What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-01 compared with 2020-02-28 · 114 added, 111 removed, 110 unchanged (67% of the section changed)

was incorporated on February 17, 2017 as a Delaware corporation for the purpose of completing an initial public offering of equity and related transactions (our “IPO”).

Cactus LLC is a Delaware limited liability company and was formed on July 11, 2011.

We began operating in August 2011, following the formation of Cactus LLC by Scott Bender and Joel Bender, who have owned or operated wellhead manufacturing businesses since the late 1970s, and Cadent Energy Partners II, L.P.

(“Cadent”), an affiliate of Cadent Energy Partners LLC, as its equity sponsor.

We acquired our primary manufacturing facility in Bossier City, Louisiana in September 2011 and established our other production facility, located in Suzhou, China in December 2013 through our subsidiary there.

Since we began operating, we have grown to 14 U.S.

service centers located in Texas, Pennsylvania, Oklahoma, North Dakota, New Mexico, Louisiana, Colorado and Wyoming as well as three service centers in Eastern Australia.

(“Cactus Inc.”) and its consolidated subsidiaries (the “Company,” “we,” “us,” “our” and “Cactus,”), including Cactus Wellhead, LLC (“Cactus LLC”), are primarily engaged in the design, manufacture and sale of wellhead and pressure control equipment.

Our products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of our customers’ wells.

We also provide field services for all of our products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment.

Additionally, we offer repair and refurbishment services.

We operate through 14 U.S.

service centers located in Texas, New Mexico, Pennsylvania, North Dakota, Louisiana, Oklahoma, Colorado and Wyoming as well as three service centers in Eastern Australia.

Our corporate headquarters are located in Houston, Texas.

and its consolidated subsidiaries, including Cactus LLC, are primarily engaged in the design, manufacture and sale of wellhead and pressure control equipment.

In addition, we maintain a fleet of frac valves and ancillary equipment for short-term rental.

Our products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of our customers’

We also provide field services for all of our products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment as well as offer repair and refurbishment services.

Organization Structure

On February 12, 2018, we completed our initial public offering of 23.0 million shares of Class A common stock, par value $0.01 per share (“Class A common stock”), at a price to the public of $19.00 per share.

We received net proceeds of $408.0 million after deducting underwriting discounts and commissions and payment of $2.8 million in offering expenses for the IPO.

We also paid $2.2 million in offering expenses during 2017.

On February 14, 2018 we completed the sale of an additional 3.5 million shares of Class A common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares of Class A common stock (the “Option”), from which we received an additional $61.6 million net proceeds after deducting underwriting discounts and commissions.

We contributed all of the net proceeds of our IPO (including from the Option) to Cactus LLC in exchange for CW Units.

Cactus LLC used the $469.6 million of the net proceeds from our IPO to (i) repay all of the borrowings outstanding under its term loan facility, including accrued interest, of $251.0 million and (ii) redeem $216.4 million of CW Units from certain direct and indirect owners of Cactus LLC.

The remaining $2.2 million was retained by Cactus LLC to cover offering expenses previously paid in 2017.

is a holding company whose only material asset is an equity interest consisting of units representing limited liability company interests in Cactus LLC (“CW Units”).

became the sole managing member of Cactus LLC upon completion of our IPO and is responsible for all operational, management and administrative decisions relating to Cactus LLC’s business.

The Limited Liability Company Operating Agreement of Cactus LLC was amended and restated as the First Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”) to, among other things, admit Cactus Inc.

as the sole managing member of Cactus LLC.

Pursuant to the Cactus Wellhead LLC Agreement, holders of CW Units are entitled to redeem their CW Units, which results in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of

Class A common stock outstanding.

We also have manufacturing and production facilities in Bossier City, Louisiana and Suzhou, China.

was incorporated on February 17, 2017 as a Delaware corporation for the purpose of completing an initial public offering of equity and related transactions, which was completed on February 12, 2018 (our “IPO”).

