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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-38441
ChampionX Corporation
(Exact name of registrant as specified in its charter)
Delaware82-3066826
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2445 Technology Forest Blvd,Building 4, 12th Floor
The Woodlands,Texas77381
(Address of principal executive offices)(Zip Code)
(281) 403-5772
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueCHXThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The registrant had 202,932,903 shares of common stock, $0.01 par value, outstanding as of July 21, 2022.



CHAMPIONX CORPORATION

TABLE OF CONTENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, contained in this report are 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”). Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “anticipate,” “expect,” “may,” “intend,” “foresee,” “guidance,” “estimate,” “potential,” “outlook,” “plan,” “should,” “would,” “could,” “target,” “forecast” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking statements. Forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.

All of our forward-looking statements involve risks, uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to materially differ from our historical experience and our present expectations or projections. Known material factors that could cause actual results to materially differ from those contemplated in the forward-looking statements are those set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in Part II, Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q, including the following:

Demand for, and profitability of our products and services, is affected by changes in the price of, and demand for, crude oil and natural gas in domestic and international markets;
Cost inflation and availability of raw materials;
The impact of inflation in wholesale product costs, labor rates and transportation costs
Our ability to successfully compete with other companies in our industry;
Our ability to develop and implement or introduce new technologies, products, and services, as well as our ability to protect and maintain critical intellectual property assets;
Our ability to successfully execute potential acquisitions;
Potential liabilities arising out of the installation or use of our products or from a chemical spill or release;
Continuing consolidation within our customers’ industry;
Credit risks related to our customer base or the loss of significant customers;
A failure of our information technology infrastructure or any significant breach of security;
Risks relating to our existing international operations and expansion into new geographical markets;
Risks relating to improper conduct by any of our employees, agents or business partners;
Global economic conditions, inflation, geopolitical issues, supply chain disruptions, and availability and cost of credit, and its impact on our operations and those of our customers and suppliers;
Failure to attract, retain and develop personnel;
Our ability to protect or obtain intellectual property rights;
The impact of natural disasters and other unusual weather conditions on our business;
The impact of the novel coronavirus (“COVID-19”) and related economic disruptions;
Investor sentiment towards climate change, fossil fuels and other environmental, social and governance matters;
Changes in domestic and foreign governmental public policies, risks associated with entry into emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits;
Disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business;
Fluctuations in currency markets worldwide and disruptions in capital and credit markets;
The impact of our indebtedness on our financial position and operating flexibility;
Our ability to realize the benefits of the acquisition of our Chemical Technologies business, and certain limitations in our ability to engage in certain activities as a result of that acquisition;
The impact of war, terrorism and civil unrest;
Changes in federal, state and local legislation and regulations relating to oil and gas development and the potential for related litigation or restrictions on our customers;
Changes in environmental and health and safety laws and regulations which may increase our costs, limit the demand for our products and services or restrict our operations; and
The impact of tariffs and other trade measures on our business.




We wish to caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update, revise or correct any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required under the federal securities laws.



PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except per share data)2022202120222021
Revenue:
Product revenue$807,553 $649,399 $1,558,221 $1,234,756 
Service revenue101,843 81,223 198,237 161,849 
Lease and other revenue23,176 18,550 42,074 37,455 
Total revenue932,572 749,172 1,798,532 1,434,060 
Cost of goods and services720,684 569,167 1,379,034 1,091,723 
Gross profit211,888 180,005 419,498 342,337 
Costs and expenses:
Selling, general and administrative expense141,351 152,341 291,711 295,819 
Interest expense, net10,765 14,064 22,128 28,035 
Other (income) expense, net32,281 2,251 33,601 315 
Income before income taxes27,491 11,349 72,058 18,168 
Provision for (benefit from) income taxes(1,405)3,563 4,989 6,345 
Net income28,896 7,786 67,069 11,823 
Less: Net income (loss) attributable to noncontrolling interest1,554 536 3,025 (1,199)
Net income attributable to ChampionX$27,342 $7,250 $64,044 $13,022 
Earnings per share attributable to ChampionX:
Basic$0.13 $0.04 $0.32 $0.06 
Diluted$0.13 $0.03 $0.31 $0.06 
Weighted-average shares outstanding:
Basic203,322 201,467 203,200 201,063 
Diluted208,714 208,541 208,863 207,939 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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CHAMPIONX CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2022202120222021
Net income $28,896 $7,786 $67,069 $11,823 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments21,169 8,332 19,604 11,545 
Cash flow hedges(3,403)(277)(4,702)136 
Defined pension and other post-retirement benefits adjustments, net70 6,373 139 6,540 
Other comprehensive income17,836 14,428 15,041 18,221 
Comprehensive income46,732 22,214 82,110 30,044 
Less: Comprehensive income (loss) attributable to noncontrolling interest1,554 536 3,025 (1,199)
Comprehensive income attributable to ChampionX$45,178 $21,678 $79,085 $31,243 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)June 30, 2022December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents$167,282 $251,678 
Restricted cash3,500 3,500 
Receivables, net614,607 584,440 
Inventories, net606,956 542,910 
Assets held for sale25,455 7,217 
Prepaid expenses and other current assets52,116 71,155 
Total current assets1,469,916 1,460,900 
Property, plant and equipment, net of accumulated depreciation of $646,795 in 2022 and $618,867 in 2021
746,408 776,813 
Goodwill724,398 702,867 
Intangible assets, net351,374 401,470 
Operating lease right-of-use assets101,350 115,458 
Other non-current assets69,705 77,193 
Total assets$3,463,151 $3,534,701 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt$4,688 $26,850 
Accounts payable496,197 473,561 
Accrued compensation and employee benefits54,864 93,131 
Current portion of operating lease liabilities32,438 36,389 
Accrued distributor fees35,166 25,621 
Liabilities held for sale10,428  
Accrued expenses and other current liabilities119,252 146,773 
Total current liabilities753,033 802,325 
Long-term debt694,430 697,657 
Deferred income taxes84,709 137,971 
Operating lease liabilities64,138 73,521 
Other long-term liabilities73,986 68,920 
Total liabilities1,670,296 1,780,394 
Stockholders’ equity: 
Common stock (2.5 billion shares authorized, $0.01 par value)
202.9 million shares and 202.9 million shares issued and outstanding in 2022 and 2021, respectively
2,029 2,029 
Capital in excess of par value of common stock2,315,965 2,315,399 
Accumulated deficit(503,089)(525,158)
Accumulated other comprehensive loss(6,584)(21,625)
ChampionX stockholders’ equity1,808,321 1,770,645 
Noncontrolling interest(15,466)(16,338)
Total equity1,792,855 1,754,307 
Total liabilities and equity$3,463,151 $3,534,701 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

Common Stock
(in thousands)SharesPar
Value
Capital in Excess of Par ValueAccum. DeficitAccum.
Other
Comp.
Loss
Non-controlling InterestTotal
December 31, 2021202,866 $2,029 $2,315,399 $(525,158)$(21,625)$(16,338)$1,754,307 
Net income— — — 36,702 — 1,471 38,173 
Other comprehensive loss— — — — (2,795)— (2,795)
Stock-based compensation290 3 4,725 — — — 4,728 
Stock options exercised189 1 1,054 — — — 1,055 
Taxes withheld on issuance of stock-based awards— — (2,639)— — — (2,639)
Dividends declared to common stockholders ($0.075 per share)
— — — (15,465)— — (15,465)
Cumulative translation adjustments— — — — — 208 208 
March 31, 2022203,345 $2,033 $2,318,539 $(503,921)$(24,420)$(14,659)$1,777,572 
Net income— — — 27,342 — 1,554 28,896 
Other comprehensive income— — — — 17,836 — 17,836 
Stock-based compensation64 1 5,070 — — — 5,071 
Stock options exercised312 3 2,087 — — — 2,090 
Taxes withheld on issuance of stock-based awards— — (739)— — — (739)
Dividends declared to common stockholders ($0.075 per share)
— — — (15,494)— — (15,494)
Repurchase and cancellation of common stock(790)(8)(8,992)(11,016)— — (20,016)
Cumulative translation adjustments— — — — — 8 8 
Distributions to noncontrolling interest— — — — — (2,369)(2,369)
June 30, 2022202,931 $2,029 $2,315,965 $(503,089)$(6,584)$(15,466)$1,792,855 

