10-Q 1 championx-20220331.htm 10-Q championx-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

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

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

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

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

The registrant had 203,400,646 shares of common stock, $0.01 par value, outstanding as of April 21, 2022.



CHAMPIONX CORPORATION

TABLE OF CONTENTS

Page
 
 
 
 
 
  
 






CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “anticipate,” “expect,” “may,” “intend,” “foresee,” “guidance,” “estimate,” “potential,” “outlook,” “plan,” “should,” “would,” “could,” “target,” “forecast” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking statements. Forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.

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

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




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



PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
(in thousands, except per share data)20222021
Revenue:
Product revenue$750,668 $585,357 
Service revenue96,394 80,626 
Lease and other revenue18,898 18,905 
Total revenue865,960 684,888 
Cost of goods and services658,350 522,556 
Gross profit207,610 162,332 
Costs and expenses:
Selling, general and administrative expense150,360 143,478 
Interest expense, net11,363 13,971 
Other (income) expense, net1,320 (1,936)
Income before income taxes44,567 6,819 
Provision for income taxes6,394 2,782 
Net income38,173 4,037 
Less: Net income (loss) attributable to noncontrolling interest1,471 (1,735)
Net income attributable to ChampionX$36,702 $5,772 
Earnings per share attributable to ChampionX:
Basic$0.18 $0.03 
Diluted$0.18 $0.03 
Weighted-average shares outstanding:
Basic203,079 200,580 
Diluted208,850 207,271 


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




CHAMPIONX CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended
March 31,
(in thousands)20222021
Net income $38,173 $4,037 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(1,565)3,213 
Cash flow hedges(1,299)413 
Defined pension and other post-retirement benefits adjustments, net69 167 
Other comprehensive income (loss)(2,795)3,793 
Comprehensive income35,378 7,830 
Less: Comprehensive income (loss) attributable to noncontrolling interest1,471 (1,735)
Comprehensive income attributable to ChampionX$33,907 $9,565 


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




CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)March 31, 2022December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents$177,109 $251,678 
Restricted cash3,500 3,500 
Receivables, net658,292 584,440 
Inventories, net625,540 542,910 
Prepaid expenses and other current assets70,848 78,372 
Total current assets1,535,289 1,460,900 
Property, plant and equipment, net of accumulated depreciation of $633,913 in 2022 and $618,867 in 2021
762,234 776,813 
Goodwill705,097 702,867 
Intangible assets, net379,485 401,470 
Operating lease right-of-use assets112,348 115,458 
Other non-current assets77,265 77,193 
Total assets$3,571,718 $3,534,701 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt$26,850 $26,850 
Accounts payable508,825 473,561 
Accrued compensation and employee benefits56,127 93,131 
Current portion of operating lease liabilities35,788 36,389 
Accrued distributor fees30,309 25,621 
Accrued expenses and other current liabilities173,976 146,773 
Total current liabilities831,875 802,325 
Long-term debt691,241 697,657 
Deferred income taxes129,340 137,971 
Operating lease liabilities71,592 73,521 
Other long-term liabilities70,098 68,920 
Total liabilities1,794,146 1,780,394 
Stockholders’ equity: 
Common stock (2.5 billion shares authorized, $0.01 par value)
203.3 million shares and 202.9 million shares issued and outstanding in 2022 and 2021, respectively
2,033 2,029 
Capital in excess of par value of common stock2,318,539 2,315,399 
Accumulated deficit(503,921)(525,158)
Accumulated other comprehensive loss(24,420)(21,625)
ChampionX stockholders’ equity1,792,231 1,770,645 
Noncontrolling interest(14,659)(16,338)
Total equity1,777,572 1,754,307 
Total liabilities and equity$3,571,718 $3,534,701 

