SEC Filing | Civeo Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

cveo-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			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: 001-36246

Civeo Corporation

(Exact name of registrant as specified in its charter)


British Columbia, Canada			98-1253716
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

Three Allen Center, 333 Clay Street, Suite 4980,			77002
Houston, Texas			(Zip Code)
(Address of principal executive offices)

(713) 510-2400

(Registrant’s telephone number, including area code)

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


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, no par value	CVEO	New York Stock Exchange

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 "accelerated filer," "large accelerated filer," "smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Emerging Growth Company

☐

Non-Accelerated Filer

☐

Smaller Reporting 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 13,712,661 common shares outstanding as of October 21, 2022.

CIVEO CORPORATION

INDEX


			Page No.
Part I -- FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Financial Statements
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021			4
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021			5
Consolidated Balance Sheets – as of September 30, 2022 (unaudited) and December 31, 2021			6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021			7
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021			8
Notes to Unaudited Consolidated Financial Statements			9

Cautionary Statement Regarding Forward-Looking Statements			20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

Item 3. Quantitative and Qualitative Disclosures About Market Risk			37

Item 4. Controls and Procedures			37


Part II -- OTHER INFORMATION

Item 1. Legal Proceedings			38

Item 1A. Risk Factors			38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38

Item 6. Exhibits			39

(a) Index of Exhibits			39

Signature Page			40

PART I -- FINANCIAL INFORMATION

ITEM 1. Financial Statements

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Service and other	$	177,504	$	150,081	$	514,328	$	419,861
Rental	5,785		4,581		18,080		12,185
Product	938		401		2,451		2,623
	184,227		155,063		534,859		434,669
Costs and expenses:
Service and other costs	127,955		107,287		373,123		307,198
Rental costs	5,024		3,892		14,830		10,523
Product costs	517		251		1,439		1,521
Selling, general and administrative expenses	17,677		17,320		50,572		46,204
Depreciation and amortization expense	22,608		20,282		65,818		62,928
Impairment expense	—		—		—		7,935
Other operating (income) expense	(339)		21		(187)		122
	173,442		149,053		505,595		436,431
Operating income (loss)	10,785		6,010		29,264		(1,762)

Interest expense	(3,001)		(3,166)		(8,077)		(9,929)
Loss on extinguishment of debt	—		(416)		—		(416)
Interest income	13		—		15		2
Other income	2,179		364		4,290		6,066
Income (loss) before income taxes	9,976		2,792		25,492		(6,039)
Income tax expense	(3,713)		(1,770)		(7,091)		(2,354)
Net income (loss)	6,263		1,022		18,401		(8,393)
Less: Net income attributable to noncontrolling interest	546		478		1,706		534
Net income (loss) attributable to Civeo Corporation	5,717		544		16,695		(8,927)
Less: Dividends attributable to Class A preferred shares	492		482		1,469		1,440
Net income (loss) attributable to Civeo common shareholders	$	5,225	$	62	$	15,226	$	(10,367)


Per Share Data (see Note 7)
Basic net income (loss) per share attributable to Civeo Corporation common shareholders	$	0.32	$	—	$	0.92	$	(0.73)

Diluted net income (loss) per share attributable to Civeo Corporation common shareholders	$	0.32	$	—	$	0.91	$	(0.73)

Weighted average number of common shares outstanding:
Basic	13,932		14,277		14,058		14,255
Diluted	14,064		14,361		14,220		14,255

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Net income (loss)	$	6,263	$	1,022	$	18,401	$	(8,393)

Other comprehensive loss, net of taxes:
Foreign currency translation adjustment, net of zero taxes	(20,745)		(12,217)		(32,757)		(15,417)
Total other comprehensive loss, net of taxes	(20,745)		(12,217)		(32,757)		(15,417)