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Common Stock
(in thousands)SharesPar
Value
Capital in Excess of Par ValueAccum. DeficitAccum.
Other
Comp.
Loss
Non-controlling InterestTotal
December 31, 2020200,380 $2,004 $2,293,179 $(638,457)$(30,755)$(13,396)$1,612,575 
Net income (loss)— — — 5,772 — (1,735)4,037 
Other comprehensive income— — — — 3,793 — 3,793 
Stock-based compensation64 — 6,442 — — — 6,442 
Stock options exercised577 6 3,341 — — — 3,347 
Taxes withheld on issuance of stock-based awards— — (556)— — — (556)
Cumulative translation adjustments— — — — — 268 268 
Distributions to noncontrolling interest— — — — — (800)(800)
March 31, 2021201,021 $2,010 $2,302,406 $(632,685)$(26,962)$(15,663)$1,629,106 
Net income— — — 7,250 — 536 7,786 
Other comprehensive income— — — — 14,428 — 14,428 
Stock-based compensation101 — 5,914 — — — 5,914 
Stock options exercised578 7 3,155 — — — 3,162 
Taxes withheld on issuance of stock-based awards— — (1,208)— — — (1,208)
Cumulative translation adjustments— — — — — (231)(231)
June 30, 2021201,700 $2,017 $2,310,267 $(625,435)$(12,534)$(15,358)$1,658,957 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5




CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended June 30,
(in thousands)20222021
Cash flows from operating activities:  
Net income$67,069 $11,823 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization117,229 120,387 
Loss on disposal group held for sale22,924  
Stock-based compensation9,799 12,356 
Provision for inventory obsolescence and write-downs 6,926 6,200 
Loss on debt extinguishment4,043 3,305 
Deferred income taxes(34,386)(1,757)
(Gain) loss on disposal of fixed assets(6,284)3,176 
Provision (recovery) for bad debt(732)86 
Amortization of deferred loan costs and accretion of discount1,766 1,628 
Employee benefit plan expense1,303 1,250 
Other234 167 
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables(42,456)(18,706)
Inventories(81,935)(41,586)
Prepaid expenses and other current assets16,793 9,215 
Accounts payable21,507 92,997 
Accrued compensation and employee benefits(39,774)(2,444)
Accrued expenses and other liabilities(18,302)(46,447)
Leased assets(13,949)(1,609)
Other(660)1,097 
Net cash flows provided by operating activities31,115 151,138 
Cash flows from investing activities:  
Capital expenditures(53,555)(45,680)
Proceeds from sale of fixed assets14,946 2,482 
Acquisitions, net of cash acquired(3,198) 
Net cash used for investing activities(41,807)(43,198)
Cash flows from financing activities:  
Proceeds from long-term debt844,838  
Repayment of long-term debt(869,987)(71,113)
Payment of debt issue costs(8,008) 
Repurchases of common stock(20,016) 
Dividends paid(15,465) 
Payments related to taxes withheld on stock-based compensation(3,378)(1,764)
Proceeds from exercise of stock options3,145 6,509 
Distributions to noncontrolling interest(2,369)(800)
Payment of finance lease obligations(3,123)(2,575)
Net cash used for financing activities(74,363)(69,743)
Effect of exchange rate changes on cash and cash equivalents and restricted cash659 (623)
Net increase (decrease) in cash and cash equivalents and restricted cash(84,396)37,574 
Cash and cash equivalents and restricted cash at beginning of period255,178 201,421 
Cash and cash equivalents and restricted cash at end of period$170,782 $238,995 
The accompanying notes are an integral part of the condensed consolidated financial statements.
6


CHAMPIONX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Business

ChampionX 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, efficiently and sustainably around the world. Our products provide efficient and safe operations throughout the lifecycle of a well with a focus on the production phase of wells.

Unless the context requires otherwise, references in this report to “we,” “us,” “our,” “the Company,” or “ChampionX” mean ChampionX Corporation, together with our subsidiaries where the context requires.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of ChampionX have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions that we may undertake in the future, actual results may differ from our estimates. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments unless otherwise specified) necessary for a fair statement of our financial condition and results of operations as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these financial statements may not be representative of the results that may be expected for the year ending December 31, 2022.

Significant Accounting Policies

Please refer to “Note 1Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for the discussion of our significant accounting policies.

New Accounting Standards

All new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

NOTE 2—SEGMENT INFORMATION

Our reporting segments are:

Production Chemical Technologies—provides oil and natural gas production and midstream markets with solutions to manage and control corrosion, oil and water separation, flow assurance, sour gas treatment and a host of water-related issues.

