SEC Filing - ChampionX Corporation

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championx-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38441

ChampionX Corporation

(Exact name of registrant as specified in its charter)


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

2445 Technology Forest Blvd,	Building 4, 12th Floor
The Woodlands,	Texas	77381
(Address of principal executive offices)		(Zip Code)

(281) 403-5772

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	CHX	The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The registrant had 201,802,181 shares of common stock, $0.01 par value, outstanding as of July 23, 2021.

CHAMPIONX CORPORATION

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Income (Loss)	1
	Condensed Consolidated Statements of Comprehensive Income (Loss)	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Executive Overview and Business Outlook	23
	Consolidated Results of Operations	25
	Segment Results of Operations	27
	Capital Resources and Liquidity	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
SIGNATURES		34

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, 2020.

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 (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2021		2020		2021		2020
Product revenue	$	649,399	$	248,871	$	1,234,756	$	473,316
Service revenue	81,223		36,846		161,849		61,770
Lease and other revenue	18,550		13,197		37,455		25,262
Total revenue	749,172		298,914		1,434,060		560,348
Cost of goods and services	569,167		266,684		1,091,723		445,779
Gross profit	180,005		32,230		342,337		114,569
Selling, general and administrative expense	152,341		130,657		295,819		208,800
Goodwill impairment	—		—		—		616,271
Long-lived asset impairment	—		—		—		40,980
Interest expense, net	14,064		11,262		28,035		20,301
Other (income) expense, net	2,251		312		315		(1,321)
Income (loss) before income taxes	11,349		(110,001)		18,168		(770,462)
Provision for (benefit from) income taxes	3,563		(954)		6,345		(27,960)
Net income (loss)	7,786		(109,047)		11,823		(742,502)
Less: Net income (loss) attributable to noncontrolling interest	536		598		(1,199)		871
Net income (loss) attributable to ChampionX	$	7,250	$	(109,645)	$	13,022	$	(743,373)








Earnings (losses) per share attributable to ChampionX: *
Basic	$	0.04	$	(0.95)	$	0.06	$	(7.72)
Diluted	$	0.03	$	(0.95)	$	0.06	$	(7.72)
Weighted-average shares outstanding: *
Basic	201,467		115,149		201,063		96,313
Diluted	208,541		115,149		207,939		96,313

_______________________

* See Note 11—Earnings Per Share

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Net income (loss)	$	7,786	$	(109,047)	$	11,823	$	(742,502)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	8,332		5,703		11,545		(5,349)
Cash flow hedges	(277)		653		136		653
Defined pension and other post-retirement benefits adjustments, net	6,373		99		6,540		198
Other comprehensive income (loss)	14,428		6,455		18,221		(4,498)
Comprehensive income (loss)	22,214		(102,592)		30,044		(747,000)
Comprehensive income (loss) attributable to noncontrolling interest	536		598		(1,199)		871
Comprehensive income (loss) attributable to ChampionX	$	21,678	$	(103,190)	$	31,243	$	(747,871)

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands)	June 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	238,995	$	201,421

Receivables, net	576,090		559,545
Inventories, net	467,594		430,112
Prepaid expenses and other current assets	67,360		74,767
Total current assets	1,350,039		1,265,845
Property, plant and equipment, net of accumulated depreciation of $541,796 in 2021 and $494,490 in 2020	818,928		854,536
Operating lease right-of-use assets	118,898		122,481

Goodwill	690,134		680,594
Intangible assets, net	436,027		479,009
Other non-current assets	71,984		73,311

Total assets	$	3,486,010	$	3,475,776
LIABILITIES AND EQUITY
Current portion of long-term debt	$	26,850	$	26,850
Accounts payable	391,213		299,666
Accrued compensation and employee benefits	69,315		70,303
Current portion of operating lease liabilities	35,471		33,234
Accrued distributor fees	28,813		37,465
Accrued expenses and other current liabilities	134,916		155,042
Total current liabilities	686,578		622,560
Long-term debt	838,826		905,764
Deferred income taxes	144,418		156,283
Operating lease liabilities	77,344		83,553

Other long-term liabilities	79,887		95,041
Total liabilities	1,827,053		1,863,201
Stockholders’ equity:
Common stock (2.5 billion shares authorized, $0.01 par value) 201.7 million shares and 200.4 million shares issued and outstanding in 2021 and 2020, respectively	2,017		2,004
Capital in excess of par value of common stock	2,310,267		2,293,179

Accumulated deficit	(625,435)		(638,457)
Accumulated other comprehensive loss	(12,534)		(30,755)
ChampionX stockholders’ equity	1,674,315		1,625,971
Noncontrolling interest	(15,358)		(13,396)
Total equity	1,658,957		1,612,575
Total liabilities and equity	$	3,486,010	$	3,475,776

