)
 
11,588

 
(749,834
)
 
54,534

Less: Net income attributable to noncontrolling interest
582

 
598

 
194

 
1,453

 
547

Net income (loss) attributable to ChampionX
$
(7,914
)
 
$
(109,645
)
 
$
11,394

 
$
(751,287
)
 
$
53,987

 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to ChampionX:
 
 
 
 
 
 
 
 
 
Basic
$
(0.04
)
 
$
(0.95
)
 
$
0.15

 
$
(5.73
)
 
$
0.70

Diluted
$
(0.04
)
 
$
(0.95
)
 
$
0.15

 
$
(5.73
)
 
$
0.70

 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
199,809

 
115,149

 
77,460

 
131,064

 
77,416

Diluted
199,809

 
115,149

 
77,573

 
131,064

 
77,615




9



CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands)
September 30, 2020
 
December 31, 2019
Assets
 
 
 
Cash and cash equivalents
$
171,462

 
$
35,290

Receivables, net
516,245

 
219,874

Inventories, net
471,331

 
211,342

Prepaid expenses and other current assets
73,713

 
26,934

Total current assets
1,232,751

 
493,440

 
 
 
 
Property, plant and equipment, net
868,111

 
248,181

Goodwill
660,329

 
911,113

Intangible assets, net
509,789

 
238,707

Other non-current assets
182,752

 
31,384

Total assets
$
3,453,732

 
$
1,922,825

 
 
 
 
Liabilities
 
 
 
Current portion of long-term debt
$
31,470

 
$
4,845

Accounts payable
262,092

 
120,291

Other current liabilities
280,845

 
74,545

Total current liabilities
574,407

 
199,681

 
 
 
 
Long-term debt
989,690

 
559,821

Other long-term liabilities
303,603

 
127,109

Equity
 
 
 
Stockholders’ equity
1,599,549

 
1,032,960

Noncontrolling interest
(13,517
)
 
3,254

Total liabilities and equity
$
3,453,732

 
$
1,922,825




10



CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
Nine Months Ended September 30,
(in thousands)
2020
 
2019
Cash provided by (used for) operating activities:
 
 
 
Net income
$
(749,834
)
 
$
54,534

Depreciation
101,434

 
51,126

Amortization
47,827

 
38,504

Goodwill and long-lived asset impairment
657,251

 
1,746

Receivables
91,204

 
14,133

Inventories
62,225

 
13,232

Accounts payable
(48,519
)
 
(16,861
)
Leased assets
(7,799
)
 
(34,305
)
Other
35,643

 
1,281

Net cash provided by operating activities
189,432

 
123,390

 
 
 
 
Cash provided by (used for) investing activities:
 

 
 

Capital expenditures
(32,169
)
 
(31,589
)
Acquisitions, net of cash acquired
57,588

 
(12,500
)
Proceeds from sale of fixed assets
9,295

 
2,954

Payments on sale of business

 
(2,194
)
Net cash provided by (used for) investing activities
34,714

 
(43,329
)
 
 
 
 
Cash used for financing activities:
 

 
 

Proceeds from long-term debt
125,000

 
36,500

Repayment of long-term debt
(206,713
)
 
(111,500
)
Debt issuance costs
(4,356
)
 

Other
(7,376
)
 
(5,949
)
Net cash used for financing activities
(93,445
)
 
(80,949
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
5,471

 
(317
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
136,172

 
(1,205
)
Cash and cash equivalents at beginning of period
35,290

 
41,832

Cash and cash equivalents at end of period
$
171,462

 
$
40,627




11



CHAMPIONX CORPORATION
BUSINESS SEGMENT DATA
(UNAUDITED)

 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Segment revenue:
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
$
410,151

 
$
136,002

 
$

 
$
546,153

 
$

Production & Automation Technologies
136,921

 
114,741

 
221,962

 
457,141

 
680,739

Drilling Technologies
15,715

 
20,948

 
54,877

 
92,618

 
202,764

Reservoir Chemical Technologies
21,264

 
9,306

 

 
30,570

 

Corporate
49,475

 
17,917

 

 
67,392

 

Total revenue
$
633,526

 
$
298,914

 
$
276,839

 
$
1,193,874

 
$
883,503

 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes:
 