Comprehensive loss	(14,482)		(11,195)		(14,356)		(23,810)
Less: Comprehensive income attributable to noncontrolling interest	368		450		1,474		488
Comprehensive loss attributable to Civeo Corporation	$	(14,850)	$	(11,645)	$	(15,830)	$	(24,298)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Thousands, Excluding Share Amounts)


	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	8,361	$	6,282
Accounts receivable, net	122,280		114,859
Inventories	6,984		6,468
Prepaid expenses	9,487		6,876
Other current assets	3,850		10,946
Assets held for sale	13,759		11,762
Total current assets	164,721		157,193

Property, plant and equipment, net	309,752		389,996
Goodwill	7,322		8,204
Other intangible assets, net	81,997		93,642
Operating lease right-of-use assets	14,267		18,327
Other noncurrent assets	5,270		5,372
Total assets	$	583,329	$	672,734

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	46,225	$	49,321
Accrued liabilities	32,432		33,564
Income taxes	111		171
Current portion of long-term debt	27,964		30,576
Deferred revenue	2,092		18,479
Other current liabilities	8,900		4,807
Total current liabilities	117,724		136,918

Long-term debt, less current maturities	96,727		142,602
Deferred income taxes	7,344		896
Operating lease liabilities	11,669		15,429
Other noncurrent liabilities	13,668		13,778
Total liabilities	247,132		309,623

Commitments and contingencies (Note 10)

Shareholders’ Equity:
Preferred shares (Class A Series 1, no par value; 50,000,000 shares authorized, 9,042 shares issued and outstanding, aggregate liquidation preference of $98,907,587 and $97,438,687 as of September 30, 2022 and December 31, 2021, respectively)	63,410		61,941
Common shares (no par value; 46,000,000 shares authorized, 14,079,336 shares and 14,431,819 shares issued, respectively, and 13,712,661 shares and 14,111,221 shares outstanding, respectively)	—		—
Additional paid-in capital	1,585,303		1,582,442
Accumulated deficit	(911,934)		(912,951)
Common shares held in treasury at cost, 366,675 and 320,598 shares, respectively	(9,063)		(8,050)
Accumulated other comprehensive loss	(394,408)		(361,883)
Total Civeo Corporation shareholders’ equity	333,308		361,499
Noncontrolling interest	2,889		1,612
Total shareholders’ equity	336,197		363,111
Total liabilities and shareholders’ equity	$	583,329	$	672,734

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(In Thousands)


	Attributable to Civeo
	Preferred Shares		Common Shares
	Amount		Par Value		Additional Paid-in Capital		Accumulated Deficit		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total Shareholders’ Equity
Balance, June 30, 2021	$	60,974	$	—	$	1,580,213	$	(918,156)	$	(8,050)	$	(352,171)	$	595	$	363,405
Net income	—		—		—		544		—		—		478		1,022
Currency translation adjustment	—		—		—		—		—		(12,189)		(28)		(12,217)
Dividends paid	—		—		—		—		—		—		(15)		(15)
Dividends attributable to Class A preferred shares	482		—		—		(482)		—		—		—		—
Common shares repurchased	—		—		—		(445)		—		—		—		(445)
Share-based compensation	—		—		1,035		—		—		—		—		1,035
Balance, September 30, 2021	$	61,456	$	—	$	1,581,248	$	(918,539)	$	(8,050)	$	(364,360)	$	1,030	$	352,785

Balance, June 30, 2022	$	62,918	$	—	$	1,584,416	$	(903,492)	$	(9,063)	$	(373,841)	$	2,582	$	363,520
Net income	—		—		—		5,717		—		—		546		6,263
Currency translation adjustment	—		—		—		—		—		(20,567)		(178)		(20,745)
Dividends paid	—		—		—		—		—		—		(61)		(61)
Dividends attributable to Class A preferred shares	492		—		—		(492)		—		—		—		—
Common shares repurchased	—		—		—		(13,667)		—		—		—		(13,667)
Share-based compensation	—		—		887		—		—		—		—		887
Balance, September 30, 2022	$	63,410	$	—	$	1,585,303	$	(911,934)	$	(9,063)	$	(394,408)	$	2,889	$	336,197