We began operating in August 2011 following the formation of Cactus LLC in part by Scott Bender and Joel Bender, who have owned or operated wellhead manufacturing businesses since the late 1970s.

is a holding company whose only material asset is an equity interest consisting of units representing limited liability company interests in Cactus LLC (“CW Units”).

became the sole managing member of Cactus LLC upon completion of our IPO and is responsible for all operational, management and administrative decisions relating to Cactus LLC’s business.

Pursuant to the First Amended and Restated Limited Liability Company Operating Agreement of Cactus LLC (the “Cactus Wellhead LLC Agreement”), owners of CW Units are entitled to redeem their CW Units for shares of Cactus Inc.’s Class A common stock, par value $0.01 per share (“Class A common stock”) on a one-for-one basis, which results in a corresponding increase in Cactus Inc.’s membership interest in Cactus LLC and an increase in the number of shares of Class A common stock outstanding.

We refer to the owners of CW Units, other than Cactus Inc., (along with their permitted transferees) as “CW Unit Holders.” CW Unit Holders own one share of our Class B common stock, par value $0.01 per share (“Class B common stock”) for each CW Unit such CW Unit Holder owns.

Cadent Energy Partners II, L.P.

(“Cadent”), an affiliate of Cadent Energy Partners LLC, and Cactus WH Enterprises, LLC (“Cactus WH Enterprises”) are the largest CW Unit Holders.

Cactus WH Enterprises is a Delaware limited liability company owned by Scott Bender, Joel Bender, Steven Bender and certain of our other employees.

Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our amended and restated certificate of incorporation.

As of December 31, 2020, Cactus Inc.

owned 63.3% and CW Unit Holders owned 36.7% of Cactus LLC, which was based on 47.7 million shares of Class A common stock issued and outstanding and 27.7 million shares of Class B common stock issued and outstanding.

Cadent and Cactus WH Enterprises held approximately 11% and 23% of our voting power, respectively, as of December 31, 2020.

The following is a rollforward of ownership of legacy CW Units by legacy CW Unit Holders:

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CW Units held by legacy CW Unit Holders as of February 7, 2018 60,558

July 2018 Follow-on Offering

IPO on February 12, 2018 (12,118)

July 2018 follow-on equity offering (11,197)

Other CW Unit redemptions (7)

CW Units held by legacy CW Unit Holders as of December 31, 2018 37,236

March 2019 Secondary Offering

March 2019 follow-on equity offering (8,474)

Other CW Unit redemptions (804)

CW Units held by legacy CW Unit Holders as of December 31, 2019 27,958

On July 16, 2018, we completed a public offering of 11.2 million shares (consisting of 10.0 million base shares and 1.2 million shares sold pursuant to the underwriters’

option to purchase additional shares) of Class A common stock (the “Follow-on Offering”) at a price to the public of $33.25 per share and received $359.3 million of net proceeds after deducting underwriting discounts and commissions.

contributed these net proceeds to Cactus LLC in exchange for CW Units.

Cactus LLC then used the net proceeds to redeem 11.2 million CW Units from certain of the owners of Cactus LLC, and Cactus Inc.

canceled a corresponding number of shares of Class B common stock, par value $0.01 per share (“Class B common stock”).

On March 19, 2019, Cactus Inc.

entered into an underwriting agreement by and among Cactus Inc., Cactus LLC, certain selling stockholders of Cactus (the “Selling Stockholders”) and the underwriters named therein, providing for the offer and sale of Class A common stock by the Selling Stockholders (the “March 2019 Secondary Offering”).

As described in the prospectus supplement dated March 19, 2019 and filed with the Securities and Exchange Commission on March 20, 2019, in connection with the March 2019 Secondary Offering, certain Selling Stockholders owning CW Units exercised their Redemption Right with respect to 8.5 million CW Units, together with a corresponding number of shares of Class B common stock, as provided in the Cactus LLC Agreement.