 
 
 

 
 
 
 
Segment operating profit:
 

 
 
 
 

 
 
 
 
Production Chemical Technologies
$
35,172

 
$
9,922

 
$

 
$
45,094

 
$

Production & Automation Technologies
(7,454
)
 
(37,168
)
 
18,917

 
(693,213
)
 
51,849

Drilling Technologies
(5,127
)
 
(3,811
)
 
13,797

 
2,421

 
64,853

Reservoir Chemical Technologies
(3,819
)
 
(2,811
)
 

 
(6,630
)
 

Total segment operating profit (loss)
18,772

 
(33,868
)
 
32,714

 
(652,328
)
 
116,702

Corporate expense and other
14,131

 
64,871

 
8,111

 
93,192

 
16,668

Interest expense, net
15,935

 
11,262

 
9,590

 
36,236

 
30,226

Income (loss) before income taxes
$
(11,294
)
 
$
(110,001
)
 
$
15,013

 
$
(781,756
)
 
$
69,808

 
 
 
 
 
 
 
 
 
 
Operating profit margin / income (loss) before income taxes margin:
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
8.6
 %
 
7.3
 %
 
%
 
8.3
 %
 
%
Production & Automation Technologies
(5.4
)%
 
(32.4
)%
 
8.5
%
 
(151.6
)%
 
7.6
%
Drilling Technologies
(32.6
)%
 
(18.2
)%
 
25.1
%
 
2.6
 %
 
32.0
%
Reservoir Chemical Technologies
(18.0
)%
 
(30.2
)%
 
%
 
(21.7
)%
 
%
ChampionX Consolidated
(1.8
)%
 
(36.8
)%
 
5.4
%
 
(65.5
)%
 
7.9
%
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
$
71,505

 
$
22,431

 
$

 
$
93,936

 
$

Production & Automation Technologies
24,995

 
14,492

 
50,462

 
79,518

 
144,151

Drilling Technologies
(2,782
)
 
1,800

 
16,567

 
14,788

 
72,459

Reservoir Chemical Technologies
(1,432
)
 
(314
)
 

 
(1,746
)
 

Corporate
(5,464
)
 
(3,948
)
 
(3,381
)
 
(11,955
)
 
(10,085
)
Adjusted EBITDA
$
86,822

 
$
34,461

 
$
63,648

 
$
174,541

 
$
206,525

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
17.4
 %
 
16.5
 %
 
%
 
17.2
 %
 
%
Production & Automation Technologies
18.3
 %
 
12.6
 %
 
22.7
%
 
17.4
 %
 
21.2
%
Drilling Technologies
(17.7
)%
 
8.6
 %
 
30.2
%
 
16.0
 %
 
35.7
%
Reservoir Chemical Technologies
(6.7
)%
 
(3.4
)%
 
%
 
(5.7
)%
 
%
ChampionX Consolidated
13.7
 %
 
11.5
 %
 
23.0
%
 
14.6
 %
 
23.4
%


12



CHAMPIONX CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)


 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Net income (loss) attributable to ChampionX
$
(7,914
)
 
$
(109,645
)
 
$
11,394

 
$
(751,287
)
 
$
53,987

Pre-tax adjustments:
 
 
 
 
 
 
 
 
 
Goodwill and long-lived asset impairment (1)

 

 

 
657,251

 
1,746

Separation and supplemental benefit costs (2)
383

 
(317
)
 
4,440

 
434

 
6,046

Restructuring and other related charges
3,426

 
12,128

 
2,720

 
18,320

 
6,751

Environmental costs

 

 
1,988

 

 
1,988

Acquisition and integration related costs (3)
8,665

 
58,752

 
330

 
78,925

 
330

Acquisition-related adjustments (4)
3,511

 
5,831

 

 
9,342

 

Professional fees related to material weakness remediation and impairment analysis (5)
940

 
2,044

 

 
5,728

 

Intellectual property defense
408

 
181

 

 
800

 

Tax impact of adjustments (6)
(3,968
)
 
(18,208
)
 
(2,251
)
 
(61,298
)
 
(4,005
)
Adjusted net income (loss) attributable to ChampionX
5,451

 
(49,234
)
 
18,621

 
(41,785
)
 