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




CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

Common Stock
(in thousands)SharesPar
Value
Capital in Excess of Par ValueAccum. DeficitAccum.
Other
Comp.
Loss
Non-controlling InterestTotal
December 31, 2021202,866 $2,029 $2,315,399 $(525,158)$(21,625)$(16,338)$1,754,307 
Net income— — — 36,702 — 1,471 38,173 
Other comprehensive loss— — — — (2,795)— (2,795)
Stock-based compensation290 3 4,725 — — — 4,728 
Stock options exercised189 1 1,054 — — — 1,055 
Taxes withheld on issuance of stock-based awards— — (2,639)— — — (2,639)
Dividends declared to common stockholders ($0.075 per share)
— — — (15,465)— — (15,465)
Cumulative translation adjustments— — — — — 208 208 
March 31, 2022203,345 $2,033 $2,318,539 $(503,921)$(24,420)$(14,659)$1,777,572 

Common Stock
(in thousands)SharesPar
Value
Capital in Excess of Par ValueAccum. DeficitAccum.
Other
Comp.
Loss
Non-controlling InterestTotal
December 31, 2020200,380 $2,004 $2,293,179 $(638,457)$(30,755)$(13,396)$1,612,575 
Net income (loss)— — — 5,772 — (1,735)4,037 
Other comprehensive income— — — — 3,793 — 3,793 
Stock-based compensation64 — 6,442 — — — 6,442 
Stock options exercised577 6 3,341 — — — 3,347 
Taxes withheld on issuance of stock-based awards— — (556)— — — (556)
Cumulative translation adjustments— — — — — 268 268 
Distributions to noncontrolling interest— — — — — (800)(800)
March 31, 2021201,021 $2,010 $2,302,406 $(632,685)$(26,962)$(15,663)$1,629,106 

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


4




CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,
(in thousands)20222021
Cash flows from operating activities:  
Net income$38,173 $4,037 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization57,699 61,001 
Stock-based compensation4,728 6,442 
(Gain) loss on disposal of fixed assets(5,070)1,954 
Provision (recovery) for bad debt13 (1,413)
Provision for inventory obsolescence and write-downs 3,988 4,856 
Amortization of deferred loan costs and accretion of discount828 948 
Deferred income taxes(7,788)(2,450)
Employee benefit plan expense497 718 
Other102 103 
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables(73,262)30,019 
Inventories(81,283)(6,511)
Prepaid expenses and other current assets6,647 (1,247)
Accounts payable27,184 36,227 
Accrued compensation and employee benefits(38,174)(8,467)
Accrued expenses and other liabilities28,746 (34,399)
Leased assets(5,265)(1,138)
Other(888)(466)
Net cash flows from operating activities(43,125)90,214 
Cash flows from investing activities:  
Capital expenditures(30,597)(25,579)
Proceeds from sale of fixed assets12,731 912 
Acquisitions, net of cash acquired(3,198) 
Net cash used for investing activities(21,064)(24,667)
Cash flows from financing activities:  
Repayment of long-term debt(6,713)(6,712)
Payments related to taxes withheld on stock-based compensation(2,639)(556)
Proceeds from exercise of stock options1,055 3,347 
Distributions to noncontrolling interest (800)
Payment of finance lease obligations(1,501)(1,215)
Net cash used for financing activities(9,798)(5,936)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(582)(1,211)
Net increase (decrease) in cash and cash equivalents and restricted cash(74,569)58,400 
Cash and cash equivalents and restricted cash at beginning of period255,178 201,421 
Cash and cash equivalents and restricted cash at end of period$180,609 $259,821 
The accompanying notes are an integral part of the condensed consolidated financial statements.
5


CHAMPIONX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

Description of the Business

ChampionX Corporation is a global leader in chemistry solutions and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely, efficiently and sustainably around the world. Our products provide efficient and safe operations throughout the lifecycle of a well with a focus on the production phase of wells.

