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)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common stock, $0.01 par value
|
CHX
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
Emerging growth company
|
☐
|
Page
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Product revenue
|
$
|
248,871
|
|
|
$
|
269,670
|
|
|
$
|
473,316
|
|
|
$
|
535,622
|
|
Service revenue
|
36,846
|
|
|
24,063
|
|
|
61,770
|
|
|
47,874
|
|
||||
Lease and other revenue
|
13,197
|
|
|
12,437
|
|
|
25,262
|
|
|
23,168
|
|
||||
Total revenue
|
298,914
|
|
|
306,170
|
|
|
560,348
|
|
|
606,664
|
|
||||
Cost of goods and services
|
266,684
|
|
|
197,410
|
|
|
445,779
|
|
|
394,893
|
|
||||
Gross profit
|
32,230
|
|
|
108,760
|
|
|
114,569
|
|
|
211,771
|
|
||||
Selling, general and administrative expense
|
130,657
|
|
|
66,687
|
|
|
208,800
|
|
|
130,816
|
|
||||
Goodwill impairment
|
—
|
|
|
—
|
|
|
616,271
|
|
|
—
|
|
||||
Long-lived asset impairment
|
—
|
|
|
—
|
|
|
40,980
|
|
|
1,746
|
|
||||
Interest expense, net
|
11,262
|
|
|
10,109
|
|
|
20,301
|
|
|
20,636
|
|
||||
Other (income) expense, net
|
312
|
|
|
2,676
|
|
|
(1,321
|
)
|
|
3,778
|
|
||||
Income (loss) before income taxes
|
(110,001
|
)
|
|
29,288
|
|
|
(770,462
|
)
|
|
54,795
|
|
||||
Provision for (benefit from) income taxes
|
(954
|
)
|
|
6,280
|
|
|
(27,960
|
)
|
|
11,849
|
|
||||
Net income (loss)
|
(109,047
|
)
|
|
23,008
|
|
|
(742,502
|
)
|
|
42,946
|
|
||||
Net income attributable to noncontrolling interest
|
598
|
|
|
71
|
|
|
871
|
|
|
353
|
|
||||
Net income (loss) attributable to ChampionX
|
$
|
(109,645
|
)
|
|
$
|
22,937
|
|
|
$
|
(743,373
|
)
|
|
$
|
42,593
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share attributable to ChampionX:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.95
|
)
|
|
$
|
0.30
|
|
|
$
|
(7.72
|
)
|
|
$
|
0.55
|
|
Diluted
|
$
|
(0.95
|
)
|
|
$
|
0.30
|
|
|
$
|
(7.72
|
)
|
|
$
|
0.55
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
115,149
|
|
|
77,425
|
|
|
96,313
|
|
|
77,394
|
|
||||
Diluted
|
115,149
|
|
|
77,632
|
|
|
96,313
|
|
|
77,636
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss)
|
$
|
(109,047
|
)
|
|
$
|
23,008
|
|
|
$
|
(742,502
|
)
|
|
$
|
42,946
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments (1)
|
5,703
|
|
|
974
|
|
|
(5,349
|
)
|
|
2,064
|
|
||||
Other activities, net (2)
|
752
|
|
|
68
|
|
|
851
|
|
|
167
|
|
||||
Other comprehensive income (loss)
|
6,455
|
|
|
1,042
|
|
|
(4,498
|
)
|
|
2,231
|
|
||||
Comprehensive income (loss)
|
(102,592
|
)
|
|
24,050
|
|
|
(747,000
|
)
|
|
45,177
|
|
||||
Comprehensive income attributable to noncontrolling interest
|
598
|
|
|
71
|
|
|
871
|
|
|
353
|
|
||||
Comprehensive income (loss) attributable to ChampionX
|
$
|
(103,190
|
)
|
|
$
|
23,979
|
|
|
$
|
(747,871
|
)
|
|
$
|
44,824
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
141,895
|
|
|
$
|
35,290
|
|
Receivables, net
|
517,110
|
|
|
219,874
|
|
||
Inventories, net
|
527,642
|
|
|
211,342
|
|
||
Prepaid expenses and other current assets
|
71,900
|
|
|
26,934
|
|
||
Total current assets
|
1,258,547
|
|
|
493,440
|
|
||
Property, plant and equipment, net of accumulated depreciation of $463,962 in 2020 and $426,722 in 2019
|
944,745
|
|
|
248,181
|
|
||
Operating lease right-of-use assets
|
124,289
|
|
|
24,289
|
|
||
Goodwill
|
644,381
|
|
|
911,113
|
|
||
Intangible assets, net
|
485,988
|
|
|
238,707
|
|
||
Other non-current assets
|
62,883
|
|
|
7,095
|
|
||
Total assets
|
$
|
3,520,833
|
|
|
$
|
1,922,825
|
|
Liabilities and Equity
|
|
|
|
||||
Current portion of long-term debt
|
$
|
31,656
|
|
|
$
|
4,845
|
|
Accounts payable
|
274,964
|
|
|
120,291
|
|
||
Accrued compensation and employee benefits
|
48,044
|
|
|
38,470
|
|
||
Current portion of operating lease liabilities
|
34,771
|
|
|
7,620
|
|
||
Accrued distributor fees
|
47,044
|
|
|
—
|
|
||
Accrued expenses and other current liabilities
|
121,870
|
|
|
28,455
|
|
||
Total current liabilities
|
558,349
|
|
|
199,681
|
|
||
Long-term debt
|
1,071,727
|
|
|
559,821
|
|
||
Deferred income taxes
|
156,622
|
|
|
84,060
|
|
||
Operating lease liabilities
|
85,668
|
|
|
19,419
|
|
||
Other long-term liabilities
|
63,871
|
|
|
23,630
|
|
||
Total liabilities
|
1,936,237
|
|
|
886,611
|
|
||
Stockholders’ equity:
|
|
|
|
|
|||
Common stock (2.5 billion shares authorized, $0.01 par value)
199.8 million shares and 77.5 million shares issued and outstanding in 2020 and 2019, respectively
|
1,998
|
|
|
775
|
|
||
Capital in excess of par value of common stock
|
2,283,096
|
|
|
969,174
|
|
||
Retained earnings (accumulated deficit)
|
(637,861
|
)
|
|
107,048
|
|
||
Accumulated other comprehensive loss
|
(48,535
|
)
|
|
(44,037
|
)
|
||
Total stockholders’ equity
|
1,598,698
|
|
|
1,032,960
|
|
||
Noncontrolling interest
|
(14,102
|
)
|
|
3,254
|
|
||
Total equity
|
1,584,596
|
|
|
1,036,214
|
|
||
Total liabilities and equity
|
$
|
3,520,833
|
|
|
$
|
1,922,825
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(in thousands)
|
Shares
|
|
Par
Value
|
|
Capital in Excess of Par Value
|
|
Retained Earnings
|
|
Accum.
Other
Comp.
Loss
|
|
Non-controlling Interest
|
|
Total
|
|||||||||||||
December 31, 2018
|
77,353
|
|
|
$
|
774
|
|
|
$
|
960,773
|
|
|
$
|
54,884
|
|
|
$
|
(42,906
|
)
|
|
$
|
2,458
|
|
|
$
|
975,983
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
19,656
|
|
|
—
|
|
|
282
|
|
|
19,938
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,189
|
|
|
—
|
|
|
1,189
|
|
||||||
Stock-based compensation
|
39
|
|
|
—
|
|
|
2,285
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,285
|
|
||||||
Taxes withheld on issuance of stock-based awards
|
—
|
|
|
—
|
|
|
(719
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(719
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
14
|
|
||||||
March 31, 2019
|
77,392
|
|
|
$
|
774
|
|
|
$
|
962,339
|
|
|
$
|
74,540
|
|
|
$
|
(41,717
|
)
|
|
$
|
2,754
|
|
|
$
|
998,690
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
22,937
|
|
|
—
|
|
|
71
|
|
|
23,008
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,042
|
|
|
—
|
|
|
1,042
|
|
||||||
Stock-based compensation
|
67
|
|
|
1
|
|
|
2,735
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,736
|
|
||||||
Taxes withheld on issuance of stock-based awards
|
—
|
|
|
—
|
|
|
(1,080
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,080
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(14
|
)
|
||||||
June 30, 2019
|
77,459
|
|
|
775
|
|
|
963,994
|
|
|
97,477
|
|
|
(40,675
|
)
|
|
2,811
|
|
|
1,024,382
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(in thousands)
|
Shares
|
|
Par
Value
|
|
Capital in Excess of Par Value
|
|
Retained Earnings (Accum. Deficit)
|
|
Accum.
Other
Comp.