66,843

Tax impact of adjustments (6)
3,968

 
18,208

 
2,251

 
61,298

 
4,005

Net income attributable to noncontrolling interest
582

 
598

 
194

 
1,453

 
547

Depreciation and amortization
64,848

 
54,581

 
29,567

 
149,261

 
89,630

Provision for (benefit from) income taxes
(3,962
)
 
(954
)
 
3,425

 
(31,922
)
 
15,274

Interest expense, net
15,935

 
11,262

 
9,590

 
36,236

 
30,226

Adjusted EBITDA
$
86,822

 
$
34,461

 
$
63,648

 
$
174,541

 
$
206,525

 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share attributable to ChampionX:
 
 
 
 
 
 
 
 
 
Reported
$
(0.04
)
 
$
(0.95
)
 
$
0.15

 
$
(5.73
)
 
$
0.70

Adjusted
$
0.03

 
$
(0.43
)
 
$
0.24

 
$
(0.32
)
 
$
0.86

_______________________
(1)
Includes charges for goodwill and long-lived asset impairments of $657.3 million in our Production & Automation Technologies segment during the three months ended March 31, 2020. During the nine months ended September 30, 2019, we incurred an impairment loss of $1.7 million related to the classification of our pressure vessel manufacturing business as held for sale.
(2) Separation and supplemental benefit costs primarily relates to separation costs, and to a lesser extent, enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. Supplemental benefit costs are expected to be incurred through the end of 2020. During the three months ended September 30, 2019, pursuant to the provisions of the tax matters agreement with Dover Corporation, we recognized approximately $3.4 million of tax indemnification expense. This was settled and paid during the three months ended June 30, 2020, resulting in a benefit for the period as a result of the true-up of our accrual.
(3)
Includes costs incurred in relation to business combinations, primarily related to the Merger of legacy ChampionX of $3.1 million and $60.9 million for the three and nine months ended September 30, 2020, respectively. Additionally, we incurred professional fees related to the integration of legacy ChampionX of $5.3 million and $17.1 million for the three and nine months ended September 30, 2020, respectively.
(4)
Includes incremental expense related to the step-up of inventory value resulting from the purchase accounting entries. This is partially offset by revenue associated with the amortization of a liability established as part of the Merger, representing unfavorable terms under the Cross Supply Agreement.  
(5)
Includes professional fees related to the remediation of material weaknesses identified during 2019 as well as professional fees incurred in connection with the goodwill impairment charge recognized during the three months ended March 31, 2020.
(6) We generally tax effect adjustments using a combined federal and state statutory income tax rate of approximately 23 percent.



13



 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Diluted earnings (loss) per share attributable to ChampionX
$
(0.04
)
 
$
(0.95
)
 
$
0.15

 
$
(5.73
)
 
$
0.70

Per share adjustments:
 
 
 
 
 
 
 
 
 
Goodwill and long-lived asset impairment

 

 

 
5.01

 
0.02

Separation and supplemental benefit costs

 

 
0.06

 

 
0.08

Restructuring and other related charges
0.02

 
0.11

 
0.04

 
0.14

 
0.09

Environmental costs

 

 
0.02

 

 
0.02

Acquisition and integration related costs
0.04

 
0.51

 

 
0.60

 

Acquisition-related adjustments
0.02

 
0.05

 

 
0.07

 

Professional fees related to material weakness remediation and impairment analysis

 
0.01

 

 
0.04

 

Intellectual property defense

 

 

 
0.01

 

Tax impact of adjustments
(0.01
)
 
(0.16
)
 
(0.03
)
 
(0.46
)
 
(0.05
)
Adjusted diluted earnings (loss) per share attributable to ChampionX
0.03

 
(0.43
)
 
0.24

 
(0.32
)
 
0.86




14






Free Cash Flow

 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Free Cash Flow
 
 
 
 
 
 
 
 
 
Cash provided by operating activities
$
111,399

 
$
48,811

 
$
64,089

 
$
189,432

 
$
123,390

Less: Capital expenditures
(12,847
)
 
(11,855
)
 
(8,901
)
 
(32,169
)
 
(31,589
)
Free cash flow
$
98,552

 
$
36,956

 
$
55,188

 
$
157,263

 
$
91,801

Cash transaction expenses
33,428

 
35,100

 