The March 2019 Secondary Offering closed on March 21, 2019, at which time, in exercise of its Call Right, Cactus Inc.

acquired the redeemed CW Units and a corresponding number of shares of Class B common stock (which shares of Class B common stock were then canceled) and issued 8.5 million shares of Class A common stock to the underwriters at the direction of the redeeming Selling Stockholders, as provided in the Cactus LLC Agreement.

In addition, certain other Selling Stockholders sold 26 thousand shares of Class A common stock in the March 2019 Secondary Offering, which shares were owned by them directly prior to the closing of this offering.

Cactus did not receive any of the proceeds from the sale of common stock in the March 2019 Secondary Offering.

Cactus incurred $1.0 million in offering expenses which were recorded in other income (expense), net, in the consolidated statement of income.

In this Annual Report, we refer to the owners of CW Units, other than Cactus Inc., (along with their permitted transferees) as “CW Unit Holders.”

CW Unit Holders also own one share of our Class B common stock for each CW Unit such CW Unit Holder owns.

As of December 31, 2019, after giving effect to our IPO, Follow-on Offering, the March 2019 Secondary Offering and additional redemptions pursuant to the Cactus Wellhead LLC Agreement, Cactus Inc.

owns an approximate 62.8% interest in Cactus LLC, and the CW Unit Holders own an approximate 37.2% interest in Cactus LLC as of December 31, 2019, which is based on 47.2 million shares of Class A common stock and 28.0 million shares of Class B common stock issued and outstanding.

Other CW Unit redemptions (303)

CW Units held by legacy CW Unit Holders as of December 31, 2020 27,655

For more information on our 2018 IPO, see our Annual Report of Form 10-K for the year ended December 31, 2018 .

For further information on the follow-on equity offerings in July 2018 and March 2019, see Note 10 in the Notes to the Consolidated Financial Statements.

The following diagram indicates our simplified ownership structure as of December 31, 2020:

Our principal products include our Cactus SafeDrill ®

wellhead systems as well as frac stacks, our Cactus SafeLink TM system, zipper manifolds and production trees that we design and manufacture.

Our principal products include our Cactus SafeDrill ® wellhead systems as well as frac stacks, our Cactus SafeLink ™ monobore, SafeClamp ® and SafeInject ® systems, zipper manifolds and production trees that we design and manufacture.

Every oil and gas well requires a wellhead, which is installed at the onset of the drilling process and remains with the well through its entire productive life.

The Cactus SafeDrill ®

wellhead systems employ technology which allows technicians to land and secure casing strings more safely from the rig floor, reducing the need to descend into the cellar.

The Cactus SafeDrill ® wellhead systems employ technology which allows technicians to land and secure casing strings more safely from the rig floor, reducing the need to descend into the cellar.

We believe we are a market leader in the application of such technology, with thousands of our products sold and installed across the United States since 2011.

During the completion phase of a well, we rent frac stacks, zipper manifolds and other high-pressure equipment that are used for well control and for managing the transmission of frac fluids and proppants during the hydraulic fracturing process.

During the completion phase of a well, we rent frac stacks, zipper manifolds and other high-pressure equipment including our SafeLink ™ , SafeClamp ® and SafeInject ® systems that are used for well control and managing the transmission of frac fluids and proppants during the hydraulic fracturing process.

These severe service applications require robust and reliable equipment.

Cactus, through its proprietary equipment, digital offerings and services, reduces the need for human intervention in the exclusion zone, eliminating non-productive time while leading to inherently safer and more environmentally responsible operations.

For the subsequent production phase of a well, we sell production trees and the equipment to interface with various forms of artificial lift that regulate hydrocarbon production, which are installed on the wellhead after the frac stack has been removed.

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Our innovative wellhead products and pressure control equipment are developed internally.

We believe our close relationship with our customers provides us with insight into the specific issues encountered in the drilling and completion processes, allowing us to provide them appropriate product and service solutions.

