SEC Filing - ChampionX Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

championx-20230930

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 September 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 194.8 million shares of common stock, $0.01 par value, outstanding as of October 19, 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 (Loss)	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	21
	Executive Overview and Business Outlook	21
	Consolidated Results of Operations	22
	Segment Results of Operations	24
	Capital Resources and Liquidity	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities , Use of Proceeds, and Issuer Purchases of Equity Securities	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	31
Item 6.	Exhibits	32
SIGNATURES		33

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 and assumptions (some of which are significant or beyond our control) 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, geopolitical issues, supply chain disruptions, and availability and cost of credit, and the impact thereof 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

•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;

•Risks relating to information technology and cybersecurity, including the potential for cyberattacks or security breaches that could disrupt our or our partners’ or suppliers’ operations, compromise confidential or otherwise protected information, damage our reputation, expose us to legal liability, or cause financial losses;

•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 September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenue:
Product revenue	$	827,659	$	897,156	$	2,474,098	$	2,455,377
Service revenue	86,849		101,598		268,739		299,835
Lease and other revenue	25,275		22,807		71,893		64,881
Total revenue	939,783		1,021,561		2,814,730		2,820,093
Cost of goods and services	647,923		825,018		1,957,309		2,204,052
Gross profit	291,860		196,543		857,421		616,041
Costs and expenses:
Selling, general and administrative expense	162,317		153,736		485,617		445,447

Loss (gain) on disposal group	—		(6,409)		12,965		16,515
Interest expense, net	13,744		11,454		40,754		33,582
Other expense, net	5,998		291		8,189		10,968
Income before income taxes	109,801		37,471		309,896		109,529
Provision for income taxes	29,009		14,246		69,334		19,235
Net income	80,792		23,225		240,562		90,294
Net income attributable to noncontrolling interest	3,081		157		3,522		3,182
Net income attributable to ChampionX	$	77,711	$	23,068	$	237,040	$	87,112

Earnings per share attributable to ChampionX:
Basic	$	0.40	$	0.11	$	1.20	$	0.43
Diluted	$	0.39	$	0.11	$	1.18	$	0.42
Weighted-average shares outstanding:
Basic	195,881		201,421		197,058		202,600
Diluted	199,592		206,522		201,025		208,155

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net income	$	80,792	$	23,225	$	240,562	$	90,294
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(13,144)		(47,067)		(14,800)		(27,463)
Cash flow hedges	6,164		16,310		1,706		11,608
Defined pension and other post-retirement benefits adjustments, net	59		68		10		207
Other comprehensive loss	(6,921)		(30,689)		(13,084)		(15,648)
Comprehensive income (loss)	73,871		(7,464)		227,478		74,646
Less: Comprehensive income attributable to noncontrolling interest	3,081		157		3,522		3,182
Comprehensive income (loss) attributable to ChampionX	$	70,790	$	(7,621)	$	223,956	$	71,464

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share data)	September 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	285,006	$	250,187
Receivables, net of allowances of $6,148 in 2023 and $5,148 in 2022	520,106		601,061
Inventories, net	588,800		542,543
Assets held for sale	9,959		29,334
Prepaid expenses and other current assets	81,825		75,456
Total current assets	1,485,696		1,498,581
Property, plant, and equipment, net of accumulated depreciation of $751,939 in 2023 and $693,226 in 2022	763,559		734,810
Goodwill	666,108		679,488
Intangible assets, net	256,376		305,010
Operating lease right-of-use assets	75,924		92,928

Other non-current assets	63,541		76,666

Total assets	$	3,311,204	$	3,387,483
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	6,250	$	6,250
Accounts payable	500,021		469,566
Accrued compensation and employee benefits	90,772		102,750
Current portion of operating lease liabilities	24,586		28,838
Accrued distributor fees	38,531		102,034
Liabilities held for sale	—		7,186
Accrued expenses and other current liabilities	133,716		142,352
Total current liabilities	793,876		858,976
Long-term debt	594,943		621,702
Deferred income taxes	77,457		94,235
Operating lease liabilities	46,162		59,686
Other long-term liabilities	92,638		75,669
Total liabilities	1,605,076		1,710,268
Stockholders’ equity:
Common stock (2.5 billion shares authorized, $0.01 par value) 195.0 million shares and 198.5 million shares issued and outstanding in 2023 and 2022, respectively	1,950		1,985
Capital in excess of par value of common stock	2,204,974		2,249,698

