SEC Filing - ChampionX Corporation

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championx-20230630

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

☐ 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)


Delaware		82-3066826
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2445 Technology Forest Blvd,	Building 4, 12th Floor
The Woodlands,	Texas	77381
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	CHX	The 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 filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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


PART I — FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Income	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Executive Overview and Business Outlook	20
	Consolidated Results of Operations	21
	Segment Results of Operations	23
	Capital Resources and Liquidity	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	29
Item 6.	Exhibits	29
SIGNATURES		30

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)	2023		2022		2023		2022
Revenue:
Product revenue	$	813,416	$	807,553	$	1,646,439	$	1,558,221
Service revenue	88,645		101,843		181,890		198,237
Lease and other revenue	24,539		23,176		46,618		42,074
Total revenue	926,600		932,572		1,874,947		1,798,532
Cost of goods and services	644,394		720,684		1,309,386		1,379,034
Gross profit	282,206		211,888		565,561		419,498
Costs and expenses:
Selling, general and administrative expense	162,484		141,351		323,300		291,711

Loss on disposal group	—		22,924		12,965		22,924
Interest expense, net	14,544		10,765		27,010		22,128
Other expense (income), net	(3,104)		9,357		2,191		10,677
Income before income taxes	108,282		27,491		200,095		72,058
Provision for (benefit from) income taxes	11,656		(1,405)		40,325		4,989
Net income	96,626		28,896		159,770		67,069
Net income attributable to noncontrolling interest	829		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:
Basic	197,034		203,322		197,657		203,200
Diluted	200,735		208,714		201,694		208,863

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Net income	$	96,626	$	28,896	$	159,770	$	67,069
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	9,020		21,169		(1,656)		19,604
Cash flow hedges	231		(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 income	105,775		46,732		153,607		82,110
Less: Comprehensive income attributable to noncontrolling interest	829		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.

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands)	June 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	263,088	$	250,187
Receivables, net	522,106		601,061
Inventories, net	599,040		542,543
Assets held for sale	13,165		29,334
Prepaid expenses and other current assets	87,432		75,456
Total current assets	1,484,831		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
Goodwill	669,067		679,488
Intangible assets, net	270,599		305,010
Operating lease right-of-use assets	84,476		92,928

Other non-current assets	63,024		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 payable	550,827		469,566
Accrued compensation and employee benefits	85,521		102,750
Current portion of operating lease liabilities	26,641		28,838
Accrued distributor fees	19,297		102,034
Liabilities held for sale	—		7,186
Accrued expenses and other current liabilities	125,919		142,352
Total current liabilities	814,455		858,976
Long-term debt	595,165		621,702
Deferred income taxes	72,399		94,235
Operating lease liabilities	52,528		59,686
Other long-term liabilities	82,969		75,669
Total liabilities	1,617,516		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 stock	2,220,909		2,249,698

Accumulated deficit	(457,148)		(527,603)
Accumulated other comprehensive loss	(35,693)		(29,530)
ChampionX stockholders’ equity	1,730,031		1,694,550
Noncontrolling interest	(17,709)		(17,335)
Total equity	1,712,322		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.

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock
(in thousands)	Shares	Par Value		Capital in Excess of Par Value		Accum. Deficit		Accum. Other Comp. Loss		Non-controlling Interest		Total
December 31, 2022	198,466	$	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 compensation	327	3		5,231		—		—		—		5,234
Stock options exercised	481	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, 2023	197,972	$	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 compensation	180	2		6,339		—		—		—		6,341
Stock options exercised	27	—		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, 2023	196,296	$	1,963	$	2,220,909	$	(457,148)	$	(35,693)	$	(17,709)	$	1,712,322


	Common Stock
(in thousands)	Shares	Par Value		Capital in Excess of Par Value		Accum. Deficit		Accum. Other Comp. Loss		Non-controlling Interest		Total
December 31, 2021	202,866	$	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 compensation	290	3		4,725		—		—		—		4,728
Stock options exercised	189	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, 2022	203,345	$	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 compensation	64	1		5,070		—		—		—		5,071
Stock options exercised	312	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, 2022	202,931	$	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.