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

Basis of Presentation

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

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

Significant Accounting Policies

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

New Accounting Standards

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

6


NOTE 2—SEGMENT INFORMATION

Our reporting segments are:

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

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

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

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

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

Segment revenue and segment operating profit
Three Months Ended March 31,
(in thousands)20222021
Segment revenue:  
Production Chemical Technologies$514,972 $412,371 
Production & Automation Technologies220,349 166,845 
Drilling Technologies56,859 34,994 
Reservoir Chemical Technologies39,900 29,891 
Corporate and other (1)
33,880 40,787 
Total revenue$865,960 $684,888 
Segment operating profit (loss):  
Production Chemical Technologies$31,263 $30,357 
Production & Automation Technologies24,710 5,362 
Drilling Technologies15,220 6,386 
Reservoir Chemical Technologies(3,469)(3,228)
Total segment operating profit67,724 38,877 
Corporate and other (1)
11,794 18,087 
Interest expense, net11,363 13,971 
Income before income taxes$44,567 $6,819 
_______________________
(1)    Corporate and other includes costs not directly attributable or allocated to our reporting segments such as corporate executive management and other administrative functions, and the results attributable to our noncontrolling interest. Additionally, the sales and expenses related to the Cross Supply and Product Transfer Agreement with Ecolab Inc. (“Ecolab”) are included within Corporate and other.



7


NOTE 3—REVENUE

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

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

Revenue disaggregated by geography was as follows:
Three Months Ended March 31, 2022
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$190,906 $167,802 $46,819 $25,221 $21,854 $452,602 
Latin America99,605 5,003  3,590 725 108,923 
Middle East & Africa74,044 16,711 1,689 7,721 314 100,479 
Canada75,799 19,452 2,941 478 26 98,696 
Europe49,021 2,345 3,710 903 3,471 59,450 
Asia-Pacific8,483 1,671 1,675 1,045 7,490 20,364 
Australia5,843 7,275  108  13,226 
Other11,271 90 25 834  12,220 
Total revenue$514,972 $220,349 $56,859 $39,900 $33,880 $865,960 
Three Months Ended March 31, 2021
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical Technologies
Corporate and other (1)
Total
United States$149,864 $126,374 $25,407 $15,609 $25,556 $342,810 
Latin America71,616 4,642  3,019 1,431 80,708 
Middle East & Africa58,370 10,272 716 6,062 5,583 81,003 
Canada61,292 12,528 3,827 729 158 78,534 
Europe42,608 1,983 2,499 1,389 2,257 50,736 
Asia-Pacific10,492 1,463 1,553 1,120 5,802 20,430 
Australia6,395 9,576 117 54  16,142 
Other11,734 7 875 1,909  14,525 
Total revenue$412,371 $166,845 $34,994 $29,891 $40,787 $684,888 
_______________________
(1)    Revenues associated with sales under the Cross Supply and Product Transfer Agreement with Ecolab are included within Corporate and other.
Revenue is attributed to regions based on the location of our direct customer, which in some instances is an intermediary and not necessarily the end user.

8


Contract Balances

The beginning and ending contract asset and contract liability balances from contracts with customers were as follows:
(in thousands)March 31, 2022December 31, 2021
Contract assets$ $ 
Contract liabilities - current$16,645 $15,246 

NOTE 4—INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The components of our definite- and indefinite-lived intangible assets were as follows:
March 31, 2022December 31, 2021
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Definite-lived
intangible assets:
Customer relationships$593,312 $377,103 $216,209 $593,242 $365,773 $227,469 
Unpatented technologies142,727 42,090 100,637 142,540 37,264 105,276 
Favorable supply agreements59,000 35,355 23,645 59,000 30,546 28,454 
Trademarks59,876 33,221 26,655 59,873 32,270 27,603 
Patents38,822 31,417 7,405 38,735 31,080 7,655 
Other5,409 5,275 134 5,390 5,177 213 
899,146 524,461 374,685 898,780 502,110 396,670 
Indefinite-lived
intangible assets:
Trademarks3,600 — 3,600 3,600 — 3,600 
In-process research and development1,200 — 1,200 1,200 — 1,200 
4,800 — 4,800 4,800 — 4,800 
Total$903,946 $524,461 $379,485 $903,580 $502,110 $401,470 