Balance, December 31, 2020	$	60,016	$	—	$	1,578,315	$	(907,727)	$	(6,930)	$	(348,989)	$	672	$	375,357
Net income (loss)	—		—		—		(8,927)		—		—		534		(8,393)
Currency translation adjustment	—		—		—		—		—		(15,371)		(46)		(15,417)
Dividends paid	—		—		—		—		—		—		(130)		(130)
Dividends attributable to Class A preferred shares	1,440		—		—		(1,440)		—		—		—		—
Common shares repurchased	—		—		—		(445)		—		—		—		(445)
Share-based compensation	—		—		2,933		—		(1,120)		—		—		1,813
Balance, September 30, 2021	$	61,456	$	—	$	1,581,248	$	(918,539)	$	(8,050)	$	(364,360)	$	1,030	$	352,785

Balance, December 31, 2021	$	61,941	$	—	$	1,582,442	$	(912,951)	$	(8,050)	$	(361,883)	$	1,612	$	363,111
Net income	—		—		—		16,695		—		—		1,706		18,401
Currency translation adjustment	—		—		—		—		—		(32,525)		(232)		(32,757)
Dividends paid	—		—		—		—		—		—		(197)		(197)
Dividends attributable to Class A preferred shares	1,469		—		—		(1,469)		—		—		—		—
Common shares repurchased	—		—		—		(14,209)		—		—		—		(14,209)
Share-based compensation	—		—		2,861		—		(1,013)		—		—		1,848
Balance, September 30, 2022	$	63,410	$	—	$	1,585,303	$	(911,934)	$	(9,063)	$	(394,408)	$	2,889	$	336,197


	Preferred Shares	Common Shares (in thousands)
Balance, December 31, 2021	9,042	14,111
Share-based compensation	—	100
Common shares repurchased	—	(498)
Balance, September 30, 2022	9,042	13,713

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	18,401	$	(8,393)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	65,818		62,928
Impairment charges	—		7,935
Loss on extinguishment of debt	—		416
Deferred income tax expense	6,930		2,105
Non-cash compensation charge	2,861		2,933
Gains on disposals of assets	(4,069)		(2,305)
Provision (benefit) for credit losses, net of recoveries	(23)		155
Other, net	2,397		2,436
Changes in operating assets and liabilities:
Accounts receivable	(19,138)		(21,516)
Inventories	(1,557)		(193)
Accounts payable and accrued liabilities	3,515		9,836
Taxes payable	(62)		61
Other current and noncurrent assets and liabilities, net	(12,701)		6,843
Net cash flows provided by operating activities	62,372		63,241

Cash flows from investing activities:
Capital expenditures	(17,466)		(9,645)

Proceeds from dispositions of property, plant and equipment	11,975		7,545
Other, net	190		—
Net cash flows used in investing activities	(5,301)		(2,100)

Cash flows from financing activities:
Revolving credit borrowings	204,951		367,622
Revolving credit repayments	(219,775)		(305,148)
Term loan repayments	(23,059)		(117,595)
Debt issuance costs	—		(4,407)
Repurchases of common shares	(14,209)		(445)
Taxes paid on vested shares	(1,013)		(1,120)
Net cash flows used in financing activities	(53,105)		(61,093)

Effect of exchange rate changes on cash	(1,887)		(1,255)
Net change in cash and cash equivalents	2,079		(1,207)
Cash and cash equivalents, beginning of period	6,282		6,155

Cash and cash equivalents, end of period	$	8,361	$	4,948

Non-cash financing activities:
Preferred dividends paid-in-kind	$	1,469	$	1,440

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of the Business

We provide hospitality services to the natural resources industry in Canada, Australia and the U.S. Our full suite of hospitality services for our guests includes lodging, catering and food service, housekeeping and maintenance at accommodation facilities that we or our customers own. In many cases, we provide services that support the day-to-day operations, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics. We also offer development activities for workforce accommodation facilities, including site selection, permitting, engineering and design, manufacturing management and site construction, along with providing hospitality services once the facility is constructed. We primarily operate in some of the world’s most active oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore producing regions, and our customers include major and independent oil companies, mining companies, engineering companies and oilfield and mining service companies. We operate in three principal reportable business segments – Canada, Australia and the U.S.