Loss
|
|
Non-controlling Interest
|
|
Total
|
|||||||||||||
December 31, 2019
|
77,460
|
|
|
$
|
775
|
|
|
$
|
969,174
|
|
|
$
|
107,048
|
|
|
$
|
(44,037
|
)
|
|
$
|
3,254
|
|
|
$
|
1,036,214
|
|
Cumulative effect of accounting changes, net of tax (Note 3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,573
|
)
|
|
—
|
|
|
—
|
|
|
(1,573
|
)
|
||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(633,728
|
)
|
|
—
|
|
|
273
|
|
|
(633,455
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,953
|
)
|
|
—
|
|
|
(10,953
|
)
|
||||||
Stock-based compensation
|
44
|
|
|
—
|
|
|
2,429
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,429
|
|
||||||
Taxes withheld on issuance of stock-based awards
|
—
|
|
|
—
|
|
|
(368
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(368
|
)
|
||||||
March 31, 2020
|
77,504
|
|
|
$
|
775
|
|
|
$
|
971,235
|
|
|
$
|
(528,253
|
)
|
|
$
|
(54,990
|
)
|
|
$
|
3,527
|
|
|
$
|
392,294
|
|
Issuance of common stock related to the Merger
|
122,237
|
|
|
1,223
|
|
|
1,262,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,263,931
|
|
||||||
Issuance of replacement awards related to the Merger
|
—
|
|
|
—
|
|
|
43,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,964
|
|
||||||
Non-controlling interest acquired in the Merger
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,015
|
)
|
|
(16,015
|
)
|
||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(109,645
|
)
|
|
—
|
|
|
598
|
|
|
(109,047
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,455
|
|
|
—
|
|
|
6,455
|
|
||||||
Stock-based compensation
|
67
|
|
|
—
|
|
|
5,433
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,433
|
|
||||||
Taxes withheld on issuance of stock-based awards
|
—
|
|
|
—
|
|
|
(244
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(244
|
)
|
||||||
Distributions to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,200
|
)
|
|
(2,200
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
(12
|
)
|
|
25
|
|
||||||
June 30, 2020
|
199,808
|
|
|
1,998
|
|
|
2,283,096
|
|
|
(637,861
|
)
|
|
(48,535
|
)
|
|
(14,102
|
)
|
|
1,584,596
|
|
|
Six Months Ended June 30,
|
||||||
(in thousands)
|
2020
|
|
2019
|
||||
Cash provided by (used for) operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(742,502
|
)
|
|
$
|
42,946
|
|
Adjustments to reconcile net income to net cash provided (required) by operating activities:
|
|
|
|
||||
Depreciation
|
58,139
|
|
|
34,190
|
|
||
Amortization
|
26,274
|
|
|
25,873
|
|
||
Stock-based compensation
|
7,862
|
|
|
5,021
|
|
||
Loss on disposal of fixed assets
|
4,040
|
|
|
65
|
|
||
Loss on goodwill and long-lived asset impairment
|
657,251
|
|
|
1,746
|
|
||
Loss on sale of business
|
—
|
|
|
2,475
|
|
||
Provision for losses on accounts receivable
|
3,498
|
|
|
(307
|
)
|
||
Provision for inventory obsolescence and write-downs
|
8,354
|
|
|
—
|
|
||
Amortization of deferred loan costs and accretion of discount
|
1,999
|
|
|
1,295
|
|
||
Deferred income taxes
|
(24,682
|
)
|
|
(5,300
|
)
|
||
Employee benefit plan expense
|
859
|
|
|
1,135
|
|
||
Other
|
(264
|
)
|
|
(418
|
)
|
||
Changes in operating assets and liabilities (net of effects of foreign exchange):
|
|
|
|
||||
Receivables
|
77,777
|
|
|
(5,161
|
)
|
||
Inventories
|
24,794
|
|
|
1,029
|
|
||
Prepaid expenses and other current assets
|
22,088
|
|
|
(2,311
|
)
|
||
Accounts payable
|
(30,331
|
)
|
|
(3,088
|
)
|
||
Accrued compensation and employee benefits
|
(13,846
|
)
|
|
(7,989
|
)
|
||
Accrued expenses and other liabilities
|
4,717
|
|
|
(3,126
|
)
|
||
Leased assets
|
(9,311
|
)
|
|
(29,421
|
)
|
||
Other
|
1,317
|
|
|
647
|
|
||
Net cash provided by operating activities
|
78,033
|
|
|
59,301
|
|
||
|
|
|
|
||||
Cash provided by (used for) investing activities:
|
|
|
|
|
|
||
Capital expenditures
|
(19,322
|
)
|
|
(22,688
|
)
|
||
Acquisitions, net of cash acquired
|
57,588
|
|
|
—
|
|
||
Proceeds from sale of fixed assets
|
1,066
|
|
|
2,475
|
|
||
Payment on sale of business
|
—
|
|
|
(2,194
|
)
|
||
Net cash provided by (used for) investing activities
|
39,332
|
|
|
(22,407
|
)
|
||
|
|
|
|
||||
Cash provided by (used for) financing activities:
|
|
|
|
|
|
||
Proceeds from long-term debt, net of discounts
|
125,000
|
|
|
4,000
|
|
||
Payment of debt issue costs
|
(4,356
|
)
|
|
—
|
|
||
Repayment of long-term debt
|
(125,000
|
)
|
|
(54,000
|
)
|
||
Distribution to noncontrolling interest
|
(2,200
|
)
|
|
—
|
|
||
Payment of finance lease obligations
|
(2,802
|
)
|
|
(2,690
|
)
|
||
Payments related to taxes withheld on stock-based compensation
|
(612
|
)
|
|
(1,799
|
)
|
||
Net cash used for financing activities
|
(9,970
|
)
|
|
(54,489
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(790
|
)
|
|
99
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
106,605
|
|
|
(17,496
|
)
|
||
Cash and cash equivalents at beginning of period
|
35,290
|
|
|
41,832
|
|
||
Cash and cash equivalents at end of period
|
$
|
141,895
|
|
|
$
|
24,336
|
|
|
Three Months Ended June 30, 2019
|
||||||||||
(in thousands, except per share data)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
||||||
Product revenue
|
$
|
270,273
|
|
|
$
|
(603
|
)
|
|
$
|
269,670
|
|
Service revenue
|
24,071
|
|
|
(8
|
)
|
|
24,063
|
|
|||
Lease and other revenue
|
11,710
|
|
|
727
|
|
|
12,437
|
|
|||
Total revenue
|
306,054
|
|
|
116
|
|
|
306,170
|
|
|||
Cost of goods and services
|
196,285
|
|
|
1,125
|
|
|
197,410
|
|
|||
Gross profit
|
109,769
|
|
|
(1,009
|
)
|
|
108,760
|
|
|||
Selling, general and administrative expense
|
66,642
|
|
|
45
|
|
|
66,687
|
|
|||
Interest expense, net
|
10,057
|
|
|
52
|
|
|
10,109
|
|
|||
Other expense, net
|
2,676
|
|
|
—
|
|
|
2,676
|
|
|||
Income before income taxes
|
30,394
|
|
|
(1,106
|
)
|
|
29,288
|
|
|||
Provision for income taxes
|
6,544
|
|
|
(264
|
)
|
|
6,280
|
|
|||
Net income
|
23,850
|
|
|
(842
|
)
|
|
23,008
|
|
|||
Net income attributable to noncontrolling interest
|
71
|
|
|
—
|
|
|
71
|
|
|||
Net income attributable to ChampionX
|
$
|
23,779
|
|
|
$
|
(842
|
)
|
|
$
|
22,937
|
|
|
|
|
|
|
|
||||||
Earnings per share attributable to ChampionX:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.31
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.30
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.30
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
24,892
|
|
|
$
|
(842
|
)
|
|
$
|
24,050
|
|
Comprehensive income attributable to ChampionX
|
$
|
24,821
|
|
|
$
|
(842
|
)
|
|
$
|
23,979
|
|
|
Six Months Ended June 30, 2019
|
||||||||||
(in thousands, except per share data)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
||||||
Product revenue
|
$
|
536,417
|
|
|
$
|
(795
|
)
|
|
$
|
535,622
|
|
Service revenue
|
47,978
|
|
|
(104
|
)
|
|
47,874
|
|
|||
Lease and other revenue
|
23,350
|
|
|
(182
|
)
|
|
23,168
|
|
|||
Total revenue
|
607,745
|
|
|
(1,081
|
)
|
|
606,664
|
|
|||
Cost of goods and services
|
392,427
|
|
|
2,466
|
|
|
394,893
|
|
|||
Gross profit
|
215,318
|
|
|
(3,547
|
)
|
|
211,771
|
|
|||
Selling, general and administrative expense
|
130,231
|
|
|
585
|
|
|
130,816
|
|
|||
Long-lived asset impairment (1)
|
1,746
|
|
|
—
|
|
|
1,746
|
|
|||
Interest expense, net
|
20,531
|
|
|
105
|
|
|
20,636
|
|
|||
Other expense, net
|
3,778
|
|
|
—
|
|
|
3,778
|
|
|||
Income before income taxes
|
59,032
|
|
|
(4,237
|
)
|
|
54,795
|
|
|||
Provision for income taxes
|
12,613
|
|
|
(764
|
)
|
|
11,849
|
|
|||
Net income
|
46,419
|
|
|
(3,473
|
)
|
|
