ChampionX(CHX) - 2024 Q4 - Annual Report

Financial Performance - Consolidated revenue for 2024 decreased by $124.3 million, or 3%, to $3,633.983 million, primarily due to a decline in revenues in Latin America and the expected decline from the Ecolab agreement[167]. - Gross profit increased by $49.1 million, or 4%, year-over-year, mainly due to productivity improvements and discretionary spend control[168]. - Selling, general and administrative expenses rose by $87.6 million, or 14%, year-over-year, largely due to transaction costs related to the pending merger with SLB and acquisitions[169]. - Production Chemical Technologies segment revenue decreased by $115.5 million, or 5%, primarily due to lower sales volumes in Latin America[176]. - Production & Automation Technologies segment revenue increased by $39.2 million, or 4%, driven by revenues from the acquisition of RMSpumptools[178]. - Operating profit for Drilling Technologies increased by $33.0 million, or 73%, primarily due to a $29.8 million gain on a sale-leaseback transaction[180]. Cash and Liquidity - Cash and cash equivalents at December 31, 2024, were $507.7 million, up from $288.6 million at December 31, 2023[184]. - Total liquidity at December 31, 2024, was $1.2 billion, consisting of $507.7 million in cash and $674.8 million available on the revolver[184]. - Long-term debt balance as of December 31, 2024, was $591.5 million, primarily consisting of the 2022 Term Loan Facility[186]. - Cash provided by operating activities increased by $49.4 million to $589.7 million in 2024, driven by tax payment deferrals and improved segment profit margins[196][197]. - Cash used in financing activities was $150.5 million in 2024, primarily due to stock repurchases and dividends paid totaling $70.5 million[202]. - Cash used for investing activities was $215.3 million in 2024, including $123.3 million for acquisitions[199]. Shareholder Returns - The Board approved a regular quarterly cash dividend increase to $0.095 per share, resulting in a dividend payable of $19.0 million as of December 31, 2024[190]. - The Share Repurchase Program was increased to $1.5 billion, with $49.4 million used to repurchase 1,611,055 shares in 2024[191]. Tax and Regulatory Matters - The effective tax rate for 2024 was 26.1%, compared to 24.8% in 2023[173]. - The company has included a current liability of $3.5 million in its provision related to the OECD's Pillar Two framework, which introduces a global minimum Effective Tax Rate of 15%[220]. - The company assesses the likelihood of recovering deferred tax assets and establishes a valuation allowance if recovery is not likely, which is a critical accounting estimate[218]. Risk Management - A 10% increase or decrease in the average exchange rates of all foreign currencies would have changed the company's revenue and income before income taxes by approximately 3.1% and 4.5%, respectively, for the year ended December 31, 2024[223]. - The company is exposed to commodity price fluctuations, particularly for metals such as nickel, chrome, and steel scrap, which can impact earnings[222]. - The company does not hedge the translation impact on earnings from foreign currency fluctuations, exposing it to potential earnings volatility[223]. - The company uses foreign currency forward contracts to manage risks associated with foreign currency exchange rates[224]. - The company maintains a five-year amortizing floating-to-fixed interest rate swap to reduce the impact of changes in interest rates on its variable-rate debt[227]. - The company does not currently intend to enter into any interest rate hedging agreements but will continue to monitor interest rate exposure[228]. Debt and Credit Facilities - The five-year revolving credit facility had an outstanding debt of $700 million with an unused capacity of $674.8 million as of December 31, 2024[204]. - The company had approximately $70.3 million in outstanding letters of credit and guarantees as of December 31, 2024[195]. - The fair value of the company's fixed-rate long-term debt and variable rate debt is estimated based on quoted market prices or prices from third-party financial institutions[228]. - The company has $8.6 million in uncertain tax positions recorded in other long-term liabilities as of December 31, 2024[219].