 
76,244

 

Adjusted free cash flow
$
131,980

 
$
72,056

 
$
55,188

 
$
233,507

 
$
91,801

 
 
 
 
 
 
 
 
 
 
Cash From Operating Activities to Revenue Ratio
 
 
 
 
 
 
Cash provided by operating activities
$
111,399

 
$
48,811

 
$
64,089

 
$
189,432

 
$
123,390

Revenue
$
633,526

 
$
298,914

 
$
276,839

 
$
1,193,874

 
$
883,503

 
 
 
 
 
 
 
 
 
 
Cash from operating activities to revenue ratio
18
%
 
16
%
 
23
%
 
16
%
 
14
%
 
 
 
 
 
 
 
 
 
 
Free Cash Flow to Revenue Ratio
 
 
 
 

 
 
 
 
Free cash flow
$
98,552

 
$
36,956

 
$
55,188

 
$
157,263

 
$
91,801

Revenue
$
633,526

 
$
298,914

 
$
276,839

 
$
1,193,874

 
$
883,503

 
 
 
 
 
 
 
 
 
 
Free cash flow to revenue ratio
16
%
 
12
%
 
20
%
 
13
%
 
10
%


15



ChampionX is providing the below unaudited supplemental historical financial information of the Company on a non-GAAP adjusted basis for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019 and the nine months ended September 30, 2020 and 2019 as if the Merger was completed on January 1, 2019, to assist investors in assessing ChampionX’s historical performance on a basis that includes the combined results of operations of both legacy Apergy Corporation and legacy ChampionX. The unaudited pro forma historical financial information has been prepared by ChampionX using assumptions that ChampionX believes provide a reasonable basis for presenting the combination of the historical financial information of legacy Apergy and legacy ChampionX. As legacy ChampionX historically was unable to allocate certain charges on a segment basis, we have determined an allocation methodology for historical pro forma information to provide additional comparability amongst the legacy ChampionX segments. ChampionX management believes this unaudited supplemental historical financial information helps investors understand the long-term profitability trends of its newly combined business giving effect to the Merger and facilitates comparisons of our profitability to prior and future periods and to our peers. The supplemental unaudited financial information herein may not be comparable to similarly titled measures reported by other companies. The supplemental unaudited pro forma combined financial information does not purport to represent what the actual results of operations or the financial position of the combined company would have been had the Transactions occurred on the dates assumed, nor are they indicative of future results of operations or financial position of the combined company.
 



16



CHAMPIONX CORPORATION
PRO FORMA BUSINESS SEGMENT DATA
(UNAUDITED)

 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Segment revenue:
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
$
410,151

 
$
433,128

 
$
514,189

 
$
1,353,523

 
$
1,493,543

Production & Automation Technologies
136,921

 
114,741

 
221,962

 
457,141

 
680,739

Drilling Technologies
15,715

 
20,948

 
54,877

 
92,618

 
202,764

Reservoir Chemical Technologies
21,264

 
27,950

 
75,441

 
98,231

 
256,817

Corporate
49,475

 
17,917

 
37

 
67,391

 
146

Total revenue
$
633,526

 
$
614,684

 
$
866,506

 
$
2,068,904

 
$
2,634,009

 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes:
 
 
 
 

 
 
 
 
Segment operating profit:
 

 
 
 
 

 
 
 
 
Production Chemical Technologies
$
42,793

 
$
37,154

 
$
69,536

 
$
150,362

 
$
166,386

Production & Automation Technologies
(7,454
)
 
(37,142
)
 
18,917

 
(693,188
)
 
51,849

Drilling Technologies
(5,127
)
 
(3,811
)
 
13,797

 
2,421

 
64,853

Reservoir Chemical Technologies
(3,562
)
 
(16,072
)
 
3,130

 
(175,098
)
 
13,726

Total segment operating profit (loss)
26,650

 
(19,871
)
 
105,380

 
(715,503
)
 
296,814

Corporate expense and other
5,717

 
8,692

 
8,992

 
16,032

 
12,495

Interest expense, net
15,935

 
16,526

 
19,191

 
49,939

 
59,597

Income (loss) before income taxes
$
4,998

 
$
(45,089
)
 
