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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, 2023
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 196,581,903 shares of common stock, $0.01 par value, outstanding as of July 20, 2023.



CHAMPIONX CORPORATION

TABLE OF CONTENTS

Page
 
 
 
 
 
  
 






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, 2022 and in Part II, Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q, and include 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 on wholesale product costs, labor rates, transportation costs, and on our customers’ financial position and ability to purchase our products;
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;
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 intellectual property assets;
Our ability to successfully execute potential acquisitions and integrate acquired businesses;
Potential liabilities arising out of the installation, use or manufacturing of our products or from a chemical spill or release;
Manufacturing disruptions, particularly with respect to our chemical products, including as a result of fires, explosions and chemical spills, releases or discharges;
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;
Failure to attract, retain and develop personnel;
The impact of natural disasters and other unusual weather conditions on our business;
Investor sentiment towards companies in the oil and gas industry due to climate change, fossil fuels and other environmental, social and governance matters;
Changes in domestic and foreign governmental public policies and actions of governments that impact oil and gas operations or favor renewable energy projects, 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;
Disruptions in the capital and credit markets;
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)2023202220232022
Revenue:
Product revenue$813,416 $807,553 $1,646,439 $1,558,221 
Service revenue88,645 101,843 181,890 198,237 
Lease and other revenue24,539 23,176 46,618 42,074 
Total revenue926,600 932,572 1,874,947 1,798,532 
Cost of goods and services644,394 720,684 1,309,386 1,379,034 
Gross profit282,206 211,888 565,561 419,498 
Costs and expenses:
Selling, general and administrative expense162,484 141,351 323,300 291,711 
Loss on disposal group 22,924 12,965 22,924 
Interest expense, net14,544 10,765 27,010 22,128 
Other expense (income), net(3,104)9,357 2,191 10,677 
Income before income taxes108,282 27,491 200,095 72,058 
Provision for (benefit from) income taxes11,656 (1,405)40,325 4,989 
Net income96,626 28,896 159,770 67,069 
Net income attributable to noncontrolling interest829 1,554 441 3,025 
Net income attributable to ChampionX$95,797 $27,342 $159,329 $64,044 
Earnings per share attributable to ChampionX:
Basic$0.49 $0.13 $0.81 $0.32 
Diluted$0.48 $0.13 $0.79 $0.31 
Weighted-average shares outstanding:
Basic197,034 203,322 197,657 203,200 
Diluted200,735 208,714 201,694 208,863 

The accompanying notes are an integral part of the condensed consolidated financial statements.
1




CHAMPIONX CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Net income$96,626 $28,896 $159,770 $67,069 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments9,020 21,169 (1,656)19,604 
Cash flow hedges231 (3,403)(4,458)(4,702)
Defined pension and other post-retirement benefits adjustments, net(102)70 (49)139 
Other comprehensive income (loss)9,149 17,836 (6,163)15,041 
Comprehensive income105,775 46,732 153,607 82,110 
Less: Comprehensive income attributable to noncontrolling interest829 1,554 441 3,025 
Comprehensive income attributable to ChampionX$104,946 $45,178 $153,166 $79,085 

The accompanying notes are an integral part of the condensed consolidated financial statements.
2




CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)June 30, 2023December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents$263,088 $250,187 
Receivables, net522,106 601,061 
Inventories, net599,040 542,543 
Assets held for sale13,165 29,334 
Prepaid expenses and other current assets87,432 75,456 
Total current assets1,484,831 1,498,581 
Property, plant, and equipment, net of accumulated depreciation of $743,426 in 2023 and $693,226 in 2022
757,841 734,810 
Goodwill669,067 679,488 
Intangible assets, net270,599 305,010 
Operating lease right-of-use assets84,476 92,928 
Other non-current assets63,024 76,666 
Total assets$3,329,838 $3,387,483 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt$6,250 $6,250 
Accounts payable550,827 469,566 
Accrued compensation and employee benefits85,521 102,750 
Current portion of operating lease liabilities26,641 28,838 
Accrued distributor fees19,297 102,034 
Liabilities held for sale 7,186 
Accrued expenses and other current liabilities125,919 142,352 
Total current liabilities814,455 858,976 
Long-term debt595,165 621,702 
Deferred income taxes72,399 94,235 
Operating lease liabilities52,528 59,686 
Other long-term liabilities82,969 75,669 
Total liabilities1,617,516 1,710,268 
Stockholders’ equity: 
Common stock (2.5 billion shares authorized, $0.01 par value)
196.3 million shares and 198.5 million shares issued and outstanding in 2023 and 2022, respectively
1,963 1,985 
Capital in excess of par value of common stock2,220,909 2,249,698 
Accumulated deficit(457,148)(527,603)
Accumulated other comprehensive loss(35,693)(29,530)
ChampionX stockholders’ equity1,730,031 1,694,550 
Noncontrolling interest(17,709)(17,335)
Total equity1,712,322 1,677,215 
Total liabilities and equity$3,329,838 $3,387,483 

The accompanying notes are an integral part of the condensed consolidated financial statements.
3




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, 2022198,466 $1,985 $2,249,698 $(527,603)$(29,530)$(17,335)$1,677,215 
Net income— — — 63,532 — (388)63,144 
Other comprehensive loss— — — — (15,312)— (15,312)
Stock-based compensation327 3 5,231 — — — 5,234 
Stock options exercised481 5 3,009 — — — 3,014 
Taxes withheld on issuance of stock-based awards— — (5,100)— — — (5,100)
Dividends declared to common stockholders ($0.085 per share)
— — — (16,784)— — (16,784)
Repurchase and cancellation of common stock(1,302)(13)(14,811)(25,603)— — (40,427)
Distributions to noncontrolling interest— — — — — (823)(823)
Cumulative translation adjustments— — — — — 8 8 
March 31, 2023197,972 $1,980 $2,238,027 $(506,458)$(44,842)$(18,538)$1,670,169 
Net income— — — 95,797 — 829 96,626 
Other comprehensive income— — — — 9,149 — 9,149 
Stock-based compensation180 2 6,339 — — — 6,341 
Stock options exercised27  24 — — — 24 
Taxes withheld on issuance of stock-based awards— — (2,039)— — — (2,039)
Dividends declared to common stockholders ($0.085 per share)
— — — (16,758)— — (16,758)
Repurchase and cancellation of common stock(1,883)(19)(21,442)(29,729)— — (51,190)
June 30, 2023196,296 $1,963 $2,220,909 $(457,148)$(35,693)$(17,709)$1,712,322 

4




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)
Distributions to noncontrolling interest— — — — — (2,369)(2,369)
Cumulative translation adjustments— — — — — 8 8 
June 30, 2022202,931 $2,029 $2,315,965 $(503,089)$(6,584)$(15,466)$1,792,855 

