BEP Diamond Topco L.P.
Notes to Consolidated Financial Statements
(Except as noted within the context of each note disclosure, the dollar amounts presented in tables are stated in thousands)
In circumstances where the most likely outcome of a contingency can be reasonably estimated, the Company
accrues a liability for that amount. Where the most likely outcome cannot be estimated, a range of potential losses is established and if no one amount in that range is more likely than others, the low end of the range is accrued.
Concentrations of Credit and Supplier Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Credit risk can be
negatively impacted by adverse changes in the economy or by disruptions in the credit markets. However, we believe that credit risk with respect to trade accounts receivable is somewhat mitigated by our large number of geographically diverse
customers and our credit evaluation procedures. We establish specific reserves for certain customer accounts when there is an expectation of future or known collection problems due to insolvency, disputes or other collection issues. The allowance
for credit losses is charged with the write-off of uncollectible customer accounts.
No single customer represented more than 10% of the Companys
revenue for the year ended December 31, 2022. No single customer had an accounts receivable balance more than 10% of the Companys trade receivables as of December 31, 2022. The Company had two customers as of December 31, 2022
with an accounts receivable balance that combined, comprised 14.7% of the total trade receivables. The Company does not believe that risk associated with these customers will have an adverse effect on the business.
The Company maintains its cash deposits with established commercial banks. At times, balances may exceed federally insured limits. We have not experienced any
losses in such accounts and do not believe that we are exposed to any significant credit risk associated with our cash deposits.
During the year ended
December 31, 2022, the Company had one major vendor that comprised 10.4% of the Companys total purchases. While alternative sources exist, the risk associated with the loss of a critical vendors could have a temporary adverse effect on
the Company. The Company had three vendors as of December 31, 2022 making up 42% of total trade payable.
Related Party Transactions
The Company has a support and services agreement with Blackstone Management Partners L.L.C. (BMP), affiliated with The Blackstone
Group L.P. (Blackstone). Under the support and services agreement, the Company has agreed to reimburse BMP for any out-of-pocket expenses incurred by BMP and its affiliates and to indemnify BMP and its affiliates and related parties, in
each case, in connection with the acquisition of ASP Ulterra Holdings, Inc. by BEP Ulterra Holdings Inc. (the Acquisition) on November 26, 2018 (the Acquisition Date) and the provision of services under the support and
services agreement. Additionally, under the support and services agreement, the Company engaged BMP to arrange for Blackstones portfolio operations group to provide support services customarily provided by Blackstones portfolio
operations group to Blackstones private equity portfolio companies of a type and amount determined by such portfolio services group to be warranted and appropriate. The Company did not incur any expenses for the year ended December 31,
2022 in connection with this agreement.
The support and services agreement governs the respective rights, responsibilities and obligations of each party
with respect to taxes and tax benefits, the filing of tax returns, the control of audits, and other tax matters. The Company did not recognize any amounts related to the tax provisions of the agreement for the year ended December 31, 2022.
Revenue Recognition
The Company manufactures and
distributes drilling equipment, comprised of drill bits and downhole tools, to customers in the oil and gas exploration and mining industries. All of the Companys contracts with customers have terms of less than one year. Therefore, the
Company does not adjust for any significant financing component or disclose the value of unsatisfied performance obligations related to customer contracts. We recognize revenue in accordance with two accounting standards: 1) Topic 842 and 2) Topic
606.
15