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common stock
(in thousands)	Shares	Par Value		Capital in Excess of Par Value		Accum. Deficit		Accum. Other Comp. Loss		Non-controlling Interest		Total
December 31, 2020	200,380	$	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 compensation	64	—		6,442		—		—		—		6,442
Stock options exercised	577	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, 2021	201,021	$	2,010	$	2,302,406	$	(632,685)	$	(26,962)	$	(15,663)	$	1,629,106
Net income (loss)	—	—		—		7,250		—		536		7,786
Other comprehensive income	—	—		—		—		14,428		—		14,428
Stock-based compensation	101	—		5,914		—		—		—		5,914
Stock options exercised	578	7		3,155		—		—		—		3,162
Taxes withheld on issuance of stock-based awards	—	—		(1,208)		—		—		—		(1,208)
Cumulative translation adjustments	—	—		—		—		—		(231)		(231)


June 30, 2021	201,700	$	2,017	$	2,310,267	$	(625,435)	$	(12,534)	$	(15,358)	$	1,658,957


	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	—	—		—		(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

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

CHAMPIONX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2021		2020
Cash flows from operating activities:
Net income (loss)	$	11,823	$	(742,502)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation	76,648		58,139
Amortization	43,739		26,274
Stock-based compensation	12,356		7,862
Loss on disposal of fixed assets	3,176		4,040
Loss on goodwill and long-lived asset impairment	—		657,251

Loss on debt extinguishment	3,305		—
Provision for bad debt	86		3,498
Provision for inventory obsolescence and write-downs	6,200		8,354
Amortization of deferred loan costs and accretion of discount	1,628		1,999
Deferred income taxes	(1,757)		(24,682)
Employee benefit plan expense	1,250		859
Other	167		(264)
Changes in operating assets and liabilities (net of effects of foreign exchange):
Receivables	(18,706)		77,777
Inventories	(41,586)		24,794
Prepaid expenses and other current assets	9,215		22,088
Accounts payable	92,997		(30,331)
Accrued compensation and employee benefits	(2,444)		(13,846)
Accrued expenses and other liabilities	(46,447)		4,717

Leased assets	(1,609)		(9,311)
Other	1,097		1,317
Net cash provided by operating activities	151,138		78,033

Cash flows from investing activities:
Capital expenditures	(45,680)		(19,322)
Acquisitions, net of cash acquired	—		57,588
Proceeds from sale of fixed assets	2,482		1,066

Net cash (used for) provided by investing activities	(43,198)		39,332

Cash flows from financing activities:
Proceeds from long-term debt	—		125,000
Payment of debt issue costs	—		(4,356)
Repayment of long-term debt	(71,113)		(125,000)
Distributions to noncontrolling interest	(800)		(2,200)
Payment of finance lease obligations	(2,575)		(2,802)
Proceeds from exercise of stock options	6,509		—
Payments related to taxes withheld on stock-based compensation	(1,764)		(612)
Net cash used for financing activities	(69,743)		(9,970)






Effect of exchange rate changes on cash and cash equivalents	(623)		(790)

Net increase (decrease) in cash and cash equivalents	37,574		106,605
Cash and cash equivalents at beginning of period	201,421		35,290
Cash and cash equivalents at end of period	$	238,995	$	141,895

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

CHAMPIONX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Description of the Business

ChampionX Corporation is a global leader in chemistry solutions and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Our products provide efficient functioning 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.

On June 3, 2020, the Company and Ecolab Inc. (“Ecolab”) completed a Reverse Morris Trust transaction in which we acquired the Chemical Technologies business (“the Merger”). In association with the completion of the Merger, the Company changed its name from Apergy Corporation (“Apergy”) to ChampionX Corporation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of ChampionX have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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, 2021.

Significant Accounting Policies

Please refer to "Note 1–Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 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.

NOTE 2—MERGER TRANSACTION

On June 3, 2020 we completed the acquisition of the Chemical Technologies business. To complete the acquisition, we issued 122.2 million shares of common stock, at a share price of $10.34 per share, in exchange for 100% equity ownership of Chemical Technologies.

Purchase Price Allocation

The acquisition-date fair value of the consideration transferred consisted of the following:


(in thousands)
Equity consideration	$	1,263,931
Replacement awards attributable to pre-combination services(1)	43,964
Unfavorable supply agreement(2)	46,000
Favorable supply agreement(2)	(59,000)
Fair value of consideration transferred	$	1,294,895

_______________________

(1) Represents the fair value of the replacement equity awards to the extent services were provided by employees of Chemical Technologies prior to closing.