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)20232022
Cash flows from operating activities:  
Net income$159,770 $67,069 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization115,387 117,229 
Loss on disposal group12,965 22,924 
Stock-based compensation11,575 9,799 
Provision for inventory obsolescence and write-downs 12,344 6,926 
Loss on debt extinguishment 4,043 
Deferred income taxes(22,187)(34,386)
Gain on disposal of fixed assets(1,070)(6,284)
Amortization of deferred loan costs and accretion of discount2,029 1,766 
Other3,185 805 
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables83,589 (42,456)
Inventories(70,040)(81,935)
Leased assets(22,125)(13,949)
Other assets3,135 16,133 
Accounts payable40,632 21,507 
Other liabilities(120,901)(58,076)
Net cash flows provided by operating activities208,288 31,115 
Cash flows from investing activities:  
Capital expenditures(57,277)(53,555)
Proceeds from sale of fixed assets7,109 14,946 
Acquisitions, net of cash acquired (3,198)
Net cash used for investing activities(50,168)(41,807)
Cash flows from financing activities:  
Proceeds from long-term debt15,500 844,838 
Repayment of long-term debt(43,633)(869,987)
Payment of debt issue costs (8,008)
Repurchases of common stock(91,617)(20,016)
Dividends paid(31,591)(15,465)
Payments related to taxes withheld on stock-based compensation(7,139)(3,378)
Proceeds from exercise of stock options3,038 3,145 
Payment of finance lease obligations(4,376)(3,123)
Distributions to noncontrolling interest(823)(2,369)
Proceeds expected to be remitted under the Accounts Receivable Facility15,400  
Net cash used for financing activities(145,241)(74,363)
Effect of exchange rate changes on cash and cash equivalents22 659 
Net increase (decrease) in cash and cash equivalents12,901 (84,396)
Cash and cash equivalents at beginning of period250,187 255,178 
Cash and cash equivalents at end of period$263,088 $170,782 
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, artificial lift systems, and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely, efficiently, and sustainably around the world. Our expertise, innovative products, and digital technologies provide enhanced oil and gas production, transportation, and real-time emissions monitoring throughout the lifecycle of a well.

Unless the context requires otherwise, references in this report to “we,” “us,” “our,” “the Company,” or “ChampionX” mean ChampionX Corporation, together with its 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 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, 2022.

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, 2023.

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, 2022 for the discussion of our significant accounting policies.

New Accounting Standards Issued

In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which requires that a buyer in a supplier finance program disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. The ASU does not affect the recognition, measurement or financial statement presentation of obligations covered by supplier finance programs. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.
The adoption of this ASU did not have a material effect on our consolidated financial statements, other than the newly required disclosures. See Note 15—Supply Chain Finance for information on our supplier finance programs.

7


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, Norriseal-Wellmark, Quartzdyne, Spirit, Theta, Timberline and Windrock.

Drilling Technologies—designs, manufactures and markets polycrystalline diamond cutters and bearings 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 remediation needs 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. Although Reservoir Chemical Technologies is not required to be disclosed separately as a reportable segment based on materiality, management believes the additional information may contribute to a better understanding of the business. Other 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)2023202220232022
Segment revenue:  
Production Chemical Technologies$574,302 $552,411 $1,165,986 $1,067,383 
Production & Automation Technologies254,156 242,399 505,704 462,748 
Drilling Technologies57,324 57,858 114,031 114,717 
Reservoir Chemical Technologies23,853 44,114 49,659 84,014 
Corporate and other (1)
16,965 35,790 39,567 69,670 
Total revenue$926,600 $932,572 $1,874,947 $1,798,532 
Segment operating profit (loss):  
Production Chemical Technologies$87,163 $25,606 $153,477 $56,869 
Production & Automation Technologies33,208 23,650 68,000 48,360 
Drilling Technologies12,660 15,043 24,547 30,263 
Reservoir Chemical Technologies2,186 (8,147)4,173 (11,616)
Total segment operating profit135,217 56,152 250,197 123,876 
Corporate and other (1)
12,391 17,896 23,092 29,690 
Interest expense, net14,544 10,765 27,010 22,128 
Income before income taxes$108,282 $27,491 $200,095 $72,058 
_______________________
(1)    Corporate and other includes costs not directly attributable or allocated to our reporting segments such as overhead and other costs pertaining to 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.
8


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 consolidated balance sheets.