42,946
|
|
|||
Net income attributable to noncontrolling interest
|
353
|
|
|
—
|
|
|
353
|
|
|||
Net income attributable to ChampionX
|
$
|
46,066
|
|
|
$
|
(3,473
|
)
|
|
$
|
42,593
|
|
|
|
|
|
|
|
||||||
Earnings per share attributable to ChampionX:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.60
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.55
|
|
Diluted
|
$
|
0.59
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.55
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
48,650
|
|
|
(3,473
|
)
|
|
45,177
|
|
|||
Comprehensive income attributable to ChampionX
|
48,297
|
|
|
(3,473
|
)
|
|
44,824
|
|
|
June 30, 2019
|
||||||||||
(in thousands)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
||||||
Stockholders’ Equity:
|
|
|
|
|
|
||||||
Capital in excess of par value of common stock
|
$
|
968,593
|
|
|
$
|
(4,599
|
)
|
|
$
|
963,994
|
|
Retained earnings
|
100,233
|
|
|
(2,756
|
)
|
|
97,477
|
|
|||
Total equity
|
1,031,737
|
|
|
(7,355
|
)
|
|
1,024,382
|
|
(in thousands)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
||||||
Total equity at December 31, 2018
|
$
|
981,527
|
|
|
$
|
(5,544
|
)
|
|
$
|
975,983
|
|
Cumulative effect of accounting changes
|
(1,662
|
)
|
|
1,662
|
|
|
—
|
|
|||
Net income
|
22,569
|
|
|
(2,631
|
)
|
|
19,938
|
|
|||
Total equity at March 31, 2019
|
1,005,203
|
|
|
(6,513
|
)
|
|
998,690
|
|
|||
Net income
|
23,850
|
|
|
(842
|
)
|
|
23,008
|
|
|||
June 30, 2019
|
1,031,737
|
|
|
(7,355
|
)
|
|
1,024,382
|
|
|
Six Months Ended June 30, 2019
|
||||||||||
(in thousands)
|
As Reported
|
|
Adjustments
|
|
As Revised
|
||||||
Cash provided (required) by operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
46,419
|
|
|
$
|
(3,473
|
)
|
|
$
|
42,946
|
|
Adjustments to reconcile net income to net cash provided (required) by operating activities:
|
|
|
|
|
|
||||||
Deferred income taxes
|
(10,891
|
)
|
|
5,591
|
|
|
(5,300
|
)
|
|||
Loss on sale of fixed assets (1)
|
65
|
|
|
—
|
|
|
65
|
|
|||
Provision for losses on accounts receivable (1)
|
(307
|
)
|
|
—
|
|
|
(307
|
)
|
|||
Amortization of deferred loan costs and accretion of discount (1)
|
1,295
|
|
|
—
|
|
|
1,295
|
|
|||
Other
|
(406
|
)
|
|
(12
|
)
|
|
(418
|
)
|
|||
Changes in operating assets and liabilities (net of effects of foreign exchange):
|
|
|
|
|
|
||||||
Receivables
|
(6,115
|
)
|
|
954
|
|
|
(5,161
|
)
|
|||
Inventories
|
(2,290
|
)
|
|
3,319
|
|
|
1,029
|
|
|||
Prepaid expenses and other current assets
|
3,470
|
|
|
(5,781
|
)
|
|
(2,311
|
)
|
|||
Accounts payable
|
(1,506
|
)
|
|
(1,582
|
)
|
|
(3,088
|
)
|
|||
Accrued compensation and employee benefits
|
(10,570
|
)
|
|
2,581
|
|
|
(7,989
|
)
|
|||
Accrued expenses and other liabilities
|
49
|
|
|
(3,175
|
)
|
|
(3,126
|
)
|
|||
Leased assets
|
(30,999
|
)
|
|
1,578
|
|
|
(29,421
|
)
|
(in thousands)
|
|
||
Equity consideration
|
$
|
1,263,931
|
|
Replacement awards attributable to pre-combination services(1)
|
43,964
|
|
|
Unfavorable supply agreement(2)
|
44,000
|
|
|
Favorable supply agreement(2)
|
(55,000
|
)
|
|
Fair value of consideration transferred
|
$
|
1,296,895
|
|
(in thousands)
|
Fair Value
|
|
Useful Life (years)
|
||
Land and land improvements
|
$
|
132,466
|
|
|
-
|
Buildings and leasehold improvements
|
201,001
|
|
|
5 to 40
|
|
Machinery, equipment and other
|
385,244
|
|
|
3 to 20
|
|
Capitalized software and computer hardware
|
21,896
|
|
|
3 to 7
|
|
Total property, plant, and equipment acquired
|
$
|
740,607
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Revenues
|
$
|
614,684
|
|
|
$
|
891,001
|
|
|
$
|
1,435,379
|
|
|
$
|
1,767,503
|
|
Net income (loss) attributable to ChampionX
|
(60,100
|
)
|
|
57,078
|
|
|
(794,525
|
)
|
|
109,879
|
|
(in thousands)
|
Allowance for Credit Losses
|
||
December 31, 2019
|
$
|
8,072
|
|
Impact of adoption on January 1, 2020
|
2,042
|
|
|
Provision for expected credit losses
|
3,968
|
|
|
Accounts written off
|
(1,834
|
)
|
|
Recoveries
|
(52
|
)
|
|
Foreign currency translation
|
(517
|
)
|
|
June 30, 2020
|
$
|
11,679
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
||||
Raw materials
|
$
|
163,037
|
|
|
$
|
50,099
|
|
Work in progress
|
9,890
|
|
|
13,325
|
|
||
Finished goods
|
385,208
|
|
|
175,774
|
|
||
|
558,135
|
|
|
239,198
|
|
||
Valuation adjustments
|
(12,858
|
)
|
|
(12,067
|
)
|
||
LIFO adjustments
|
(17,635
|
)
|
|
(15,789
|
)
|
||
Inventories, net
|
$
|
527,642
|
|
|
$
|
211,342
|
|
(in thousands)
|
Production Chemical Technologies
|
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Reservoir Chemical Technologies
|
|
Total
|
||||||||||
December 31, 2019
|
$
|
—
|
|
|
$
|
809,977
|
|
|
$
|
101,136
|
|
|
$
|
—
|
|
|
$
|
911,113
|
|
Acquisition (1)
|
270,532
|
|
|
—
|
|
|
—
|
|
|
81,485
|
|
|
$
|
352,017
|
|
||||
Impairment
|
—
|
|
|
(616,271
|
)
|
|
—
|
|
|
—
|
|
|
$
|
(616,271
|
)
|
||||
Foreign currency translation
|
120
|
|
|
(2,600
|
)
|
|
—
|
|
|
2
|
|
|
$
|
(2,478
|
)
|
||||
June 30, 2020
|
$
|
270,652
|
|
|
$
|
191,106
|
|
|
$
|
101,136
|
|
|
$
|
81,487
|
|
|
$
|
644,381
|
|
(1)
|
See Note 2—Merger Transaction for additional information related to the acquisition completed during June 2020.
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships (1)
|
$
|
568,818
|
|
|
$
|
297,731
|
|
|
$
|
271,087
|
|
|
$
|
560,316
|
|
|
$
|
353,189
|
|
|
$
|
207,127
|
|
Trademarks (1)
|
59,855
|
|
|
25,564
|
|
|
34,291
|
|
|
35,695
|
|
|
24,830
|
|
|
10,865
|
|
||||||
Patents
|
38,125
|
|
|
27,923
|
|
|
10,202
|
|
|
38,436
|
|
|
26,838
|
|
|
11,598
|
|
||||||
Unpatented technologies
|
123,700
|
|
|
11,123
|
|
|
112,577
|
|
|
13,700
|
|
|
9,811
|
|
|
3,889
|
|
||||||
Favorable supply agreements (2)
|
54,926
|
|
|
1,356
|
|
|
53,570
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Drawings and manuals
|
1,719
|
|
|
1,719
|
|
|
—
|
|
|
2,558
|
|
|
1,758
|
|
|
800
|
|
||||||
Other
|
5,267
|
|
|
4,606
|
|
|
661
|
|
|
5,332
|
|
|
4,504
|
|
|
828
|
|
||||||
|
852,410
|
|
|
370,022
|
|
|
482,388
|
|
|
656,037
|
|
|
420,930
|
|
|
235,107
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks
|
3,600
|
|
|
—
|
|
|
3,600
|
|
|
3,600
|
|
|
—
|
|
|
3,600
|
|
||||||
Total
|
$
|
856,010
|
|
|
$
|
370,022
|
|
|
$
|
485,988
|
|
|
$
|
659,637
|
|
|
$
|
420,930
|
|
|
$
|
238,707
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
||||
2018 Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
2018 Term Loan Facility
|
265,000
|
|
|
265,000
|
|
||
2020 Term Loan Facility
|
537,000
|
|
|
—
|
|
||
6.375% Senior Notes due 2026
|
300,000
|
|
|
300,000
|
|
||
Finance lease obligations
|
10,501
|
|
|
9,375
|
|
||
Total
|
1,112,501
|
|
|
574,375
|
|
||
Net unamortized discounts and issuance costs
|
(9,118
|
)
|
|
(9,709
|
)
|
||
Total long-term debt
|
$
|
1,103,383
|
|
|
$
|
564,666
|
|
Current portion of long-term debt
|
(31,656
|
)
|
|
(4,845
|
)
|
||
Long-term debt, less current portion
|
$
|
1,071,727
|
|
|
$
|
559,821
|
|
(in thousands)
|
Foreign Currency Translation
|
|
Defined Pension and Other Post-Retirement Benefits
|
|
Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||
December 31, 2018
|
$
|
(36,146
|
)
|
|
$
|
(6,760
|
)
|
|
$
|
—
|
|
|
$
|
(42,906
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
1,090
|
|
|
(323
|
)
|
|
—
|
|
|
767
|
|
||||
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
422
|
|
|
—
|
|
|
422
|
|
||||
Other comprehensive income, net of tax
|
1,090
|
|
|
99
|
|
|
—
|
|
|
1,189
|
|
||||
March 31, 2019
|
$
|
(35,056
|
)
|
|
$
|
(6,661
|
)
|
|
$
|
—
|
|