(2) As part of the Merger, the Company entered into a Cross Supply and Product Transfer Agreement with Ecolab in which over a period of approximately three years from the merger date, certain products will be manufactured by one party for the other. The cross selling prices in which each party will transfer their products, and include a take-or-pay element, have been set forth within this agreement and are not reflective of market terms. As a result, we recognized an intangible asset recorded at fair value for the favorable terms and a liability recorded at fair value for the unfavorable terms. The intangible asset will be amortized on a straight-line basis over a three-year period into cost of goods and services and the liability will be amortized as a component of product revenue.

The following table provides the final allocation of the purchase price as of the acquisition date.


(in thousands)
Cash and cash equivalents	$	57,588
Receivables	394,432
Inventories	340,000
Prepaid expenses and other current assets	63,576
Property, plant, and equipment	687,085
Identifiable intangible assets(1)	290,000
Other non-current assets	156,427
Total identifiable assets acquired	1,989,108
Accounts payable	184,028
Other current liabilities(1)	172,997
Long-term debt (2)	537,000
Deferred tax liabilities	103,956
Other liabilities(1)	98,970
Total liabilities assumed	1,096,951
Net identifiable assets acquired	892,157
Add: Negative fair value of non-controlling interests	16,052
Goodwill	386,686
Total net assets acquired	$	1,294,895

_______________________

(1) The fair value of the consideration transferred related to the favorable and unfavorable terms of the cross supply agreement has been excluded.

(2) In connection with the Merger, we assumed a term loan from Chemical Technologies, of which approximately $26.9 million has been classified as short-term representing the mandatory amortization payments due within the next twelve months. See Note 6—Debt for further information.

Pro forma financial information

The following unaudited pro forma results of operations have been prepared as though the Merger was completed on January 1, 2019. Pro forma amounts are based on the preliminary purchase price allocation of the acquisition and are not necessarily indicative of results that may be reported in the future. Non-recurring pro forma adjustments including acquisition-related costs directly attributable to the Merger are included within the reported pro forma revenue and net income (loss).


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except per share data)	2020		2020
Revenues	$	614,684	$	1,435,379
Net income (loss) attributable to ChampionX	(60,100)		(794,525)

Included in the net income (loss) attributable to ChampionX on a pro forma basis were goodwill and long-lived asset impairment charges of $805.0 million during the six months ended June 30, 2020.

NOTE 3—SEGMENT INFORMATION

Our reporting segments are:

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

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

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

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

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 were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Segment revenue:
Production Chemical Technologies	$	447,049	$	136,002	$	859,420	$	136,002
Production & Automation Technologies	188,173		114,741		355,018		320,220
Drilling Technologies	37,589		20,948		72,583		76,903
Reservoir Chemical Technologies	33,222		9,306		63,113		9,306
Corporate and other (1)	43,139		17,917		83,926		17,917
Total revenue	$	749,172	$	298,914	$	1,434,060	$	560,348

Segment operating profit (loss):
Production Chemical Technologies	$	33,871	$	9,922	$	64,228	$	9,922
Production & Automation Technologies	12,292		(37,168)		17,654		(685,759)
Drilling Technologies	3,868		(3,811)		10,254		7,548
Reservoir Chemical Technologies	(2,594)		(2,811)		(5,822)		(2,811)
Total segment operating profit (loss)	47,437		(33,868)		86,314		(671,100)
Corporate and other (1)	22,024		64,871		40,111		79,061
Interest expense, net	14,064		11,262		28,035		20,301
Income (loss) before income taxes	$	11,349	$	(110,001)	$	18,168	$	(770,462)

_______________________

(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.

NOTE 4—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, asset monitoring, and other field services. Lease revenue is derived from rental income of leased production equipment. These lease arrangements generally allow customers to rent equipment on a daily basis with no stated end date. Management accounts for these arrangements as a daily renewal option beginning on the lease commencement date, with the lease term determined as the period in which it is reasonably certain the option will be exercised. As our costs are shared across the various revenue categories, cost of goods sold is not tracked separately and is not discretely identifiable.

Revenue disaggregated by geography was as follows:


	Three Months Ended June 30, 2021
(in thousands)	Production Chemical Technologies		Production & Automation Technologies		Drilling Technologies		Reservoir Chemical Technologies		Corporate		Total
United States	$	156,852	$	141,799	$	30,392	$	19,589	$	30,225	$	378,857
Latin America	93,389		4,530		—		3,587		1,261		102,767
Middle East & Africa	66,213		13,358		1,446		6,534		1,945		89,496
Canada	63,639		14,754		1,986		377		124		80,880
Europe	41,046		1,790		2,278		1,101		3,690		49,905
Asia-Pacific	10,562		2,743		853		1,393		5,894		21,445
Australia	5,994		9,182		13		30		—		15,219
Other	9,354		17		621