We believe our close

relationship with our customers provides us with insight into the specific issues encountered in the drilling and completion processes, allowing us to provide them the highest quality products and service solutions.

We have achieved significant market share, as measured by the percentage of total active U.S.

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onshore drilling rigs to which we are the primary provider of wellhead products and corresponding services during drilling), and brand name recognition with respect to our engineered products, which we believe is due to our focus on safety, reliability, cost effectiveness and time saving features.

We optimize our products for pad drilling (i.e., the process of drilling multiple wellbores from a single surface location) to reduce rig time and provide operators with significant efficiencies that translate to cost savings at the wellsite.

We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford, and Bakken, among other active oil and gas regions in the United States, and in Eastern Australia.

We operate through service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, Marcellus, Utica, Haynesville, Eagle Ford, Bakken and SCOOP/STACK, among other active oil and gas regions in the United States, and in Eastern Australia.

These service centers support our field services and provide equipment assembly and repair services.

Our manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China.

How We Generate Our Revenues

We operate in one business segment.

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In 2018, we derived 53% of our total revenues from the sale of our products, 25% from rental and 22% from field service and other.

We have predominantly domestic operations, with a small amount of sales being generated in Australia.

We have predominantly domestic operations, with a small amount of sales in Australia.

Most of our sales are made on a call out basis pursuant to agreements, wherein our clients provide delivery instructions for goods and/or services as their operations require.

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Selling, general and administrative expense is comprised of costs such as sales and marketing, engineering, general corporate overhead, business development, compensation, employment benefits, information technology, safety and environmental, legal and professional.

Interest income (expense), net includes interest expense associated with our credit facility, finance leases and accrued interest on deferred payments under the TRA.

Impact of Section 232 of the Trade Expansion Act of 1962 (“Section 232”)

On March 8, 2018, the President of the United States issued two proclamations imposing tariffs on imports of certain steel and aluminum products, effective March 23, 2018.

The decision was made in response to the Department of Commerce's findings and recommendations in its reports of its investigations into the impact of imported steel and aluminum on the national security of the United States pursuant to Section 232.

Specifically, the President imposed a 25% global tariff on certain imported steel mill products and a 10% global tariff on certain imported aluminum products.

The President subsequently has issued proclamations permanently excluding Argentina, Australia, Brazil, Canada, Mexico and South Korea from the steel tariff and Argentina, Australia, Canada and Mexico from the aluminum tariff, though imports of steel from Argentina, Brazil and South Korea, and imports of aluminum from Argentina, are subject to absolute quotas.

The tariffs and quotas have caused the cost of raw materials to increase.

Impact of Section 301 of the Trade Act of 1974 (“Section 301”)

On May 10, 2019, the U.S.

Trade Representative announced that it was increasing the level of tariffs on approximately $200 billion worth of Chinese imports pursuant to Section 301.

The tariff rate on covered products that were exported on or after May 10, 2019 was raised from 10% to 25%.

Covered products that were exported from China to the United States prior to May 10, 2019 remained subject to an additional 10% tariff if they entered the U.S.

before June 15, 2019.

Substantially all of the products and frac rental equipment that we import through our Chinese supply chain are subject to the tariffs.

For the year ended December 31, 2019, we estimate that approximately 50% of our goods received were sourced through our Chinese supply chain.

We believe further increases in the tariff rate above 25% may adversely affect our business, but a combination of factors may mitigate some of the impact of any future increases in tariff rates on our results of operations.

These include, among other things, use of product received prior to the introduction of tariffs, our negotiations with suppliers, use of alternative supply chains and favorable currency exchange movements.

Suppliers and Raw Materials

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In addition, we require accessory items (such as elastomers, ring gaskets, studs and nuts) and machined components.

We purchase these items from vendors in the United States, China and Australia.