$
77,197

 
$
(781,474
)
 
$
224,722

 
 
 
 
 
 
 
 
 
 
Operating profit margin / income (loss) before income taxes margin:
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
10.4
 %
 
8.6
 %
 
13.5
%
 
11.1
 %
 
11.1
%
Production & Automation Technologies
(5.4
)%
 
(32.4
)%
 
8.5
%
 
(151.6
)%
 
7.6
%
Drilling Technologies
(32.6
)%
 
(18.2
)%
 
25.1
%
 
2.6
 %
 
32.0
%
Reservoir Chemical Technologies
(16.8
)%
 
(57.5
)%
 
4.1
%
 
(178.3
)%
 
5.3
%
ChampionX Consolidated
0.8
 %
 
(7.3
)%
 
8.9
%
 
(37.8
)%
 
8.5
%
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
71,505

 
58,466

 
90,953

 
222,757

 
235,464

Production & Automation Technologies
24,995

 
14,493

 
50,462

 
79,518

 
144,151

Drilling Technologies
(2,782
)
 
1,800

 
16,567

 
14,788

 
72,459

Reservoir Chemical Technologies
(1,432
)
 
(9,573
)
 
9,657

 
(13,147
)
 
34,109

Corporate
(5,464
)
 
(2,432
)
 
(296
)
 
(8,123
)
 
(677
)
Adjusted EBITDA
$
86,822

 
$
62,754

 
$
167,343

 
$
295,793

 
$
485,506

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
 
 
 
 
 
 
 
 
 
Production Chemical Technologies
17.4
 %
 
13.5
 %
 
17.7
%
 
16.5
 %
 
15.8
%
Production & Automation Technologies
18.3
 %
 
12.6
 %
 
22.7
%
 
17.4
 %
 
21.2
%
Drilling Technologies
(17.7
)%
 
8.6
 %
 
30.2
%
 
16.0
 %
 
35.7
%
Reservoir Chemical Technologies
(6.7
)%
 
(34.3
)%
 
12.8
%
 
(13.4
)%
 
13.3
%
ChampionX Consolidated
13.7
 %
 
10.2
 %
 
19.3
%
 
14.3
 %
 
18.4
%


17



CHAMPIONX CORPORATION
PRO FORMA - RECONCILIATION GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

 
Three Months Ended
 
Nine Months Ended
 
Sep 30,
 
Jun 30,
 
Sep 30,
 
September 30,
(in thousands)
2020
 
2020
 
2019
 
2020
 
2019
Net income (loss) attributable to ChampionX
$
4,667

 
$
(60,100
)
 
$
53,251

 
$
(789,858
)
 
$
163,130

Pre-tax adjustments:
 
 
 
 
 
 
 
 
 
Goodwill and long-lived asset impairment

 

 

 
805,011

 
1,746

Separation and supplemental benefit costs
383

 
(317
)
 
4,440

 
434

 
6,046

Restructuring and other related charges
3,426

 
15,950

 
6,689

 
23,008

 
17,623

Environmental costs

 

 
1,988

 

 
1,988

Acquisition and integration related costs
250

 
250

 
330

 
884

 
330

Acquisition-related adjustments
(4,367
)
 

 

 
(4,367
)


Professional fees related to material weakness remediation and impairment analysis
940

 
2,044

 

 
5,728

 

Intellectual property defense
408

 
181

 

 
800

 

Tax impact of adjustments
(238
)
 
(4,145
)
 
(3,078
)
 
(28,300
)
 
(6,348
)
Adjusted net income (loss) attributable to ChampionX
5,469

 
(46,137
)
 
63,620

 
13,340

 
184,515

Tax impact of adjustments
238

 
4,145

 
3,078

 
28,300

 
6,348

Net income attributable to noncontrolling interest
582

 
(535
)
 
3,555

 
2,774

 
6,001

Depreciation and amortization
64,848

 
73,209

 
57,508

 
195,829

 
173,453

Provision for (benefit from) income taxes
(250
)
 
15,546

 
20,391

 
5,611

 
55,592

Interest expense, net
15,935

 
16,526

 
19,191

 
49,939

 
59,597

Adjusted EBITDA
$
86,822

 
$
62,754

 
$
167,343

 
$
295,793

 
$
485,506