|
$
|
(41,717
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
974
|
|
|
—
|
|
|
—
|
|
|
974
|
|
||||
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
68
|
|
|
—
|
|
|
68
|
|
||||
Other comprehensive income (loss), net of tax
|
974
|
|
|
68
|
|
|
—
|
|
|
1,042
|
|
||||
June 30, 2019
|
$
|
(34,082
|
)
|
|
$
|
(6,593
|
)
|
|
$
|
—
|
|
|
$
|
(40,675
|
)
|
(in thousands)
|
Foreign Currency Translation
|
|
Defined Pension and Other Post-Retirement Benefits
|
|
Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||
December 31, 2019
|
$
|
(35,210
|
)
|
|
$
|
(8,827
|
)
|
|
$
|
—
|
|
|
$
|
(44,037
|
)
|
Other comprehensive loss before reclassifications, net of tax
|
(11,052
|
)
|
|
—
|
|
|
—
|
|
|
(11,052
|
)
|
||||
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
99
|
|
|
—
|
|
|
99
|
|
||||
Other comprehensive income (loss), net of tax
|
(11,052
|
)
|
|
99
|
|
|
—
|
|
|
(10,953
|
)
|
||||
March 31, 2020
|
$
|
(46,262
|
)
|
|
$
|
(8,728
|
)
|
|
$
|
—
|
|
|
$
|
(54,990
|
)
|
Other comprehensive income before reclassifications, net of tax
|
5,703
|
|
|
—
|
|
|
653
|
|
|
6,356
|
|
||||
Reclassification adjustment for net losses included in net income, net of tax
|
—
|
|
|
99
|
|
|
—
|
|
|
99
|
|
||||
Other comprehensive income, net of tax
|
5,703
|
|
|
99
|
|
|
653
|
|
|
6,455
|
|
||||
June 30, 2020
|
$
|
(40,559
|
)
|
|
$
|
(8,629
|
)
|
|
$
|
653
|
|
|
$
|
(48,535
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Affected line items on the condensed consolidated statements of income (loss)
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|||||||||
Pensions and other post-retirement benefits:
|
|||||||||||||||||
Amortization of actuarial loss and other
|
$
|
132
|
|
|
$
|
92
|
|
|
$
|
264
|
|
|
$
|
183
|
|
|
Other (income) expense, net
|
Settlement loss
|
—
|
|
|
—
|
|
|
—
|
|
|
486
|
|
|
Other (income) expense, net
|
||||
Total before tax
|
132
|
|
|
92
|
|
|
264
|
|
|
669
|
|
|
Income (loss) before income taxes
|
||||
Tax benefit
|
(33
|
)
|
|
(24
|
)
|
|
(66
|
)
|
|
(179
|
)
|
|
Provision for (benefit from) income taxes
|
||||
Net of tax
|
$
|
99
|
|
|
$
|
68
|
|
|
$
|
198
|
|
|
$
|
490
|
|
|
Net income (loss)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss) attributable to ChampionX
|
$
|
(109,645
|
)
|
|
$
|
22,937
|
|
|
$
|
(743,373
|
)
|
|
$
|
42,593
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of shares outstanding
|
115,149
|
|
|
77,425
|
|
|
96,313
|
|
|
77,394
|
|
||||
Dilutive effect of stock-based compensation
|
—
|
|
|
207
|
|
|
—
|
|
|
242
|
|
||||
Total shares and dilutive securities
|
115,149
|
|
|
77,632
|
|
|
96,313
|
|
|
77,636
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share attributable to ChampionX
|
$
|
(0.95
|
)
|
|
$
|
0.30
|
|
|
$
|
(7.72
|
)
|
|
$
|
0.55
|
|
Diluted earnings (loss) per share attributable to ChampionX
|
$
|
(0.95
|
)
|
|
$
|
0.30
|
|
|
$
|
(7.72
|
)
|
|
$
|
0.55
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||
Potentially dilutive securities excluded as anti-dilutive
|
976
|
|
|
422
|
|
|
770
|
|
|
348
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Production Chemical Technologies:
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
119,467
|
|
|
$
|
—
|
|
|
$
|
119,467
|
|
|
$
|
—
|
|
Service revenue
|
16,232
|
|
|
—
|
|
|
16,232
|
|
|
—
|
|
||||
Lease and other revenue
|
303
|
|
|
—
|
|
|
303
|
|
|
—
|
|
||||
Total Production Chemical Technologies revenue
|
$
|
136,002
|
|
|
$
|
—
|
|
|
$
|
136,002
|
|
|
$
|
—
|
|
Production & Automation Technologies:
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
82,350
|
|
|
$
|
199,330
|
|
|
$
|
250,873
|
|
|
$
|
387,747
|
|
Service revenue
|
19,497
|
|
|
24,052
|
|
|
44,388
|
|
|
47,863
|
|
||||
Lease and other revenue
|
12,894
|
|
|
12,437
|
|
|
24,959
|
|
|
23,168
|
|
||||
Total Production & Automation Technologies revenue
|
$
|
114,741
|
|
|
$
|
235,819
|
|
|
$
|
320,220
|
|
|
$
|
458,778
|
|
Drilling Technologies
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
20,948
|
|
|
$
|
70,340
|
|
|
$
|
76,870
|
|
|
$
|
147,875
|
|
Service revenue
|
—
|
|
|
11
|
|
|
33
|
|
|
11
|
|
||||
Total Drilling Technologies revenue
|
$
|
20,948
|
|
|
$
|
70,351
|
|
|
$
|
76,903
|
|
|
$
|
147,886
|
|
Reservoir Chemical Technologies:
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
9,239
|
|
|
$
|
—
|
|
|
$
|
9,239
|
|
|
$
|
—
|
|
Service revenue
|
67
|
|
|
—
|
|
|
67
|
|
|
—
|
|
||||
Total Reservoir Chemical Technologies revenue
|
$
|
9,306
|
|
|
$
|
—
|
|
|
$
|
9,306
|
|
|
$
|
—
|
|
Corporate and other: (1)
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
16,867
|
|
|
$
|
—
|
|
|
$
|
16,867
|
|
|
$
|
—
|
|
Service revenue
|
1,050
|
|
|
—
|
|
|
1,050
|
|
|
—
|
|
||||
Total Corporate and other revenue
|
$
|
17,917
|
|
|
$
|
—
|
|
|
$
|
17,917
|
|
|
$
|
—
|
|
Total Revenue:
|
|
|
|
|
|
|
|
||||||||
Product revenue
|
$
|
248,871
|
|
|
$
|
269,670
|
|
|
$
|
473,316
|
|
|
$
|
535,622
|
|
Service revenue
|
36,846
|
|
|
24,063
|
|
|
61,770
|
|
|
47,874
|
|
||||
Lease and other revenue
|
13,197
|
|
|
12,437
|
|
|
25,262
|
|
|
23,168
|
|
||||
Total revenue
|
$
|
298,914
|
|
|
$
|
306,170
|
|
|
$
|
560,348
|
|
|
$
|
606,664
|
|
|
Three Months Ended June 30, 2020
|
||||||||||||||||||||||
(in thousands)
|
Production Chemical Technologies
|
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Reservoir Chemical Technologies
|
|
Corporate
|
|
Total
|
||||||||||||
United States
|
$
|
41,753
|
|
|
$
|
83,153
|
|
|
$
|
13,894
|
|
|
$
|
4,275
|
|
|
$
|
11,932
|
|
|
155,007
|
|
|
Canada
|
15,961
|
|
|
3,998
|
|
|
443
|
|
|
131
|
|
|
62
|
|
|
20,595
|
|
||||||
Middle East
|
28,148
|
|
|
10,262
|
|
|
82
|
|
|
2,887
|
|
|
2,436
|
|
|
43,815
|
|
||||||
Europe
|
17,144
|
|
|
1,318
|
|
|
1,904
|
|
|
273
|
|
|
1,227
|
|
|
21,866
|
|
||||||
Australia
|
1,884
|
|
|
12,313
|
|
|
23
|
|
|
11
|
|
|
—
|
|
|
14,231
|
|
||||||
Latin America
|
25,035
|
|
|
3,154
|
|
|
—
|
|
|
488
|
|
|
490
|
|
|
29,167
|
|
||||||
Asia-Pacific
|
3,692
|
|
|
1,295
|
|
|
4,170
|
|
|
273
|
|
|
1,770
|
|
|
11,200
|
|
||||||
Other
|
2,385
|
|
|
(752
|
)
|
|
432
|
|
|
968
|
|
|
—
|
|
|
3,033
|
|
||||||
Total revenue
|
$
|
136,002
|
|
|
$
|
114,741
|
|
|
$
|
20,948
|
|
|
$
|
9,306
|
|
|
$
|
17,917
|
|
|
$
|
298,914
|
|
|
Six Months Ended June 30, 2020
|
||||||||||||||||||||||
(in thousands)
|
Production Chemical Technologies
|
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Reservoir Chemical Technologies
|
|
Corporate
|
|
Total
|
||||||||||||
United States
|
$
|
41,753
|
|
|
$
|
237,581
|
|
|
$
|
54,834
|
|
|
$
|
4,275
|
|
|
$
|
11,932
|
|
|
350,375
|
|
|
Canada
|
15,961
|
|
|
17,122
|
|
|
5,271
|
|
|
131
|
|
|
62
|
|
|
38,547
|
|
||||||
Middle East
|
28,148
|
|
|
22,166
|
|
|
540
|
|
|
2,887
|
|
|
2,436
|
|
|
56,177
|
|
||||||
Europe
|
17,144
|
|
|
7,658
|
|
|
7,595
|
|
|
273
|
|
|
1,227
|
|
|
33,897
|
|
||||||
Australia
|
1,884
|
|
|
21,535
|
|
|
69
|
|
|
11
|
|
|
—
|
|
|
23,499
|
|
||||||
Latin America
|
25,035
|
|
|
10,714
|
|
|
22
|
|
|
488
|
|
|
490
|
|
|
36,749
|
|
||||||
Asia-Pacific
|
3,692
|
|
|
3,272
|
|
|
7,678
|
|
|
273
|
|
|
1,770
|
|
|
16,685
|
|
||||||
Other
|
2,385
|
|
|
172
|
|
|
894
|
|
|
968
|
|
|
—
|
|
|
4,419
|
|
||||||
Total revenue
|
$
|
136,002
|
|
|
$
|
320,220
|
|
|
$
|
76,903
|
|
|
$
|
9,306
|
|
|
$
|
17,917
|
|
|
$
|
560,348
|
|
|
Three Months Ended June 30, 2019
|
||||||||||||||||||||||
(in thousands)
|
Production Chemical Technologies
|
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Reservoir Chemical Technologies