For the years ended December 31, 2019, 2018 and 2017, approximately $36.5 million, $46.7 million and $33.4 million, respectively, of machined component purchases were made from a vendor located in China, representing approximately 16%, 21% and 22%, respectively, of our total third-party vendor purchases.

We purchase these items from vendors in the United States, China, India and Australia.

For the years ended December 31, 2020, 2019 and 2018, approximately $6.7 million, $36.5 million and $46.7 million, respectively, of machined component purchases were made from a vendor located in China, representing approximately 7%, 16% and 21%, respectively, of our total third-party vendor purchases of raw materials, finished products, equipment, machining and other services.

We do not believe that we are overly dependent on any individual vendor to supply our required materials or services.

The materials and services essential to our business are normally readily available and, where we use one or a few vendors as a source of any particular materials or services, we believe that we can, within a reasonable period of time, make satisfactory alternative arrangements in the event of an interruption of supply from any vendor.

We believe that our materials and services vendors have the capacity to meet additional demand should we require it, although likely at higher costs and delayed deliveries.

The materials

and services essential to our business are normally readily available and, where we use one or a few vendors as a source of any particular materials or services, we believe that we can, within a reasonable period of time, make satisfactory alternative arrangements in the event of an interruption of supply from any vendor.

We believe that our materials and services vendors have the capacity to meet additional demand should we require it, although initially at higher costs and delayed deliveries.

Manufacturing

Our manufacturing and production facilities are located in Bossier City, Louisiana and Suzhou, China.

Although both facilities can produce our full range of products, our Bossier City facility has advanced capabilities and is designed to support time-sensitive and rapid turnaround orders, while our facility in China is optimized for longer lead time orders and outsources its machining requirements.

Both our Bossier City and China facilities are licensed to the latest American Petroleum Institute (“API”) 6A specification for both wellheads and valves and API Q1 and ISO 9001:2015 quality management systems.

Our Bossier City facility is configured to provide rapid-response production of made-to-order equipment.

Where traditional manufacturing facilities are designed to run in batches with different machining processes occurring in stages, this facility uses advanced computer numeric control machines to perform multiple machining operations in a single step.

Although both facilities can produce our full range of products, our Bossier City facility has advanced capabilities and is designed to support time-sensitive and rapid turnaround of made-to-order equipment, while our facility in China is optimized for longer lead time orders and outsources its machining requirements.

Both facilities are licensed to the latest American Petroleum Institute (“API”) 6A specification for both wellheads and valves and API Q1 and ISO 9001:2015 quality management systems.

Where traditional manufacturing facilities are designed to run in batches with different machining processes occurring in stages, our Bossier City facility uses advanced computer numeric control machines to perform multiple machining operations in a single step.

We believe eliminating the setup and queue times between machining processes allows us to offer significantly shorter order-to-delivery time for equipment than our competitors, albeit at higher costs than China.

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Our Bossier City manufacturing facility also functions as a repair and testing facility with its API 6A certification and full Quality Assurance and Quality Control department.

The facility also has the ability to perform hydrostatic testing, phosphate and oiling, copper coating and frac valve remanufacturing.

The facility also has the ability to perform phosphate and oiling, copper coating and frac rental equipment remanufacturing.

Our production facility in China is configured to efficiently produce our range of pressure control products and components for less time-sensitive, higher-volume orders.

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Our Suzhou facility currently assembles and tests machined components before shipment to Cactus facilities in the United States and Australia.

Trademarks and Other Intellectual Property

Trademarks and Patents

Trademarks are important to the marketing of our products.

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The Company has numerous trademarks registered with the U.S.

Patent and Trademark Office and has also applied for registration status of numerous trademarks which are pending.

Patent and Trademark Office and has also applied for registration status of several trademarks which are pending.

Once registered, our trademarks can be renewed every 10 years as long as we are using them in commerce.

We also seek to protect our technology through use of patents, which afford us 20 years of protection of our proprietary inventions and technology, although we do not deem patents to be critical to our success.