Accumulated deficit	(442,831)		(527,603)
Accumulated other comprehensive loss	(42,614)		(29,530)
ChampionX stockholders’ equity	1,721,479		1,694,550
Noncontrolling interest	(15,351)		(17,335)
Total equity	1,706,128		1,677,215
Total liabilities and equity	$	3,311,204	$	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
Net income	—	—		—		77,711				3,081		80,792
Other comprehensive loss	—	—		—		—		(6,921)		—		(6,921)
Stock-based compensation	129	1		6,088		—		—		—		6,089
Stock options exercised	444	5		2,754		—		—		—		2,759
Taxes withheld on issuance of stock-based awards	—	—		(2,593)		—		—		—		(2,593)
Dividends declared to common stockholders ($0.085 per share)	—	—		—		(16,718)		—		—		(16,718)
Repurchase and cancellation of common stock	(1,883)	(19)		(21,418)		(46,676)		—		—		(68,113)
Distributions to noncontrolling interest	—	—		(766)		—		—		(716)		(1,482)
Cumulative translation adjustments	—	—		—		—		—		(7)		(7)

September 30, 2023	194,986	$	1,950	$	2,204,974	$	(442,831)	$	(42,614)	$	(15,351)	$	1,706,128


	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
Net income	—	—		—		23,068		—		157		23,225
Other comprehensive loss	—	—		—		—		(30,689)		—		(30,689)
Stock-based compensation	20	—		5,009		—		—		—		5,009
Stock options exercised	87	1		563		—		—		—		564
Taxes withheld on issuance of stock-based awards	—	—		(198)		—		—		—		(198)
Dividends declared to common stockholders ($0.075 per share)	—	—		—		(15,315)		—		—		(15,315)
Repurchase and cancellation of common stock	(3,698)	(37)		(45,245)		(34,792)		—		—		(80,074)
Distributions to noncontrolling interest	—	—		—		—		—		(647)		(647)
Cumulative translation adjustments	—	—		—		—		—		(10)		(10)

September 30, 2022	199,340	$	1,993	$	2,276,094	$	(530,128)	$	(37,273)	$	(15,966)	$	1,694,720

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(in thousands)	2023		2022
Cash flows from operating activities:
Net income	$	240,562	$	90,294
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	177,226		177,761
Loss on disposal group	12,965		16,515


Stock-based compensation	17,664		14,808
Provision for inventory obsolescence and write-downs	16,354		21,214
Loss on debt extinguishment	—		4,043
Deferred income taxes	(15,380)		(37,505)
Gain on disposal of fixed assets	(1,480)		(4,428)

Amortization of deferred loan costs and accretion of discount	3,044		2,736

Other	4,791		1,261
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables	85,181		(50,075)
Inventories	(50,011)		(72,298)
Leased assets	(38,597)		(20,947)
Other assets	17,470		24,022
Accounts payable	(7,018)		38,600
Other liabilities	(91,453)		12,266






Net cash flows provided by operating activities	371,318		218,267

Cash flows from investing activities:
Capital expenditures	(110,965)		(74,752)
Proceeds from sale of fixed assets	12,328		16,424

Acquisitions, net of cash acquired	—		(3,198)


Net cash used for investing activities	(98,637)		(61,526)

Cash flows from financing activities:
Proceeds from long-term debt	15,500		995,038
Repayment of long-term debt	(43,625)		(1,071,386)
Payment of debt issue costs	(1,028)		(8,008)
Repurchases of common stock	(159,730)		(100,090)
Dividends paid	(48,309)		(30,480)
Payments related to taxes withheld on stock-based compensation	(9,732)		(3,576)
Proceeds from exercise of stock options	5,797		3,709
Payment of finance lease obligations	(7,148)		(4,503)
Distributions to noncontrolling interest	(2,305)		(3,016)
Proceeds expected to be remitted under the Accounts Receivable Facility	14,032		7,111

Net cash used for financing activities	(236,548)		(215,201)






Effect of exchange rate changes on cash and cash equivalents	(1,314)		(5,746)

Net increase (decrease) in cash and cash equivalents	34,819		(64,206)
Cash and cash equivalents at beginning of period	250,187		255,178
Cash and cash equivalents at end of period	$	285,006	$	190,972

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 program.