Basis of Presentation

Unless otherwise stated or the context otherwise indicates: (i) all references in these consolidated financial statements to “Civeo,” “us,” “our” or “we” refer to Civeo Corporation and its consolidated subsidiaries; and (ii) all references in this report to “dollars” or “$” are to U.S. dollars.

The accompanying unaudited consolidated financial statements of Civeo have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) has been condensed or omitted pursuant to those rules and regulations. The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year.

The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements.

The financial statements included in this report should be read in conjunction with our audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

2.REVENUE

The following table disaggregates our revenue by our three reportable segments: Canada, Australia and the U.S., and major categories for the periods indicated (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Canada
Accommodation revenues	$	72,724	$	60,511	$	219,349	$	176,800
Mobile facility rental revenues	25,283		19,075		73,359		38,240
Food service and other services revenues	5,002		4,471		15,276		14,183

Total Canada revenues	103,009		84,057		307,984		229,223

Australia
Accommodation revenues	$	38,316	$	38,104	$	114,967	$	109,559
Food service and other services revenues	35,489		27,014		90,187		79,215
Total Australia revenues	73,805		65,118		205,154		188,774

U.S.
Accommodation revenues	$	990	$	1,812	$	2,244	$	4,189
Mobile facility rental revenues	5,811		3,941		18,128		10,769
Manufacturing revenues	587		124		1,286		1,686
Food service and other services revenues	25		11		63		28
Total U.S. revenues	7,413		5,888		21,721		16,672

Total revenues	$	184,227	$	155,063	$	534,859	$	434,669

Our payment terms vary by the type and location of our customer and the products or services offered. The time between invoicing and when our performance obligations are satisfied is not significant. Payment terms are generally within 30 days and in most cases do not extend beyond 60 days. We do not have significant financing components or significant payment terms.

As of September 30, 2022, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue. The table only includes revenue expected to be recognized from contracts where the quantity of service is certain (in thousands):


	For the years ending December 31,
	2022		2023		2024		Thereafter		Total
Revenue expected to be recognized as of September 30, 2022	$	41,135	$	86,433	$	47,742	$	297,488	$	472,798

We applied the practical expedient and do not disclose consideration for remaining performance obligations with an original expected duration of one year or less. In addition, we do not estimate revenues expected to be recognized related to unsatisfied performance obligations for contracts without minimum room commitments. The table above represents only a portion of our expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues.

3.IMPAIRMENT CHARGES

Quarter ended June 30, 2021. During the second quarter of 2021, we recorded impairment expense of $7.9 million related to various undeveloped land positions and related permitting costs in Australia. At June 30, 2021, we identified an impairment trigger related to certain of these properties due to the cancellation of a significant thermal coal project in Australia and our negative expectations related to other possible Australian thermal coal projects becoming viable in the near term. Accordingly, the assets were written down to their estimated fair value of $2.4 million.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

4.FAIR VALUE MEASUREMENTS

Our financial instruments consist of cash and cash equivalents, receivables, payables and debt instruments. We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.

As of September 30, 2022 and December 31, 2021, we believe the carrying value of our floating-rate debt outstanding under our term loans and revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment. We estimated the fair value of our floating-rate term loan and revolving credit facilities using significant other observable inputs, representative of a Level 2 fair value measurement, including terms and credit spreads for these loans. In addition, the estimated fair value of our assets held for sale is based upon Level 2 fair value measurements, which include appraisals and previous negotiations with third parties.