We have been awarded several U.S.

patents and currently have additional patent applications pending.

We also rely on trade secret protection for our confidential and proprietary information.

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There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to our trade secrets.

We have been awarded several U.S.

patents and currently have patent applications pending.

We seek to protect our technology through use of patent protections, although we do not deem patents to be critical to our success.

We are substantially dependent on conditions in the oil and gas industry, including the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies.

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These factors could have an adverse effect on our revenue and profitability.

Our business is not significantly impacted by seasonality, although our fourth quarter has historically been impacted by holidays and our clients’

budget cycles.

Due to the ongoing COVID-19 pandemic, 2020 witnessed a severe decline in demand for fossil fuels resulting from government mandated lockdowns and travel restrictions.

The oil and gas industry was first impacted by this decline in March 2020 amid the initial worldwide spread of the virus, with West Texas Intermediate (WTI) prices trading at negative levels for a brief period in April.

Although oil prices recovered in the last quarter of 2020 from such lows, demand for oil and our customer activity levels remain significantly below levels before the pandemic.

Our business is not significantly impacted by seasonality, although our fourth quarter has historically been impacted by holidays and our clients’ budget cycles.

We serve over 200 customers representing majors, independents and other oil and gas companies with operations in the key U.S.

oil and gas producing basins including the Permian, SCOOP/STACK, Marcellus, Utica, Eagle Ford, Bakken and other active oil and gas basins, as well as in Australia.

Pioneer Natural Resources represented approximately 10% of total revenues for the year ended December 31, 2019 and 11% during each of the years ended December 31, 2018 and 2017.

oil and gas producing basins as well as in Australia.

No customer represented 10% or more of total revenues during the year ended December 31, 2020, whereas one customer represented approximately 10% of total revenues during the year ended December 31, 2019 and 11% during the year ended December 31, 2018.

The markets in which we operate are highly competitive.

We believe that we are one of the largest suppliers of wellheads in the United States.

We compete with divisions of Schlumberger, Baker Hughes and TechnipFMC, as well as with a number of other companies.

Similar to Cactus, each of Schlumberger, Baker Hughes and TechnipFMC manufacture their own engineered products.

We compete with divisions of Schlumberger and TechnipFMC, as well as with a number of other companies.

Similar to Cactus, Schlumberger and TechnipFMC manufacture their own engineered products.

We believe that the rental market for frac stacks and related flow control equipment is more fragmented than the wellhead product market.

Cactus does not believe that any individual company represents more than 20% of the U.S.

As is the case in the wellhead market, Cactus, Schlumberger, Baker Hughes and TechnipFMC rent internally engineered and manufactured products.

Other competitors generally rent foreign manufactured generic products.

rental market.

As is the case in the wellhead market, Cactus, Schlumberger and TechnipFMC rent internally engineered and manufactured products.

The majority of our other competitors generally rent foreign manufactured generic products.

We believe that the principal competitive factors in the markets we serve are technical features, equipment availability, work force competency, efficiency, safety record, reputation, experience and price.

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These laws and regulations include, among others:

the Federal Water Pollution Control Act (the “Clean Water Act”);

• the Federal Water Pollution Control Act (the “Clean Water Act”);

• the Clean Air Act;

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• the Occupational Safety and Health Act;

national and local environmental protection laws in the People’s Republic of China.

• national and local environmental protection laws in Australia and the People’s Republic of China.

New, modified or stricter enforcement of environmental laws and regulations could be adopted or implemented that significantly increase our compliance costs, pollution mitigation costs, or the cost of any remediation of environmental contamination that may become necessary, and these costs could be material.

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Substantial fines and penalties can be imposed and orders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulations relating to worker health and safety.

API Certifications.

Our manufacturing facility and our production facility are currently certified by the API as being in compliance with API 6A, 21st Edition product specification for both wellheads and valves and API Q1, 9th Edition, Addendum 2, and ISO 9001:2015 quality management systems.