|
|
Corporate
|
|
Total
|
||||||||||||
United States
|
$
|
—
|
|
|
$
|
182,592
|
|
|
$
|
54,461
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
237,053
|
|
Canada
|
—
|
|
|
11,800
|
|
|
4,071
|
|
|
—
|
|
|
—
|
|
|
15,871
|
|
||||||
Middle East
|
—
|
|
|
14,016
|
|
|
423
|
|
|
—
|
|
|
—
|
|
|
14,439
|
|
||||||
Europe
|
—
|
|
|
5,069
|
|
|
8,022
|
|
|
—
|
|
|
—
|
|
|
13,091
|
|
||||||
Australia
|
—
|
|
|
8,025
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,025
|
|
||||||
Latin America
|
—
|
|
|
9,383
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
9,378
|
|
||||||
Asia-Pacific
|
—
|
|
|
4,679
|
|
|
3,188
|
|
|
—
|
|
|
—
|
|
|
7,867
|
|
||||||
Other
|
—
|
|
|
255
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
446
|
|
||||||
Total revenue
|
$
|
—
|
|
|
$
|
235,819
|
|
|
$
|
70,351
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
306,170
|
|
|
Six Months Ended June 30, 2019
|
||||||||||||||||||||||
(in thousands)
|
Production Chemical Technologies
|
|
Production & Automation Technologies
|
|
Drilling Technologies
|
|
Reservoir Chemical Technologies
|
|
Corporate
|
|
Total
|
||||||||||||
United States
|
$
|
—
|
|
|
$
|
358,235
|
|
|
$
|
110,176
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
468,411
|
|
Canada
|
—
|
|
|
25,701
|
|
|
9,085
|
|
|
—
|
|
|
—
|
|
|
34,786
|
|
||||||
Middle East
|
—
|
|
|
27,410
|
|
|
633
|
|
|
—
|
|
|
—
|
|
|
28,043
|
|
||||||
Europe
|
—
|
|
|
9,854
|
|
|
20,196
|
|
|
—
|
|
|
—
|
|
|
30,050
|
|
||||||
Australia
|
—
|
|
|
14,007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,007
|
|
||||||
Latin America
|
—
|
|
|
17,101
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,101
|
|
||||||
Asia-Pacific
|
—
|
|
|
6,068
|
|
|
7,343
|
|
|
—
|
|
|
—
|
|
|
13,411
|
|
||||||
Other
|
—
|
|
|
402
|
|
|
453
|
|
|
—
|
|
|
—
|
|
|
855
|
|
||||||
Total revenue
|
$
|
—
|
|
|
$
|
458,778
|
|
|
$
|
147,886
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
606,664
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
||||
Contract assets
|
$
|
6
|
|
|
$
|
285
|
|
Contract liabilities - current
|
16,369
|
|
|
6,148
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Segment restructuring charges:
|
|
|
|
|
|
|
|
||||||||
Production & Automation Technologies
|
$
|
8,334
|
|
|
$
|
660
|
|
|
$
|
9,005
|
|
|
$
|
1,070
|
|
Drilling Technologies
|
3,426
|
|
|
—
|
|
|
5,521
|
|
|
—
|
|
||||
Corporate
|
368
|
|
|
—
|
|
|
368
|
|
|
—
|
|
||||
Total
|
$
|
12,128
|
|
|
$
|
660
|
|
|
$
|
14,894
|
|
|
$
|
1,070
|
|
|
|
|
|||||||||||||
Statements of Income (Loss) classification:
|
|
|
|
|
|
|
|
||||||||
Cost of goods and services
|
$
|
8,707
|
|
|
$
|
319
|
|
|
$
|
10,746
|
|
|
$
|
398
|
|
Selling, general and administrative expense
|
3,421
|
|
|
341
|
|
|
4,148
|
|
|
672
|
|
||||
Total
|
$
|
12,128
|
|
|
$
|
660
|
|
|
$
|
14,894
|
|
|
$
|
1,070
|
|
(in thousands)
|
Restructuring Accrual Balance
|
||
December 31, 2019
|
$
|
130
|
|
Restructuring charges
|
7,543
|
|
|
Payments
|
(9,233
|
)
|
|
Liabilities assumed in the Merger
|
4,843
|
|
|
Other, including foreign currency translation
|
(7
|
)
|
|
June 30, 2020
|
$
|
3,276
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Stock-based compensation expense
|
$
|
5,433
|
|
|
$
|
2,736
|
|
|
$
|
7,862
|
|
|
$
|
5,021
|
|
Tax benefit
|
(1,203
|
)
|
|
(668
|
)
|
|
(1,802
|
)
|
|
(1,226
|
)
|
||||
Stock-based compensation expense, net of tax
|
$
|
4,230
|
|
|
$
|
2,068
|
|
|
$
|
6,060
|
|
|
$
|
3,795
|
|
(in shares)
|
Stock-Settled Appreciation Rights
|
|
Performance Share Awards
|
|
Restricted Stock Units
|
|
Non-Qualified Stock Options
|
||||
Outstanding at January 1, 2020
|
422,361
|
|
|
174,726
|
|
|
440,048
|
|
|
—
|
|
Granted
|
—
|
|
|
121,261
|
|
|
544,119
|
|
|
—
|
|
Replacement awards (1)
|
—
|
|
|
—
|
|
|
2,357,733
|
|
|
7,324,853
|
|
Forfeited
|
(7,030
|
)
|
|
(5,011
|
)
|
|
(23,046
|
)
|
|
—
|
|
Exercised / vested
|
—
|
|
|
—
|
|
|
(156,911
|
)
|
|
—
|
|
Outstanding at June 30, 2020
|
415,331
|
|
|
290,976
|
|
|
3,161,943
|
|
|
7,324,853
|
|
|
June 30, 2020
|
||||||||||||||
|
Carrying Amount
|
|
Fair Value Measurements
|
||||||||||||
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
1,334
|
|
|
$
|
—
|
|
|
$
|
1,334
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
1,414
|
|
|
$
|
—
|
|
|
$
|
1,414
|
|
|
$
|
—
|
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||
(in thousands)
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
2018 Term Loan Facility
|
$
|
265,000
|
|
|
$
|
253,904
|
|
|
$
|
265,000
|
|
|
$
|
266,161
|
|
2020 Term Loan Facility
|
$
|
537,000
|
|
|
$
|
528,274
|
|
|
$
|
—
|
|
|
$
|
—
|
|
6.375% Senior Notes due 2026
|
$
|
300,000
|
|
|
$
|
279,396
|
|
|
$
|
300,000
|
|
|
$
|
316,710
|
|
|
June 30, 2020
|
||||||
(in thousands)
|
Derivative Assets
|
|
Derivative Liabilities
|
||||
Prepaid expenses and other current assets
|
$
|
1,334
|
|
|
$
|
—
|
|
Accrued expenses and other current liabilities
|
—
|
|
|
1,414
|
|
||
|
$
|
1,334
|
|
|
$
|
1,414
|
|
(in thousands)
|
June 30, 2020
|
|
December 31, 2019
|
||||
Notional value of foreign currency forward contracts
|
$
|
345,738
|
|
|
$
|
—
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Loss reclassified from AOCI to income on cash flow hedges:
|
|
|
|
|
|
|
|
||||||||
Cost of goods and services
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
Loss on derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||||||
Other (income) expense, net
|
711
|
|
|
—
|
|
|
711
|
|
|
—
|
|
||||
Total loss of derivative instruments
|
$
|
726
|
|
|
$
|
—
|
|
|
$
|
726
|
|
|
$
|
—
|
|
•
|
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. 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.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Segment revenue:
|
|
|
|
|
|
|
|
||||||||
Production Chemical Technologies
|
$
|
136,002
|
|
|
$
|
—
|
|
|
$
|
136,002
|
|
|
$
|
—
|
|
Production & Automation Technologies
|
114,741
|
|
|
235,819
|
|
|
320,220
|
|
|
458,778
|
|
||||
Drilling Technologies
|
20,948
|
|
|
70,351
|
|
|
76,903
|
|
|
147,886
|
|
||||
Reservoir Chemical Technologies
|
9,306
|
|
|
—
|
|
|
9,306
|
|
|
—
|
|
||||
Corporate and other (1)
|
17,917
|
|
|
—
|
|
|
17,917
|
|
|
—
|
|
||||
Total revenue
|
$
|
298,914
|
|
|
$
|
306,170
|
|
|
$
|
560,348
|
|
|
$
|
606,664
|
|
|
|
|
|
|
|
|
|
||||||||
Segment operating profit:
|
|
|
|
|
|
|
|
|
|
||||||
Production Chemical Technologies
|
$
|
9,922
|
|
|
$
|
—
|
|
|
$
|
9,922
|
|
|
$
|
—
|
|
Production & Automation Technologies
|
(37,168
|
)
|
|
19,868
|
|
|
(685,759
|
)
|
|
32,932
|
|
||||
Drilling Technologies
|
(3,811
|
)
|
|
24,251
|
|
|
7,548
|
|
|
51,057
|
|
||||
Reservoir Chemical Technologies
|
(2,811
|
)
|
|
—
|
|
|
(2,811
|
)
|
|
—
|
|
||||
Total segment operating profit
|
(33,868
|
)
|
|
44,119
|
|
|
(671,100
|
)
|
|
83,989
|
|
||||
Corporate and other (1)
|
64,871
|
|
|
4,722
|
|
|
79,061
|
|
|
8,558
|
|
||||
Interest expense, net
|
11,262
|
|
|
10,109
|
|
|
20,301
|
|
|
20,636
|
|
||||
Income before income taxes
|
$
|
(110,001
|
)
|
|
$
|
29,288
|
|
|
$
|
(770,462
|
)
|
|
$
|
54,795
|
|
(1)
|
Corporate and other includes costs not directly attributable or allocated to our reporting segments such as corporate executive management and other administrative functions, and the results attributable to our noncontrolling interest. Additionally, the sales and expenses related to the Cross Supply Agreement with Ecolab are included within Corporate and other. See Note 2—Merger Transaction for further information.