Goodwill

The carrying amount of goodwill, including changes therein, by reportable segment is below:
(in thousands)Production Chemical TechnologiesProduction & Automation TechnologiesDrilling TechnologiesReservoir Chemical TechnologiesTotal
December 31, 2021$356,638 $205,467 $101,136 $39,626 $702,867 
Acquisition (1)
 6,345   6,345 
Foreign currency translation(3,772)76  (419)(4,115)
March 31, 2022$352,866 $211,888 $101,136 $39,207 $705,097 
_______________________
(1) See Note 11—Acquisitions for additional information related to the acquisition of LSI completed during the first quarter of 2022.

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

9


NOTE 5—DEBT

Long-term debt consisted of the following:
(in thousands)March 31, 2022December 31, 2021
2018 Term Loan Facility$140,000 $140,000 
2020 Term Loan Facility490,013 496,725 
6.375% Senior Notes due 2026
92,041 92,041 
Total722,054 728,766 
Net unamortized discounts and issuance costs(3,963)(4,259)
Total long-term debt718,091 724,507 
Current portion of long-term debt (1)
(26,850)(26,850)
Long-term debt, less current portion$691,241 $697,657 
_______________________
(1) Represents the mandatory amortization payments due within twelve months related to the 2020 Term Loan Facility.

On May 9, 2018, we entered into a credit agreement governing the terms of, among other things, a 7-year senior secured term
loan B facility that had an initial commitment of $415 million (the “2018 Term Loan Facility”), and on June 3, 2020,
ChampionX Holdings Inc. entered into a term loan facility for $537.0 million (the “2020 Term Loan Facility”). The 2018 Term
Loan is subject to mandatory amortization payments of 1% per annum of the initial commitment paid quarterly, and the 2020 Term Loan Facility is subject to mandatory amortization payments of $6.7 million paid quarterly, which began on September 30, 2020. The 2018 Term Loan Facility and the 2020 Term Loan Facility each contains customary representations and warranties, covenants, and events of default for loan facilities of this type. We were in compliance with all covenants as of March 31, 2022. The weighted average interest rate on borrowings during the three month period ended March 31, 2022 was 2.67% and 6.00% for the 2018 Term Loan Facility and 2020 Term Loan Facility, respectively.

NOTE 6—COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

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

In connection with the Company’s separation from Dover Corporation (“Dover”) in 2018, we entered into agreements with Dover that govern the treatment between Dover and us for certain indemnification matters and litigation responsibility. Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and to place financial responsibility for the obligations and liabilities of Dover’s business with Dover. The separation and distribution agreement also establishes procedures for handling claims subject to indemnification and related matters.

In connection with the acquisition of the Chemical Technologies business from Ecolab in 2020 (the “Merger”), we entered into agreements with Ecolab that govern the treatment between Ecolab and us for certain indemnification matters and litigation responsibility. Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and to place financial responsibility for the obligations and liabilities of Ecolab’s business with Ecolab. The separation and distribution agreement also establishes procedures for handling claims subject to indemnification and related matters. In addition, pursuant to the tax matters agreement
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relating to the Merger (the “Tax Matters Agreement”), we have agreed to indemnify Ecolab and its affiliates for (i) all taxes for which ChampionX is responsible as defined within the Tax Matters Agreement, (ii) all taxes resulting from a breach by ChampionX of any of its representations (but only to the extent relating to a breach occurring after the consummation of the Merger) or any of its covenants under the Tax Matters Agreement, (iii) all taxes resulting from an acquisition after the Merger of any of the stock or assets of ChampionX, other than as a result of the Merger or a repayment of the 2018 Credit Facility (as defined in “Note 8–Debt” to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2021), 2018 Term Loan Facility or 2020 Term Loan Facility and (iv) reasonable costs and expenses (including reasonable attorneys’ fees and expenses) related to the foregoing.