API’s standards are subject to revision, however, and there is no guarantee that future amendments or substantive changes to the standards would not require us to modify our operations or manufacturing processes to meet the new standards.

Licenses and Certifications.

Our manufacturing facility in Bossier City, Louisiana and our production facility in Suzhou, China are currently licensed by the API to monogram manufactured products in accordance with API 6A, 21st Edition product specification for both wellheads and valves while the quality management system is certified to API Q1, 9th Edition, Addendum 2 and ISO 9001:2015.

These licenses and certifications expire every three years and are renewed upon successful completion of annual audits.

Our current API licenses and certifications are published on our website under the “Quality

Assurance & Control” section of our website at www.CactusWHD.com.

Doing so may materially affect our operational costs.

We also cannot guarantee that changes to the standards would not lead to the rescission of our licenses should we be unable to make the changes necessary to meet the new standards.

Furthermore, these facilities are subjected to annual audits by the API.

Loss of our API licenses could materially affect demand for these products.

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Environmental concerns have been raised regarding the potential impact of hydraulic fracturing on underground water supplies and seismic activity.

These concerns have led to several regulatory and governmental initiatives in the United States to restrict the hydraulic fracturing process, which could have an adverse impact on our customers’

completions or production activities.

These concerns have led to several regulatory and governmental initiatives in the United States to restrict the hydraulic fracturing process, which could have an adverse impact on our customers’ completions or production activities.

Although we do not conduct hydraulic fracturing, increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques.

In addition, the adoption of new laws or regulations at the federal, state, local or foreign level imposing reporting obligations on, or otherwise limiting, delaying or banning, the hydraulic fracturing process or other processes on which hydraulic fracturing and subsequent hydrocarbon production relies, such as water disposal, could make it more difficult to complete oil and natural gas wells.

Further, it could increase our customers’

costs of compliance and doing business, and otherwise adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for our products.

Further, it could increase our customers’ costs of compliance and doing business, and otherwise adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for our products.

Climate Change.

State, national and international governments and agencies continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases.

State, national and foreign governments and agencies continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases.

Changes in environmental requirements related to greenhouse gases, climate change and alternative energy sources may negatively impact demand for our services.

For example, oil and natural gas exploration and production may decline as a result of environmental requirements, including land use policies responsive to environmental concerns.

In January 2021, the Acting Secretary of the Department of the Interior issued an order suspending new leasing and drilling permits for fossil fuel production on federal lands and waters for 60 days.

Then on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

To the extent that the review results in the development of additional restrictions on drilling, limitations on the availability of leases, or restrictions on the ability to obtain required permits, it could impact our customers’ opportunities and reduce demand for our products and services in the aforementioned areas.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties or international agreements related to greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, may reduce demand for oil and natural gas and could have a negative impact on our business.

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Historically, insurance rates have been subject to various market fluctuations that may result in less coverage, increased premium costs, or higher deductibles or self‑insured retentions.

Our insurance includes coverage for commercial general liability, damage to our real and personal property, damage to our mobile equipment, sudden and accidental pollution liability, workers’

compensation and employer’s liability, auto liability, foreign package policy, commercial crime, fiduciary liability employment practices, cargo, excess liability, and directors and officers’

Our insurance includes coverage for commercial general liability, damage to our real and personal property, damage to our mobile equipment, sudden and accidental pollution liability, workers’ compensation and employer’s liability, auto liability, foreign package policy, commercial crime, fiduciary liability employment practices, cargo, excess liability, and directors and officers’ insurance.

We also maintain a partially self-insured medical plan that utilizes specific and aggregate stop loss limits.

Our insurance includes various limits and deductibles or self‑insured retentions, which must be met prior to, or in conjunction with, recovery.

As of December 31, 2019, we employed over 1,100 people.