|
|
|
Six Months Ended June 30,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Non-cash information:
|
|
|
|
|
||||
Finance lease additions
|
|
$
|
3,111
|
|
|
$
|
3,018
|
|
|
2019
|
|
2020
|
||||||||||||||
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
|
Q1
|
Q2
|
YTD
|
||||||||
WTI Crude (per bbl) (a)
|
54.82
|
|
59.88
|
|
56.34
|
|
56.86
|
|
56.99
|
|
|
45.59
|
|
27.96
|
|
36.78
|
|
Brent Crude (per bbl) (a)
|
63.10
|
|
60.56
|
|
61.95
|
|
63.27
|
|
62.22
|
|
|
50.26
|
|
29.46
|
|
39.86
|
|
Henry Hub Natural Gas (per mmBtu) (a)
|
2.92
|
|
2.57
|
|
2.38
|
|
2.40
|
|
2.56
|
|
|
1.91
|
|
1.70
|
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. Rig Count (b)
|
1,043
|
|
989
|
|
920
|
|
820
|
|
941
|
|
|
785
|
|
392
|
|
589
|
|
Canada Rig Count (b)
|
183
|
|
82
|
|
132
|
|
139
|
|
134
|
|
|
196
|
|
25
|
|
111
|
|
International Rig Count (b)
|
1,030
|
|
1,051
|
|
1,059
|
|
1,056
|
|
1,049
|
|
|
1,074
|
|
834
|
|
954
|
|
Worldwide Rig Count
|
2,256
|
|
2,122
|
|
2,111
|
|
2,015
|
|
2,124
|
|
|
2,055
|
|
1,251
|
|
1,654
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Aggregate U.S. Well Completions (a)
|
3,814
|
|
4,161
|
|
4,193
|
|
3,639
|
|
15,807
|
|
|
3,289
|
|
1,475
|
|
4,764
|
|
•
|
reduction in total ChampionX headcount;
|
•
|
company-wide salary reductions, including steeper reductions for executive management and the highest reduction for our chief executive officer; and
|
•
|
facility rationalization and elimination of non-essential expenses.
|
•
|
taking precautions consistent with local, state, and national government health authority guidelines, including the Centers for Disease Control and Prevention and the World Health Organization;
|
•
|
meetings between the crisis management team and executive management to ensure real-time understanding of developments as they occur such that our communications and responses are appropriate and timely;
|
•
|
equipping our employees with additional personal protective equipment;
|
•
|
introducing new employee screening procedures in our operations; and
|
•
|
enacting social distancing procedures, including staggering shifts, implementing rotating work schedules, and modifying workspaces and break areas.
|
|
Three Months Ended
|
|
|
|
|
||||||||
|
June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
$
|
298,914
|
|
|
$
|
306,170
|
|
|
(7,256
|
)
|
|
(2.4
|
)
|
Cost of goods and services
|
266,684
|
|
|
197,410
|
|
|
69,274
|
|
|
35.1
|
|
||
Gross profit
|
32,230
|
|
|
108,760
|
|
|
(76,530
|
)
|
|
(70.4
|
)
|
||
Selling, general and administrative expense
|
130,657
|
|
|
66,687
|
|
|
63,970
|
|
|
95.9
|
|
||
Interest expense, net
|
11,262
|
|
|
10,109
|
|
|
1,153
|
|
|
11.4
|
|
||
Other (income) expense, net
|
312
|
|
|
2,676
|
|
|
(2,364
|
)
|
|
*
|
|
||
Income (loss) before income taxes
|
(110,001
|
)
|
|
29,288
|
|
|
(139,289
|
)
|
|
*
|
|
||
Provision for (benefit from) income taxes
|
(954
|
)
|
|
6,280
|
|
|
(7,234
|
)
|
|
*
|
|
||
Net income (loss)
|
(109,047
|
)
|
|
23,008
|
|
|
(132,055
|
)
|
|
*
|
|
||
Net income attributable to noncontrolling interest
|
598
|
|
|
71
|
|
|
527
|
|
|
*
|
|
||
Net income (loss) attributable to ChampionX
|
$
|
(109,645
|
)
|
|
$
|
22,937
|
|
|
(132,582
|
)
|
|
*
|
|
|
|
|
|
|
|
|
|
||||||
Gross profit margin
|
10.8
|
%
|
|
35.5
|
%
|
|
|
|
(2470) bps.
|
|
|||
SG&A expense, percent of revenue
|
43.7
|
%
|
|
21.8
|
%
|
|
|
|
2190 bps.
|
|
|||
Effective tax rate
|
0.9
|
%
|
|
21.4
|
%
|
|
|
|
(2050) bps.
|
|
*
|
Not meaningful
|
|
Six Months Ended
|
|
|
|
|
||||||||
|
June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
$
|
560,348
|
|
|
$
|
606,664
|
|
|
(46,316
|
)
|
|
(7.6
|
)
|
Cost of goods and services
|
445,779
|
|
|
394,893
|
|
|
50,886
|
|
|
12.9
|
|
||
Gross profit
|
114,569
|
|
|
211,771
|
|
|
(97,202
|
)
|
|
(45.9
|
)
|
||
Selling, general and administrative expense
|
208,800
|
|
|
130,816
|
|
|
77,984
|
|
|
59.6
|
|
||
Goodwill impairment
|
616,271
|
|
|
—
|
|
|
616,271
|
|
|
*
|
|
||
Long-lived asset impairment
|
40,980
|
|
|
1,746
|
|
|
39,234
|
|
|
*
|
|
||
Interest expense, net
|
20,301
|
|
|
20,636
|
|
|
(335
|
)
|
|
(1.6
|
)
|
||
Other (income) expense, net
|
(1,321
|
)
|
|
3,778
|
|
|
(5,099
|
)
|
|
(135.0
|
)
|
||
Income (loss) before income taxes
|
(770,462
|
)
|
|
54,795
|
|
|
(825,257
|
)
|
|
(1,506.1
|
)
|
||
Provision for (benefit from) income taxes
|
(27,960
|
)
|
|
11,849
|
|
|
(39,809
|
)
|
|
(336.0
|
)
|
||
Net income (loss)
|
(742,502
|
)
|
|
42,946
|
|
|
(785,448
|
)
|
|
(1,828.9
|
)
|
||
Net income attributable to noncontrolling interest
|
871
|
|
|
353
|
|
|
518
|
|
|
*
|
|
||
Net income (loss) attributable to ChampionX
|
$
|
(743,373
|
)
|
|
$
|
42,593
|
|
|
(785,966
|
)
|
|
(1,845.3
|
)
|
|
|
|
|
|
|
|
|
||||||
Gross profit margin
|
20.4
|
%
|
|
34.9
|
%
|
|
|
|
-1450 bps.
|
|
|||
SG&A expense, percent of revenue
|
37.3
|
%
|
|
21.6
|
%
|
|
|
|
1570 pts.
|
|
|||
Effective tax rate
|
3.6
|
%
|
|
21.6
|
%
|
|
|
|
(1800) pts.
|
|
(dollars in thousands)
|
|
For the period June 3, 2020 through June 30, 2020(1)
|
||
Revenue
|
|
$
|
136,002
|
|
Operating profit
|
|
9,922
|
|
|
Operating profit margin
|
|
7.3
|
%
|
|
|
|
|
||
Depreciation and amortization
|
|
$
|
6,957
|
|
|
|
Three Months Ended June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
|
$
|
114,741
|
|
|
$
|
235,819
|
|
|
(121,078
|
)
|
|
(51.3
|
)
|
Operating profit
|
|
(37,168
|
)
|
|
19,868
|
|
|
(57,036
|
)
|
|
(287.1
|
)
|
||
Operating profit margin
|
|
(32.4
|
)%
|
|
8.4
|
%
|
|
|
|
(4080) bps.
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
$
|
41,535
|
|
|
$
|
27,697
|
|
|
13,838
|
|
|
50.0
|
|
Restructuring and other related charges
|
|
8,334
|
|
|
3,135
|
|
|
5,199
|
|
|
165.8
|
|
*
|
Not meaningful
|
|
|
Six Months Ended June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
|
$
|
320,220
|
|
|
$
|
458,778
|
|
|
(138,558
|
)
|
|
(30.2
|
)
|
Operating profit
|
|
(685,759
|
)
|
|
32,932
|
|
|
(718,691
|
)
|
|
(2,182.3
|
)
|
||
Operating profit margin
|
|
(214.2
|
)%
|
|
7.2
|
%
|
|
|
|
(22140) bps.