Revenue disaggregated by geography was as follows:
Three Months Ended June 30, 2023
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$236,917 $197,655 $44,233 $11,677 $7,014 $497,496 
Latin America116,083 5,457  3,044 752 125,336 
Middle East & Africa81,776 14,756 2,967 7,123 (53)106,569 
Canada72,403 15,648 2,922 540 7 91,520 
Europe53,415 4,980 6,544 775 2,494 68,208 
Asia-Pacific8,572 3,527 658 692 6,751 20,200 
Australia5,136 12,133  2  17,271 
Other      
Total revenue$574,302 $254,156 $57,324 $23,853 $16,965 $926,600 
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 
9


Six Months Ended June 30, 2023
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$478,678 $390,196 $87,193 $24,250 $20,604 $1,000,921 
Latin America240,554 10,145  7,012 1,719 259,430 
Middle East & Africa158,763 30,177 5,448 13,860 (438)207,810 
Canada146,567 36,185 6,689 958 18 190,417 
Europe103,218 9,939 12,704 1,143 5,125 132,129 
Asia-Pacific17,791 5,605 1,995 1,871 12,539 39,801 
Australia11,085 23,457  2  34,544 
Other9,330  2 563  9,895 
Total revenue$1,165,986 $505,704 $114,031 $49,659 $39,567 $1,874,947 
Six Months Ended June 30, 2022
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$396,363 $355,784 $92,667 $56,259 $41,893 $942,966 
Latin America224,145 11,361  6,811 1,630 243,947 
Middle East & Africa150,072 35,773 2,909 13,282 601 202,637 
Canada148,380 36,936 6,418 1,111 63 192,908 
Europe94,910 5,729 8,866 1,871 6,768 118,144 
Asia-Pacific18,001 2,455 3,817 1,954 18,715 44,942 
Australia10,803 14,583 15 199  25,600 
Other24,709 127 25 2,527  27,388 
Total revenue$1,067,383 $462,748 $114,717 $84,014 $69,670 $1,798,532 
______________________
(1)    Revenues associated with sales under the Cross Supply and Product Transfer Agreement with Ecolab are included within Corporate and other.

Revenue is attributed to regions based on the location of our direct customer, which in some instances is an intermediary and not necessarily the end user.

Contract Balances

The beginning and ending contract asset and contract liability balances from contracts with customers were as follows:
(in thousands)June 30, 2023December 31, 2022
Contract assets$ $ 
Contract liabilities - current$20,549 $14,113 

10


NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The components of our definite- and indefinite-lived intangible assets were as follows:
June 30, 2023December 31, 2022
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Definite-lived
intangible assets:
Customer relationships$583,522 $423,001 $160,521 $582,466 $407,212 $175,254 
Unpatented technologies142,760 65,713 77,047 142,760 56,264 86,496 
Favorable supply agreements57,000 57,000  57,000 49,056 7,944 
Trademarks59,862 37,865 21,997 59,856 36,048 23,808 
Patents38,346 32,112 6,234 38,175 31,481 6,694 
Other525 525  1,892 1,878 14 
882,015 616,216 265,799 882,149 581,939 300,210 
Indefinite-lived
intangible assets:
Trademarks3,600 — 3,600 3,600 — 3,600 
In-process research and development1,200 — 1,200 1,200 — 1,200 
4,800 — 4,800 4,800 — 4,800 
Total$886,815 $616,216 $270,599 $886,949 $581,939 $305,010 

Goodwill

The carrying amount of goodwill, including changes therein, by reportable segment is below:
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical TechnologiesTotal
December 31, 2022$367,084 $211,268 $101,136 $ $679,488 
Foreign currency translation(10,554)133   (10,421)
June 30, 2023$356,530 $211,401 $101,136 $ $669,067 

Goodwill is not subject to amortization but is tested for impairment on an annual basis or more frequently if impairment indicators arise.

11


NOTE 5—DEBT

Long-term debt consisted of the following:

(in thousands)June 30, 2023December 31, 2022
2022 Revolving Credit Facility$ $25,000 
2022 Term Loan Facility620,304 623,438 
Total620,304 648,438 
Net unamortized discounts and issuance costs(18,889)(20,486)
Total long-term debt601,415 627,952 
Current portion of long-term debt (1)
(6,250)(6,250)
Long-term debt, less current portion$595,165 $621,702 
_______________________
(1) Includes the mandatory amortization payments due within twelve months related to the 2022 Term Loan Facility as of June 30, 2023.