Our future success will depend partially on our ability to attract, retain and motivate qualified personnel.

Human Capital Management

As of December 31, 2020, we employed over 660 people worldwide, of which more than 550 were employed in the United States.

We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages.

We consider our relations with our employees to be good.

We consider our relations with our workforce to be good.

Our business’s success depends mainly on our ability to attract, retain and motivate a diverse population of talented employees at all levels of our organization, including the individuals

who comprise our global workforce and executive officers and other key personnel.

To succeed in a competitive industry, we have developed key recruitment and retention strategies, objectives and measures which we focus on as part of the overall management of our business.

Recruiting and Development.

Our talent strategy is focused on attracting the best talent and rewarding their performance while developing and retaining them.

Fiscal year 2020 was a challenging year in which we made difficult staffing decisions, resulting in significant reductions to our workforce.

We strive to maintain good relationships with our employees and prioritize rehiring our most experienced branch and field positions as the industry recovers.

We reinstated 145 employees before the end of 2020 who were part of our workforce reductions earlier in the year.

When hiring, we utilize employee referrals, diverse social media platforms, regional job fairs and partner with educational organizations across the United States to find diverse, qualified, motivated and responsible employees.

We are dedicated to the continual training and development of our employees, especially those in field and branch operations.

Our internal training focuses on safety, corporate and personal responsibility, product knowledge, behavioral development and ethical conduct.

Other training courses offered outside of the company are attended by employees with specialized skills, knowledge or certifications as needed for their ongoing success and professional development.

Compensation and Benefits.

We provide compensation and benefits programs to help meet the needs of our employees.

In addition to salaries and wages, these programs (which vary by country) include annual bonuses, retirement plans such as a 401(k) plan, healthcare and insurance benefits, health savings accounts partially funded by the Company, standard flexible spending accounts, legal insurance, company-sponsored long and short term disability, accident and critical illness, paid time off, family leave, partially paid maternity and paternity leave, family care resources and employee assistance programs, among others.

We also offer tuition reimbursement in certain circumstances to support the continued growth and development of our employees.

Additionally, we use targeted equity-based grants with vesting conditions to facilitate the retention of key personnel.

Health and Safety.

Our health and safety programs are designed around global standards with appropriate variations addressing the multiple jurisdictions and regulations, specific hazards and unique working environments of our manufacturing and production facilities, service centers and headquarter operations.

We require each location to conduct regular safety evaluations to verify that expectations for safety program procedures and training are being met.

We also engage in third party conformity assessments of our Health, Safety & Environment (“HSE”) processes to determine adherence to our HSE management system and to global health and safety standards.

We monitor our Occupational Safety and Health Administration Total Recordable Incident Rate (“TRIR”) to assess our operation’s health and safety performance.

TRIR is defined as the number of incidents per 100 full-time employees that have resulted in a recordable injury or illness in the pertinent period.

During fiscal year 2020, we had a TRIR of 0.55 and no work-related fatalities.

We are committed to the health, safety and wellness of our employees.

We provide our employees and their families with access to various flexible and convenient health and wellness programs.

These programs include benefits that offer protection and security to have peace of mind concerning events that may require time away from work or impact their financial well-being.

These tools also support their physical and mental health by providing resources to improve or maintain their health status.

In response to the COVID-19 pandemic, we have implemented additional safety measures for employees performing critical on-site work.

Our facilities implemented mandatory personal protective wear, extensive deep cleaning and sanitation processes.

Any associate who has exhibited symptoms or believes they may have been exposed to the virus is tested and quarantined based on guidelines provided by the Centers for Disease Control and Prevention.

We provide paid time off for our associates who miss work due to COVID at their regular pay.

Additionally, we have allowed administrative employees to work from home if desired.

Available Information

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Our website address is www.CactusWHD.com.

Our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (“SEC”) are available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC.

Information on our website or any other website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report.

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What changed 10-K

Item 1. Business