As of March 31, 2022 and December 31, 2021, we had $77.7 million and $80.2 million, respectively, of outstanding letters of credit, surety bonds and guarantees, which expire at various dates through 2039. These financial instruments are primarily maintained as security for insurance, warranty, and other performance obligations. Generally, we would only be liable for the amount of these letters of credit, surety bonds, and guarantees in the event of default in the performance of our obligations, the probability of which we believe is remote.

Litigation and Environmental Matters

We are involved in various pending or potential lawsuits, claims and environmental actions that have arisen in the ordinary course of our business. These proceedings primarily involve claims by private parties alleging injury arising out of use of our products, patent infringement, employment matters, and commercial disputes, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and either operating or owned facilities. We review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and accrued to date, and the availability and extent of insurance coverage. We accrue a liability for legal matters that are probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. We are unable to predict the ultimate outcome of these actions because of the inherent uncertainty of litigation and unfavorable rulings or developments could occur, and there can be no certainty that the Company may not ultimately incur charges in excess of recorded liabilities. However, we believe the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental Matters

The Company is currently participating in environmental assessments and remediation at approximately 11 locations, the majority of which are in the United States (“U.S.”), and environmental liabilities have been accrued reflecting our best estimate of future costs. Potential insurance reimbursements are not anticipated in the Company’s accruals for environmental liabilities. As of March 31, 2022, environmental liability accruals related to these locations were $6.5 million.

Prior to the separation from Dover in 2018, groundwater contamination was discovered at the Norris Sucker Rods plant site located in Tulsa, Oklahoma (“Norris”). Initial remedial efforts were undertaken at the time of discovery of the contamination and Norris has since coordinated monitoring and remediation with the Oklahoma Department of Environmental Quality (“ODEQ”). As part of the ongoing long-term remediation process, Norris contracted an engineering and consulting firm to develop a range of possible additional remedial alternatives in order to accelerate the remediation process and associated cost estimates for the work. In October 2019, we received the firm’s preliminary remedial alternatives for consideration. We have submitted our long-term remediation plan and it was approved by ODEQ. We are now in discussion with ODEQ to finalize a consent order. Because we have not yet finalized the consent order for further remediation at the site and discussions with ODEQ remain ongoing, we cannot fully anticipate the timing, outcome or possible impact of such further remedial activities, financial or otherwise. As a result of the recommendations in the report, we accrued liabilities for these remediation efforts of approximately $2.0 million as of December 31, 2019. Liabilities could increase in the future at such time as we ultimately reach agreement with ODEQ on our remediation plan and such liabilities become probable and can be reasonably estimated; however, there have been no changes to our estimated liability as of March 31, 2022.

Matters Related to Deepwater Horizon Incident Response

On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after an explosion and fire, resulting in a massive oil spill. Certain entities that are now subsidiaries of ChampionX as a result of the Merger (collectively the “COREXIT Defendants”) supplied COREXIT™ 9500, an oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule, which was used in the response to the spill. In connection with the provision of COREXIT™, the COREXIT Defendants were named in several lawsuits. Cases arising out of the Deepwater
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Horizon accident were administratively transferred and consolidated for pre-trial purposes under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 in the United States District Court in the Eastern District of Louisiana (E.D. La.) (“MDL 2179”). Claims related to the response to the oil spill were consolidated in a master complaint captioned the “B3 Master Complaint.” In 2011, Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) named the COREXIT Defendants and other unaffiliated companies as first party defendants (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against the COREXIT Defendants and other unaffiliated cross defendants. In April and June 2011, in support of its defense of the claims against it, the COREXIT Defendants filed counterclaims against the Cross Claimants. On May 18, 2012, the COREXIT Defendants filed a motion for summary judgment as to the claims in the B3 Master Complaint. On November 28, 2012, the Court granted the COREXIT Defendants’ motion and dismissed with prejudice the claims in the B3 Master Complaint asserted against the COREXIT Defendants. There currently remain three “B3” cases that had asserted claims against the COREXIT Defendants and that remain pending against other defendants. Because the Court’s decision was not a “final judgment” for purposes of appeal with respect to those claims, under Federal Rule of Appellate Procedure 4(a), plaintiffs will have 30 days after entry of final judgment in each case to appeal the Court’s summary judgment decision.

