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Management Discussion

• Outside of incremental revenues associated with the Merger, we experienced an increase in revenue in North America across all our business segments in the second half of 2020 as compared to the first half of 2020. This increase was driven by higher activity levels as customer spending began to recover from the compressed levels experienced during the second quarter, coupled with higher demand for our polycrystalline diamond cutters as U.S. land rig count activity began to increase later in the year. Internationally, markets were more resilient during 2020 given the longer sales cycles relative to North America.
• Revenue. Revenue for the consolidated entity increased $768.7 million, or 68%, in 2020 compared to the prior year driven by $1.2 billion of incremental revenues associated with our acquired Chemical Technologies business. The increase in revenue was offset by a decrease in Drilling Technologies revenue of $130.7 million year-over-year due to lower volumes and pricing pressure. Additionally, Production & Automation Technologies revenue decreased $268.4 million year-over-year, driven by lower volumes in North America and internationally, and the disposition of our pressure vessel manufacturing business in the second quarter of 2019.
• Gross profit. Gross profit increased $32.1 million, or 9%, year-over year, primarily due to $251.8 million generated subsequent to the Merger date by our acquired Chemical Technologies business. This was offset by lower sales volumes in our Production & Automation Technologies and Drilling Technologies segments as well as an increase in consolidated depreciation expense of $74.1 million. The increase in depreciation expense is primarily due to a change in salvage value estimate for certain of our leased assets.