On June 7, 2022, we entered into a restated credit agreement, which provides for (i) a $625.0 million seven-year senior secured term loan B facility (the “2022 Term Loan Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $700.0 million, of which $100.0 million is available for the issuance of letters of credit (the “2022 Revolving Credit Facility,” and, together with the 2022 Term Loan Facility, the “Senior Secured Credit Facility”). The full amount of the 2022 Term Loan Facility was funded, and $135.0 million of the 2022 Revolving Credit Facility was drawn, on June 7, 2022. As of June 30, 2023, we had no outstanding balance on the 2022 Revolving Credit Facility.

The 2022 Term Loan Facility matures June 7, 2029 and the 2022 Revolving Credit Facility matures June 7, 2027. The 2022 Term Loan Facility is subject to mandatory amortization payments of 1% per annum of the initial commitment paid quarterly, which began on December 30, 2022. The Senior Secured Credit Facility contains customary representations and warranties, covenants, and events of default for loan facilities of this type. We were in compliance with all covenants as of June 30, 2023.

At the Company’s election, outstanding borrowings under the Senior Secured Credit Facility will accrue interest at a per annum rate of (i) an adjusted SOFR rate plus the applicable spread or (ii) a base rate plus the applicable spread. On June 29, 2022, the Company executed a five-year amortizing floating-to-fixed interest rate swap to hedge our exposure to increases in variable interest rates on the 2022 Term Loan Facility. This interest rate swap agreement is based on a $300.0 million notional amount for the first three years, reducing to $150.0 million for years four and five. See Note 12—Derivatives and Hedging Transactions for additional information on interest rate swaps.

NOTE 6—COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and contingencies related to, among other things, workers’ compensation, general liability (including product liability), automobile claims, health care claims, environmental matters, and lawsuits. We record liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. In accordance with applicable GAAP, the Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.

Guarantees and Indemnifications

We have provided indemnities in connection with sales of certain businesses and assets, including indemnities for environmental health and safety, tax, and employment matters. We do not have any material liabilities recorded for these indemnifications and are not aware of any claims or other information that would give rise to material payments under such indemnities.

As of June 30, 2023 and December 31, 2022, we had $72.2 million and $82.4 million, respectively, of outstanding letters of credit, surety bonds and guarantees, which expire at various dates through 2039. These financial instruments are primarily maintained as security for insurance, warranty, and other performance obligations. Generally, we would only be liable for the amount of these letters of credit, surety bonds, and guarantees in the event of default in the performance of our obligations, the probability of which we believe is remote.
12





Litigation and Environmental Matters

The Company is party to various proceedings and claims incidental to its business, including matters arising under provisions relating to the protection of the environment. We review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and accrued to date, and the availability and extent of insurance coverage. We accrue a liability for legal matters that are probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. While many of these matters involve inherent uncertainty, we believe that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental Matters

The Company is currently participating in environmental assessments and remediation at approximately 11 locations, the majority of which are in the United States (“U.S.”), and environmental liabilities have been accrued reflecting our best estimate of future costs. Potential insurance reimbursements are not anticipated in the Company’s accruals for environmental liabilities. As of June 30, 2023 and December 31, 2022, environmental liability accruals related to these locations were $6.0 million and $5.9 million, respectively.