The Company believes the claims asserted against the COREXIT Defendants are without merit and intends to defend these lawsuits vigorously. The Company also believes that it has rights to contribution and/or indemnification (including legal expenses) from third parties. However, we cannot predict the outcome of these lawsuits, the involvement it might have in these matters in the future, or the potential for future litigation.

NOTE 7—RESTRUCTURING AND OTHER RELATED CHARGES

During the current and prior periods, we approved various restructuring plans related to the consolidation of product lines and associated facility closures and workforce reductions. As a result, we recognized charges of $8.5 million during the three months ended March 31, 2022, consisting primarily of employee severance and related benefits, partially offset by gains realized on the sale of facilities. During the three months ended March 31, 2021, we recorded restructuring and other charges of $4.3 million.

The following table presents the restructuring and other related charges by segment as classified in our condensed consolidated statements of income.
 Three Months Ended March 31,
(in thousands)20222021
Segment restructuring charges (income):
Production Chemical Technologies$11,636 $688 
Production & Automation Technologies(4,147)3,524 
Drilling Technologies  
Reservoir Chemical Technologies743 44 
Corporate and other252  
Total$8,484 $4,256 
Statements of Income (Loss) classification:
Cost of goods and services$(4,139)$3,484 
Selling, general and administrative expense12,623 772 
Total$8,484 $4,256 

Our liability balance for restructuring and other related charges at March 31, 2022 reflects employee severance and related benefits initiated during the period. Additional programs may be initiated during 2022 with related restructuring charges.

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The following table details our restructuring accrual activities during the three months ended March 31, 2022:
(in thousands)Restructuring Accrual Balance
December 31, 2021$3,743 
Restructuring charges8,484 
Asset sales4,523 
Payments(3,819)
March 31, 2022$12,931 

NOTE 8—EQUITY AND CASH INCENTIVE PROGRAMS

Stock-based compensation expense is reported within selling, general and administrative expense in the condensed consolidated statements of income. Stock-based compensation expense relating to all stock-based incentive plans was as follows:
 Three Months Ended March 31,
(in thousands)20222021
Stock-based compensation expense$4,728 $6,442 
Tax benefit(993)(1,353)
Stock-based compensation expense, net of tax$3,735 $5,089 

A summary of activity relating to our share-based awards for the three months ended March 31, 2022 was as follows:
(in shares)Stock-Settled Appreciation RightsPerformance Share AwardsRestricted Stock UnitsNon-Qualified Stock Options
Outstanding at January 1, 2022393,523 505,509 2,342,107 5,488,653 
Granted 347,920 900,606  
Forfeited / expired(1,758) (103,471) 
Exercised / vested (72,410)(344,288)(187,927)
Outstanding at March 31, 2022391,765 781,019 2,794,954 5,300,726 
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NOTE 9—STOCKHOLDERS' EQUITY

Dividend

On February 4, 2022, our Board of Directors (“Board”) approved a plan to initiate a regular quarterly cash dividend of $0.075 per share of the Company’s common stock. The first declared dividend is payable on April 29, 2022 to stockholders of record on April 8, 2022. Subsequent dividend declarations, if any, including the amounts and timing of future dividends, are subject to approval by the Board and will depend on future business conditions, financial conditions, results of operations and other factors.

Accumulated other comprehensive loss

Accumulated other comprehensive lossAccumulated other comprehensive loss consisted of the following:
(in thousands)Foreign Currency TranslationDefined Pension and Other Post-Retirement BenefitsCash Flow HedgesAccumulated Other Comprehensive Loss