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 September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Segment revenue:
Production Chemical Technologies	$	604,254	$	643,604	$	1,770,240	$	1,710,987
Production & Automation Technologies	256,148		247,717		761,852		710,465
Drilling Technologies	54,869		60,965		168,900		175,682
Reservoir Chemical Technologies	25,093		35,485		74,752		119,499
Corporate and other (1)	(581)		33,790		38,986		103,460
Total revenue	$	939,783	$	1,021,561	$	2,814,730	$	2,820,093

Segment operating profit (loss):
Production Chemical Technologies	$	94,560	$	86,649	$	248,037	$	143,518
Production & Automation Technologies	28,299		22,485		96,299		70,845
Drilling Technologies	12,255		14,856		36,802		45,119
Reservoir Chemical Technologies	2,461		(61,711)		6,634		(73,327)
Total segment operating profit	137,575		62,279		387,772		186,155
Corporate and other (1)	14,030		13,354		37,122		43,044
Interest expense, net	13,744		11,454		40,754		33,582
Income before income taxes	$	109,801	$	37,471	$	309,896	$	109,529

_______________________

(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”) were included within Corporate and other from June 3, 2020, the date we acquired the Chemical Technologies business from Ecolab, through June 30, 2023. Beginning July 1, 2023, these sales and expenses are recognized in the Production Chemical Technologies segment.

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 September 30, 2023
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	250,980	$	191,139	$	41,314	$	14,131	$	(30)	$	497,534
Latin America	136,714		5,400		—		2,821		—		144,935
Middle East & Africa	75,086		17,889		2,218		6,959		(547)		101,605
Canada	73,107		20,362		3,661		257		—		97,387
Europe	47,791		4,680		6,289		714		(4)		59,470
Asia-Pacific	15,075		3,846		1,387		199		—		20,507
Australia	5,501		12,832		—		12		—		18,345
Other	—		—		—		—		—		—
Total revenue	$	604,254	$	256,148	$	54,869	$	25,093	$	(581)	$	939,783

	Three Months Ended September 30, 2022
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	228,007	$	192,914	$	47,645	$	19,756	$	19,651	$	507,973
Latin America	184,964		4,963		7		3,283		758		193,975
Middle East & Africa	77,162		15,567		1,562		8,314		1,358		103,963
Canada	75,334		18,922		4,614		334		49		99,253
Europe	50,206		2,776		5,774		1,102		3,584		63,442
Asia-Pacific	8,851		1,528		1,363		767		8,390		20,899
Australia	5,518		10,803		—		30		—		16,351
Other	13,562		244		—		1,899		—		15,705
Total revenue	$	643,604	$	247,717	$	60,965	$	35,485	$	33,790	$	1,021,561


	Nine Months Ended September 30, 2023
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	729,658	$	581,335	$	128,507	$	38,381	$	20,574	$	1,498,455
Latin America	377,268		15,545		—		9,833		1,719		404,365
Middle East & Africa	233,849		48,066		7,666		20,819		(985)		309,415
Canada	219,674		56,547		10,350		1,215		18		287,804
Europe	151,009		14,619		18,993		1,857		5,121		191,599
Asia-Pacific	32,866		9,451		3,382		2,070		12,539		60,308
Australia	16,586		36,289		—		14		—		52,889
Other	9,330		—		2		563		—		9,895
Total revenue	$	1,770,240	$	761,852	$	168,900	$	74,752	$	38,986	$	2,814,730

	Nine Months Ended September 30, 2022
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate and other (1)		Total
United States	$	624,370	$	548,698	$	140,312	$	76,015	$	61,544	$	1,450,939
Latin America	409,109		16,324		7		10,094		2,388		437,922
Middle East & Africa	227,234		51,340		4,471		21,596		1,959		306,600
Canada	223,714		55,858		11,032		1,445		112		292,161
Europe	145,116		8,505		14,640		2,973		10,352		181,586
Asia-Pacific	26,852		3,983		5,180		2,721		27,105		65,841
Australia	16,321		25,386		15		229		—		41,951
Other	38,271		371		25		4,426		—		43,093
Total revenue	$	1,710,987	$	710,465	$	175,682	$	119,499	$	103,460	$	2,820,093

______________________

(1) The sales related to the Cross Supply and Product Transfer Agreement with Ecolab were included within Corporate and other from the date we acquired the Chemical Technologies business from Ecolab through June 30, 2023. Beginning July 1, 2023, these sales and expenses are recognized in the Production Chemical Technologies segment.

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)	September 30, 2023		December 31, 2022
Contract assets	$	—	$	—
Contract liabilities - current	$	25,875	$	14,113

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

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


	September 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	$	582,095	$	429,885	$	152,210	$	582,466	$	407,212	$	175,254
Unpatented technologies	142,760		70,504		72,256		142,760		56,264		86,496
Favorable supply agreements	57,000		57,000		—		57,000		49,056		7,944
Trademarks	59,856		38,750		21,106		59,856		36,048		23,808