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022
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 amortization	115,387		117,229
Loss on disposal group	12,965		22,924


Stock-based compensation	11,575		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 discount	2,029		1,766

Other	3,185		805
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables	83,589		(42,456)
Inventories	(70,040)		(81,935)
Leased assets	(22,125)		(13,949)
Other assets	3,135		16,133
Accounts payable	40,632		21,507
Other liabilities	(120,901)		(58,076)





Net cash flows provided by operating activities	208,288		31,115

Cash flows from investing activities:
Capital expenditures	(57,277)		(53,555)
Proceeds from sale of fixed assets	7,109		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 debt	15,500		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 options	3,038		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 Facility	15,400		—

Net cash used for financing activities	(145,241)		(74,363)






Effect of exchange rate changes on cash and cash equivalents	22		659

Net increase (decrease) in cash and cash equivalents	12,901		(84,396)
Cash and cash equivalents at beginning of period	250,187		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.

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 1–Basis 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.

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)	2023		2022		2023		2022
Segment revenue:
Production Chemical Technologies	$	574,302	$	552,411	$	1,165,986	$	1,067,383
Production & Automation Technologies	254,156		242,399		505,704		462,748
Drilling Technologies	57,324		57,858		114,031		114,717
Reservoir Chemical Technologies	23,853		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 Technologies	33,208		23,650		68,000		48,360
Drilling Technologies	12,660		15,043		24,547		30,263
Reservoir Chemical Technologies	2,186		(8,147)		4,173		(11,616)
Total segment operating profit	135,217		56,152		250,197		123,876
Corporate and other (1)	12,391		17,896		23,092		29,690
Interest expense, net	14,544		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.

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 Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	236,917	$	197,655	$	44,233	$	11,677	$	7,014	$	497,496
Latin America	116,083		5,457		—		3,044		752		125,336
Middle East & Africa	81,776		14,756		2,967		7,123		(53)		106,569
Canada	72,403		15,648		2,922		540		7		91,520
Europe	53,415		4,980		6,544		775		2,494		68,208
Asia-Pacific	8,572		3,527		658		692		6,751		20,200
Australia	5,136		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 Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	205,457	$	187,982	$	45,848	$	31,038	$	20,039	$	490,364
Latin America	124,540		6,358		—		3,221		905		135,024
Middle East & Africa	76,028		19,062		1,220		5,561		287		102,158
Canada	72,581		17,484		3,477		633		37		94,212
Europe	45,889		3,384		5,156		968		3,297		58,694
Asia-Pacific	9,518		784		2,142		909		11,225		24,578
Australia	4,960		7,308		15		91		—		12,374
Other	13,438		37		—		1,693		—		15,168
Total revenue	$	552,411	$	242,399	$	57,858	$	44,114	$	35,790	$	932,572


	Six Months Ended June 30, 2023
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	478,678	$	390,196	$	87,193	$	24,250	$	20,604	$	1,000,921
Latin America	240,554		10,145		—		7,012		1,719		259,430
Middle East & Africa	158,763		30,177		5,448		13,860		(438)		207,810
Canada	146,567		36,185		6,689		958		18		190,417
Europe	103,218		9,939		12,704		1,143		5,125		132,129
Asia-Pacific	17,791		5,605		1,995		1,871		12,539		39,801
Australia	11,085		23,457		—		2		—		34,544
Other	9,330		—		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 Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	396,363	$	355,784	$	92,667	$	56,259	$	41,893	$	942,966
Latin America	224,145		11,361		—		6,811		1,630		243,947
Middle East & Africa	150,072		35,773		2,909		13,282		601		202,637
Canada	148,380		36,936		6,418		1,111		63		192,908
Europe	94,910		5,729		8,866		1,871		6,768		118,144
Asia-Pacific	18,001		2,455		3,817		1,954		18,715		44,942
Australia	10,803		14,583		15		199		—		25,600
Other	24,709		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, 2023		December 31, 2022
Contract assets	$	—	$	—
Contract liabilities - current	$	20,549	$	14,113

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The components of our definite- and indefinite-lived intangible assets were as follows:


	June 30, 2023						December 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 technologies	142,760		65,713		77,047		142,760		56,264		86,496
Favorable supply agreements	57,000		57,000		—		57,000		49,056		7,944
Trademarks	59,862		37,865		21,997		59,856		36,048		23,808
Patents	38,346		32,112		6,234		38,175		31,481		6,694
Other	525		525		—		1,892		1,878		14
	882,015		616,216		265,799		882,149		581,939		300,210
Indefinite-lived intangible assets:
Trademarks	3,600		—		3,600		3,600		—		3,600
In-process research and development	1,200		—		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 Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Total
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.

NOTE 5—DEBT

Long-term debt consisted of the following:


(in thousands)	June 30, 2023		December 31, 2022
2022 Revolving Credit Facility	$	—	$	25,000
2022 Term Loan Facility	620,304		623,438
Total	620,304		648,438
Net unamortized discounts and issuance costs	(18,889)		(20,486)
Total long-term debt	601,415		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.

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.

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,