Prior to the commencement of our operations as an independent publicly traded company in 2018, groundwater contamination was discovered at the Norris Sucker Rods plant site located in Tulsa, Oklahoma. Initial remedial efforts were undertaken at the time of discovery of the contamination and we have since coordinated monitoring and remediation with the Oklahoma Department of Environmental Quality (“ODEQ”). As part of the ongoing long-term remediation process, we contracted an engineering and consulting firm to develop a range of possible additional remedial alternatives in order to accelerate the remediation process and associated cost estimates for the work. In October 2019, we received the firm’s preliminary remedial alternatives for consideration. We have submitted our long-term remediation plan and it was approved by ODEQ. We are now in discussion with ODEQ to finalize a consent order. Because we have not yet finalized the consent order for further remediation at the site and discussions with ODEQ remain ongoing, we cannot fully anticipate the timing, outcome or possible impact of such further remedial activities, financial or otherwise. As a result of the recommendations in the report, we accrued liabilities for these remediation efforts of approximately $2.0 million as of December 31, 2019. Liabilities could increase in the future at such time as we ultimately reach agreement with ODEQ on our remediation plan and such liabilities become probable and can be reasonably estimated; however, there have been no changes to our estimated liability as of June 30, 2023.

Matters Related to Deepwater Horizon Incident Response

On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after an explosion and fire, resulting in a massive oil spill. Certain entities that are now subsidiaries of ChampionX as a result of the acquisition of the Chemical Technologies business in 2020 (collectively the “COREXIT Defendants”) supplied COREXIT™ 9500, an oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule, which was used in the response to the spill. In connection with the provision of COREXIT™ 9500, the COREXIT Defendants were named in several lawsuits. Cases arising out of the Deepwater Horizon accident were administratively transferred and consolidated for pre-trial purposes under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 in the United States District Court in the Eastern District of Louisiana (E.D. La.) (“MDL 2179”). Claims related to the response to the oil spill were consolidated in a master complaint captioned the “B3 Master Complaint.” In 2011, Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) named the COREXIT Defendants and other unaffiliated companies as first party defendants (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against the COREXIT Defendants and other unaffiliated cross defendants. In April and June 2011, in support of its defense of the claims against it, the COREXIT Defendants filed counterclaims against the Cross Claimants. On May 18, 2012, the COREXIT Defendants filed a motion for summary judgment as to the claims in the B3 Master Complaint. On November 28, 2012, the Court granted the COREXIT Defendants’ motion and dismissed with prejudice the claims in the B3 Master Complaint asserted against the COREXIT Defendants. There currently remains one “B3” case that asserted claims against the COREXIT Defendants and that remains pending against other defendants. Because the Court’s decision was not a “final judgment” for purposes of appeal with respect to those claims, under Federal Rule of Appellate Procedure 4(a), the plaintiff will have 30 days after entry of final judgment in the case to appeal the Court’s summary judgment decision.
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The Company believes the claims asserted against the COREXIT Defendants are without merit and intends to defend these lawsuits vigorously. The Company also believes that it has rights to contribution and/or indemnification (including legal expenses) from third parties. However, we cannot predict the outcome of these lawsuits, the involvement it might have in these matters in the future, or the potential for future litigation.

NOTE 7—RESTRUCTURING EXPENSE

We approved various restructuring plans related to the consolidation of product lines and associated facility closures and workforce reductions during prior periods, which we expect to be completed during 2023. We recognized charges of $4.0 million and $6.2 million during the three and six months ended June 30, 2023, respectively, consisting primarily of contract termination costs, inventory obsolescence, and employee severance and related benefits. During the three and six months ended June 30, 2022, we recorded restructuring expense of $6.6 million and $15.1 million, respectively.

The following table presents the restructuring expense by segment as classified in our condensed consolidated statements of income.
 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Segment restructuring expense (income):
Production Chemical Technologies$3,434 $336 $4,578 $11,972 
Production & Automation Technologies 125 785 (4,022)
Drilling Technologies    
Reservoir Chemical Technologies427 5,358 823 6,101 
Corporate and other99 801 4 1,053 
Total$3,960 $6,620 $6,190 $15,104 
Statements of Income classification:
Cost of goods and services$1,013 $5,147 $2,544 $1,008 
Selling, general and administrative expense2,947 1,473 3,646 14,096 
Total$3,960 $6,620 $6,190