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
$
|
69,107
|
|
|
$
|
54,981
|
|
|
14,126
|
|
|
25.7
|
|
Goodwill impairment
|
|
616,271
|
|
|
—
|
|
|
616,271
|
|
|
*
|
|
||
Long Lived Asset Impairment
|
|
40,980
|
|
|
1,746
|
|
|
39,234
|
|
|
*
|
|
||
Restructuring and other related charges **
|
|
9,005
|
|
|
4,031
|
|
|
4,974
|
|
|
123.4
|
|
*
|
Not meaningful
|
|
|
Three Months Ended June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
|
$
|
20,948
|
|
|
$
|
70,351
|
|
|
(49,403
|
)
|
|
(70.2
|
)
|
Operating profit
|
|
(3,811
|
)
|
|
24,251
|
|
|
(28,062
|
)
|
|
(115.7
|
)
|
||
Operating profit margin
|
|
(18.2
|
)%
|
|
34.5
|
%
|
|
|
|
(5270) bps.
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
$
|
2,004
|
|
|
$
|
2,326
|
|
|
(322
|
)
|
|
(13.8
|
)
|
Restructuring and other related charges
|
|
3,426
|
|
|
—
|
|
|
3,426
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Change
|
||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
||||||
Revenue
|
|
$
|
76,903
|
|
|
$
|
147,886
|
|
|
(70,983
|
)
|
|
(48.0
|
)
|
Operating profit
|
|
7,548
|
|
|
51,057
|
|
|
(43,509
|
)
|
|
(85.2
|
)
|
||
Operating profit margin
|
|
9.8
|
%
|
|
34.5
|
%
|
|
|
|
(2470) bps.
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
$
|
4,109
|
|
|
$
|
4,835
|
|
|
(726
|
)
|
|
(15.0
|
)
|
Restructuring and other related charges
|
|
5,521
|
|
|
—
|
|
|
5,521
|
|
|
|
(dollars in thousands)
|
|
For the period June 3, 2020 through June 30, 2020(1)
|
||
Revenue
|
|
$
|
9,306
|
|
Operating loss
|
|
(2,811
|
)
|
|
Operating loss margin
|
|
(30.2
|
)%
|
|
|
|
|
||
Depreciation and amortization
|
|
$
|
2,218
|
|
|
Six Months Ended June 30,
|
||||||
(in thousands)
|
2020
|
|
2019
|
||||
Cash provided by operating activities
|
$
|
78,033
|
|
|
$
|
59,301
|
|
Cash provided by (used in) investing activities
|
39,332
|
|
|
(22,407
|
)
|
||
Cash used in financing activities
|
(9,970
|
)
|
|
(54,489
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(790
|
)
|
|
99
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
106,605
|
|
|
$
|
(17,496
|
)
|
•
|
the sale, exchange or transfer (by merger or otherwise) of (i) the capital stock of the Guarantor after which the Guarantor is no longer a restricted subsidiary or (ii) all or substantially all of the assets of such Guarantor made in a manner not in violation of the indenture;
|
•
|
the release or discharge of the guarantee by, or direction obligation of, such Guarantor with respect to the Senior Credit Facilities or capital markets debt securities that resulted in the creation of such guarantee, except a discharge by or as a result of payment under such guarantee;
|
•
|
the designation of the subsidiary as an unrestricted subsidiary under the indenture;
|
•
|
the legal defeasance or covenant defeasance of the Senior Notes in accordance with the terms of the indenture;
|
•
|
the merger or consolidation of any Guarantor with and into the Issuer or another Guarantor that is the surviving person in such merger or consolidation, or upon the liquidation of such Guarantor following the transfer of all its assets to the Parent or another Guarantor; or
|
•
|
an amendment of the Senior Note indenture agreement.
|
(dollars in thousands)
|
|
Six Months Ended June 30, 2020
|
||
Total Revenue
|
|
$
|
504,274
|
|
Cost of goods and services
|
|
398,654
|
|
|
Selling, general and administrative expense
|
|
198,714
|
|
|
Goodwill impairment
|
|
396,017
|
|
|
Long-lived asset impairment
|
|
40,980
|
|
|
Loss before income taxes
|
|
(548,634
|
)
|
|
Net loss
|
|
$
|
(524,901
|
)
|
(dollars in thousands)
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
Current assets:
|
|
|
|
|
||||
Current assets
|
|
$
|
1,197,901
|
|
|
$
|
419,692
|
|
Non-current assets:
|
|
|
|
|
||||
Goodwill
|
|
595,402
|
|
|
639,280
|
|
||
Advances due from affiliates
|
|
24,499
|
|
|
18,534
|
|
||
Other non-current assets
|
|
1,536,258
|
|
|
430,553
|
|
||
Total assets
|
|
$
|
3,354,060
|
|
|
$
|
1,508,059
|
|
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Current liabilities
|
|
$
|
541,446
|
|
|
$
|
173,372
|
|
Non-current liabilities:
|
|
|
|
|
||||
Advances due to affiliates
|
|
96,735
|
|
|
87,682
|
|
||
Other non-current liabilities
|
|
1,361,687
|
|
|
664,581
|
|
||
Total liabilities
|
|
$
|
1,999,868
|
|
|
$
|
925,635
|
|
(in millions)
Description
|
Amount
|
|
Debt
Outstanding
|
|
Letters
of
Credit
|
|
Unused Capacity
|
|
Maturity
|
||||||||
Five-year revolving credit facility
|
$
|
400.0
|
|
|
$
|
—
|
|
|
$
|
40.9
|
|
|
$
|
359.1
|
|
|
May 2023
|
•
|
Material weakness related to revenue recognition and accounts receivable at certain of the Company’s subsidiaries within the Artificial Lift businesses within PAT: The Company did not design or maintain effective controls within certain of its Artificial Lift businesses over the completeness, accuracy, occurrence and cut-off of revenue and within ESP over the valuation of accounts receivable. Specifically, controls were not designed or maintained to ensure (i) accuracy of the price and quantity, including the evidence of the existence of a customer contract during the revenue recognition process, and (ii) appropriate valuation of accounts receivable reserves in response to updated assessments of expected collectability. This material weakness resulted in audit adjustments to the consolidated financial statements as of and for the years ended December 31, 2019 and 2018. In addition, previously-issued interim financial statements have been revised to correct immaterial misstatements of selling, general and administrative expense and revenue for the quarters ended March 31, June 30, and September 30, 2019 and 2018. This material weakness could result in a misstatement of revenue and accounts receivable or the related disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
|
•
|
Material weakness related to manual journal entries: The Company did not maintain effective controls over the recording of manual journal entries. Specifically, controls were not operating effectively to ensure that journal entries were properly prepared with appropriate supporting documentation and/or were reviewed and approved appropriately to ensure the accuracy of journal entries. This material weakness did not result in any material misstatements to the Company’s consolidated financial statements or disclosures, however, previously-issued interim financial statements have been revised to correct immaterial misstatements to cost of goods sold for the quarters ended June 30 and September 30, 2019. Additionally, this material weakness could result in a misstatement of accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
|
•
|
Material weakness related to inventory and fixed assets: The Company did not design and maintain effective controls over the completeness, accuracy, existence and presentation and disclosure of inventory and fixed assets. Specifically, controls were not designed or maintained to (a) properly account for asset disposals and active and terminated leases, and (b) properly account for transfers between inventory and leased assets. This material weakness did not result in any material misstatements to the Company’s consolidated financial statements or disclosures, however, this material weakness resulted in audit adjustments to the consolidated financial statements as of and for the year ended December
|
•
|
Initiated personnel changes at ESP and within the Artificial Lift business;
|
•
|
Engaged third party experts to assist management in assessing current processes and designing improved processes and controls at ESP and within the Artificial Lift business; and
|
•
|
Assessed the ability to automate business processes and controls; and
|
•
|
Reviewed business processes surrounding revenue recognition, accounts receivable, manual journal entries, inventory and fixed assets, and the performance of the risk assessment to identify and begin the implementation of enhanced procedures and related internal controls at ESP.
|
•
|
Enhance and augment business process policies and procedure documentation for greater transparency, scalability, and sustainability;
|
•
|
Establish training and education programs for business personnel regarding updated policies, procedures, and control activities.
|
•
|
Complete implementation of enhanced policies, procedures, and related internal controls to standardize business processes.
|
•
|
worldwide economic activity including disruption to global trade;
|
•
|
the level of exploration and production activity;
|
•
|
the cost of and access to capital;
|
•
|
environmental regulation;
|
•
|
federal, state and foreign policies and regulations regarding current and future exploration and development of oil and gas;
|
•
|
the ability and/or desire of OPEC and other major producers to set and maintain production levels and influence pricing;
|
•
|
the cost of exploring and producing oil and gas;
|
•
|
the pace of adoption and cost of developing alternative energy sources;
|
•
|
the availability, expiration date and price of onshore and offshore leases;
|
•
|
the discovery rate of new oil and gas reserves in onshore and offshore areas;
|
•
|
the success of drilling for oil and gas in unconventional resource plays such as shale formations;
|
•
|
the depletion rate of existing wells in productions;
|
•
|
takeaway capacity within producing basins;
|
•
|
alternative opportunities to invest in onshore exploration and production opportunities;
|
•
|
domestic and global political and economic uncertainty, socio-political unrest and instability, terrorism or hostilities;
|
•
|
the recent COVID-19 pandemic or other health pandemics and epidemics;
|
•
|
technological advances; and
|
•
|
weather conditions.