Production & Automation Technologies—designs, manufactures, markets and services a full range of artificial lift equipment, end-to-end digital automation solutions, as well as other production equipment and asset monitoring technologies. Production & Automation Technologies’ products are sold under a collection of brands including Harbison-Fischer, Norris, Alberta Oil Tool, Oil Lift Technology, PCS Ferguson, Pro-Rod, Upco, Unbridled ESP, Scientific Aviation, Norriseal-Wellmark, Quartzdyne, Spirit, Theta, Timberline, Windrock, and Leak Surveys (“LSI”).

7


Drilling Technologies—designs, manufactures and markets polycrystalline diamond cutters and bearings primarily for use in oil and gas drill bits under the US Synthetic brand.

Reservoir Chemical Technologies—manufactures specialty products that support well stimulation, construction (including drilling and cementing) and well intervention in the oil and natural gas industry.

We refer to our Production Chemical Technologies segment and our Reservoir Chemical Technologies segment collectively as our Chemical Technologies business. Business activities that do not meet the criteria of an operating segment have been combined into Corporate and other. Corporate and other includes (i) corporate and overhead expenses, and (ii) revenue and costs for activities that are not operating segments.

Segment revenue and segment operating profit
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Segment revenue:  
Production Chemical Technologies$552,411 $447,049 $1,067,383 $859,420 
Production & Automation Technologies242,399 188,173 462,748 355,018 
Drilling Technologies57,858 37,589 114,717 72,583 
Reservoir Chemical Technologies44,114 33,222 84,014 63,113 
Corporate and other (1)
35,790 43,139 69,670 83,926 
Total revenue$932,572 $749,172 $1,798,532 $1,434,060 
Segment operating profit (loss):  
Production Chemical Technologies$25,606 $33,871 $56,869 $64,228 
Production & Automation Technologies23,650 12,292 48,360 17,654 
Drilling Technologies15,043 3,868 30,263 10,254 
Reservoir Chemical Technologies(8,147)(2,594)(11,616)(5,822)
Total segment operating profit56,152 47,437 123,876 86,314 
Corporate and other (1)
17,896 22,024 29,690 40,111 
Interest expense, net10,765 14,064 22,128 28,035 
Income before income taxes$27,491 $11,349 $72,058 $18,168 
_______________________
(1)    Corporate and other includes costs not directly attributable or allocated to our reporting segments such as corporate executive management and other administrative functions, and the results attributable to our noncontrolling interest. Additionally, the sales and expenses related to the Cross Supply and Product Transfer Agreement with Ecolab Inc. (“Ecolab”) are included within Corporate and other.


NOTE 3—REVENUE

Our revenue is generated primarily from product sales. Service revenue is generated from providing services to our customers. These services include installation, repair and maintenance, laboratory and logistics services, chemical management services, troubleshooting, reporting, water treatment services, technical advisory assistance, emissions detection and monitoring, and other field services. Lease revenue is derived from rental income of leased production equipment. As our costs are shared across the various revenue categories, cost of goods sold is not tracked separately and is not discretely identifiable.

In certain geographical areas, the Company utilizes joint ventures and independent third-party distributors and sales agents to sell and market products and services. Amounts payable to independent third-party distributors and sales agents may fluctuate based on sales and timing of distributor fee payments. For services rendered by such independent third-party distributors and sales agents, the Company records the consideration received on a net basis within product revenue in our condensed consolidated statements of income. Additionally, amounts owed to distributors and sales agents are reported within accrued distributor fees within our condensed consolidated balance sheets.

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Revenue disaggregated by geography was as follows:
Three Months Ended June 30, 2022
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$205,457 $187,982 $45,848 $31,038 $20,039 $490,364 
Latin America124,540 6,358  3,221 905 135,024 
Middle East & Africa76,028 19,062 1,220 5,561 287 102,158 
Canada72,581 17,484 3,477 633 37 94,212 
Europe45,889 3,384 5,156 968 3,297 58,694 
Asia-Pacific9,518 784 2,142 909 11,225 24,578 
Australia4,960 7,308 15 91  12,374 
Other13,438 37  1,693  15,168 
Total revenue$552,411 $242,399 $57,858 $44,114 $35,790 $932,572 
Three Months Ended June 30, 2021
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$156,852 $141,799 $30,392 $19,589 $30,225 $378,857 
Latin America93,389 4,530  3,587 1,261 102,767 
Middle East & Africa66,213 13,358 1,446 6,534 1,945 89,496 
Canada63,639 14,754 1,986