|
•
|
political, social and economic instability and disruptions;
|
•
|
government export controls, economic sanctions, embargoes or trade restrictions;
|
•
|
the imposition of duties and tariffs and other trade barriers;
|
•
|
limitations on ownership and on repatriation or dividend of earnings;
|
•
|
transportation delays and interruptions;
|
•
|
labor unrest and current and changing regulatory environments;
|
•
|
increased compliance costs, including costs associated with disclosure requirements and related due diligence;
|
•
|
difficulties in staffing and managing multi-national operations;
|
•
|
limitations on our ability to enforce legal rights and remedies;
|
•
|
access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks; and
|
•
|
fluctuations in foreign currency exchange rates.
|
•
|
disruptions to our supply chain resulting from limited access to vendors or vendors’ limited access to their facilities or our ability to transport raw materials from our vendors, adversely affecting the price of and our ability to obtain materials essential to our products and our business. A significant price increase in raw materials, or their unavailability, could result in a loss of customers and revenue;
|
•
|
reduction in revenues as a result of lower demand for our products as upstream oil and gas companies across the industry reduce their drilling activities, lower budgeted capital expenditures and institute additional capital discipline measures;
|
•
|
liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies, and if a significant number of our customers experience a prolonged business decline or disruption we may incur increased exposure to credit risk and bad debts;
|
•
|
a credit rating downgrade of our corporate debt if COVID-19 and the current oil market have a significant impact on our long-term profitability which could result in higher borrowing costs or reduced availability of sources of financing;
|
•
|
additional costs associated with the reduction of our global workforce to adjust to market conditions, including severance payments, retention issues, and increased expenses if we are unable to hire employees when market conditions improve;
|
•
|
workforce availability resulting from reductions to adjust to market conditions or due to restrictions that we and our customers impose, including limiting worksite access and facility shutdowns, to ensure the safety of employees and others, which could adversely affect our ability to timely fulfill customer orders and service requests;
|
•
|
the continuation of the measures taken by various governments to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns;
|
•
|
costs associated with rationalization of our portfolio of real estate facilities, including possible exit of leases and facility closures to align with expected activity and workforce capacity;
|
•
|
additional asset impairments, including an impairment of the carrying value of our goodwill, along with other accounting charges as demand for our services and products decreases;
|
•
|
operational challenges and efforts to mitigate the spread of the virus, including logistical challenges, remote work arrangements, employee productivity, and staggered work shifts to protect the health and well-being of our employees, which could increase expenses and adversely impact our ability to timely fulfill customer orders and service requests and/or maintain effective internal controls and compliance oversight activity;
|
•
|
increase in cyber and other security-related risks that are associated with employees operating in a remote work arrangement;
|
•
|
compliance with financial covenants in our credit agreement if we experience a significant and prolonged decrease in our earnings before income tax, depreciation and amortization which would cause amounts borrowed to become due and payable; and
|
•
|
disruption of the U.S. and global economic and financial markets limiting our ability to access capital markets or other sources of financing.
|
•
|
incur or guarantee additional indebtedness;
|
•
|
pay dividends on capital stock or redeem, repurchase or retire capital stock or indebtedness, as applicable;
|
•
|
make investments, loans, advances and acquisitions;
|
•
|
create restrictions on the payment of dividends or other amounts by such restricted subsidiaries or subsidiaries, as the case may be;
|
•
|
engage in transactions with our affiliates;
|
•
|
sell assets, including capital stock of subsidiaries;
|
•
|
consolidate or merge; and
|
•
|
create liens.
|
•
|
the integration of legacy ChampionX with our current businesses while carrying on the ongoing operations of all businesses;
|
•
|
managing a significantly larger company than before the consummation of the Merger;
|
•
|
coordinating geographically separate organizations;
|
•
|
integrating the business cultures of each of legacy ChampionX and Apergy, which may prove to be incompatible;
|
•
|
creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters;
|
•
|
ability to ensure the effectiveness of internal control over financial reporting;
|
•
|
integrating certain information technology, purchasing, accounting, finance, sales, billing, human resources, payroll and regulatory compliance systems; and
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•
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the potential difficulty in retaining key officers and personnel.
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•
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authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;
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•
|
limiting the liability of, and providing indemnification to, our directors and officers;
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•
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limiting the ability of our shareholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
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•
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requiring advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our Board of Directors;
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•
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controlling the procedures for the conduct and scheduling of our Board of Directors and shareholder meetings;
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•
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providing our Board of Directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;
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•
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restricting the forum for certain litigation brought against us to Delaware; and
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•
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providing our Board of Directors with the exclusive right to determine the number of directors on the Board of Directors and the filling of any vacancies or newly created seats on the Board of Directors.
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(a)
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None.
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(b)
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None.
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(c)
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None.
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CHAMPIONX CORPORATION
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(Registrant)
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/s/ ANTOINE MARCOS
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Antoine Marcos
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Vice President, Corporate Controller and Chief Accounting Officer
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(Principal Accounting Officer and a Duly Authorized Officer)
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Date:
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August 7, 2020
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Exhibit
No.
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Exhibit Description
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4.1*
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10.2*
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10.3†*
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22.1*
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31.1*
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31.2*
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32.1**
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32.2**
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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104*
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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|
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* Filed herewith
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||
** Furnished herewith
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||
† Denotes management contract or compensatory plan or arrangement
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By:
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/s/ Deric Bryant
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Name: Deric Bryant
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Title: President
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By:
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/s/ Deric Bryant
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Name: Deric Bryant
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Title: President
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By:
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/s/ Deric Bryant
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Name: Deric Bryant
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Title: President
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By:
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/s/ Deric Bryant
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Name: Deric Bryant
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Title: President
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By:
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/s/ Deric Bryant
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Name: Deric Bryant
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Title: Chief Operating Officer
and President,
Chemical Technologies
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By:
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/s/ Alexander Pabon
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Name: Alexander Pabon
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Title: Assistant Vice President
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I.
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With respect to Dover Replacement Awards issued with respect to SSARs granted under the (i) Dover Corporation 2005 Equity and Cash Incentive Plan and (ii) Dover Corporation 2012 Equity and Cash Incentive Plan prior to August 6, 2014:
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1.
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Definitions.
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2.
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SSARs.
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II.
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With respect to Dover Replacement Awards issued with respect to Awards granted under the Dover Corporation 2012 Equity and Cash Incentive Plan after August 6, 2014:
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1.
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Definitions.
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III.
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With respect to Dover Replacement Awards issued with respect to (i) SSARs granted under the Dover Corporation 2005 Equity and Cash Incentive Plan, and (ii) all Awards under the Dover Corporation 2012 Equity and Cash Incentive Plan (other than SSARs granted prior to August 6, 2014, as described in Section 1 above):
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1.
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Options and SSARs.
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2.
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Restricted Stock and Restricted Stock Units
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3.
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Performance Shares
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Entity
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Jurisdiction of Formation
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Role
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ChampionX Corporation
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Delaware
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Issuer
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Ace Downhole, LLC
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Delaware
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Guarantor
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Apergy (Delaware) Formation, Inc.
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Delaware
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Guarantor
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Apergy Artificial Lift, LLC
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Delaware
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Guarantor
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Apergy BMCS Acquisition Corp.
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Delaware
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Guarantor
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Apergy Energy Automation, LLC
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Delaware
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Guarantor
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Apergy ESP Systems, LLC
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Oklahoma
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Guarantor
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Apergy Funding Corporation
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Delaware
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Guarantor
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Apergy USA, Inc.
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Delaware
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Guarantor
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ChampionX Holding Inc.
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Delaware
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Guarantor
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ChampionX LLC
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Delaware
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Guarantor
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ChampionX U.S. 3 Inc.
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Delaware
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Guarantor
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ChampionX U.S. 5 LLC
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Delaware
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Guarantor
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ChampionX USA Inc.
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Delaware
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Guarantor
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Harbison-Fischer, Inc.
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Delaware
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Guarantor
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Honetreat Company
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California
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Guarantor
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Norris Rods, Inc.
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Delaware
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Guarantor
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Norriseal-Wellmark, Inc.
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Delaware
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Guarantor
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PCS Ferguson, Inc.
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Delaware
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Guarantor
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Quartzdyne, Inc.
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Delaware
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Guarantor
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Spirit Global Energy Solutions, Inc.
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Delaware
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Guarantor
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Theta Oilfield Services, Inc.
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Delaware
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Guarantor
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UPCO, Inc.
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Oklahoma
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Guarantor
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US Synthetic Corporation
|
Delaware
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Guarantor
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Wellmark Holdings, Inc.
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Delaware
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Guarantor
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Windrock, Inc.
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Tennessee
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Guarantor
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1.
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I have reviewed this Quarterly Report on Form 10-Q of ChampionX Corporation (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
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August 7, 2020
|
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/s/ SIVASANKARAN SOMASUNDARAM
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|
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|
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Sivasankaran Somasundaram
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|
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President and Chief Executive Officer
|
|
|
|
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(Principal Executive Officer)
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of ChampionX Corporation (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
August 7, 2020
|
|
/s/ JAY A. NUTT
|
|
|
|
|
Jay A. Nutt
|
|
|
|
|
Senior Vice President and
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
Date:
|
August 7, 2020
|
|
/s/ SIVASANKARAN SOMASUNDARAM
|
|
|
|
|
Sivasankaran Somasundaram
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
Date:
|
August 7, 2020
|
|
/s/ JAY A. NUTT
|
|
|
|
|
Jay A. Nutt
|
|
|
|
|
Senior Vice President and
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|