During the second quarter of 2021, we wrote down certain long-lived assets to fair value. Our estimate of the fair value of undeveloped land positions in Australia that were impaired was based on appraisals from third parties.

See Note 3 – Impairment Charges for further information.

5.DETAILS OF SELECTED BALANCE SHEET ACCOUNTS

Additional information regarding selected balance sheet accounts at September 30, 2022 and December 31, 2021 is presented below (in thousands):


	September 30, 2022		December 31, 2021
Accounts receivable, net:
Trade	$	69,833	$	75,740
Unbilled revenue	51,567		38,508
Other	1,184		972
Total accounts receivable	122,584		115,220
Allowance for credit losses	(304)		(361)
Total accounts receivable, net	$	122,280	$	114,859


	September 30, 2022		December 31, 2021
Inventories:
Finished goods and purchased products	$	5,586	$	5,346
Work in process	—		25
Raw materials	1,398		1,097
Total inventories	$	6,984	$	6,468


	Estimated Useful Life (in years)			September 30, 2022		December 31, 2021
Property, plant and equipment, net:
Land				$	25,896	$	30,556
Accommodations assets	3	—	15	1,426,704		1,657,577
Buildings and leasehold improvements	7	—	20	17,260		24,335
Machinery and equipment	4	—	15	10,752		14,983
Office furniture and equipment	3	—	7	61,187		63,228
Vehicles	3	—	5	8,227		14,578
Construction in progress				9,444		2,063
Total property, plant and equipment				1,559,470		1,807,320
Accumulated depreciation				(1,249,718)		(1,417,324)
Total property, plant and equipment, net				$	309,752	$	389,996

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)


	September 30, 2022		December 31, 2021
Accrued liabilities:
Accrued compensation	$	27,577	$	28,877
Accrued taxes, other than income taxes	2,901		2,944

Other	1,954		1,743
Total accrued liabilities	$	32,432	$	33,564


	September 30, 2022		December 31, 2021
Deferred revenue:
Contract liabilities	$	2,092	$	18,479

Deferred revenue consists of contract liabilities resulting from upfront payments related to the mobilization of mobile assets to service pipeline projects in our Canadian business segment. The decrease in deferred revenue from December 31, 2021 to September 30, 2022 was primarily due to the recognition of deferred revenue over the contracted terms of these pipeline projects in Canada.

6.ASSETS AND LIABILITIES HELD FOR SALE

As of September 30, 2022, assets and liabilities held for sale included certain assets and liabilities in our U.S. business segment. As of December 31, 2021, assets and liabilities held for sale included certain assets in our U.S. business segment and undeveloped land holdings in our Australia business segment. These assets and liabilities were recorded at the estimated fair value less costs to sell, which exceeded their carry values.

The following table summarizes the carrying amount as of September 30, 2022 and December 31, 2021 of the assets and liabilities classified as held for sale (in thousands):


	September 30, 2022		December 31, 2021
Assets held for sale:
Assets
Accounts receivable, net	$	1,247	$	—
Inventories	321		—
Property, plant and equipment, net	12,010		11,762
Other noncurrent assets	181		—
Total assets held for sale	$	13,759	$	11,762

Liabilities held for sale:
Liabilities
Accounts payable	$	375	$	—
Accrued liabilities	470		—
Deferred revenue	122		—
Other current liabilities	44		—
Other noncurrent liabilities	114		—
Total liabilities held for sale (1)	$	1,125	$	—

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

(1)Liabilities held for sale are classified as a current liability on the unaudited consolidated balance sheets, under the caption "Other current liabilities."

7.EARNINGS PER SHARE

We use the two-class method to calculate basic and diluted earnings per share because we have participating securities in the form of Class A preferred shares. The two-class method requires a proportional share of net income to be allocated between common shares and participating securities. The proportional share to be allocated to participating securities is determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities.

Basic earnings per share is computed under the two-class method by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period. Net income attributable to common shareholders represents our net income reduced by an allocation of current period earnings to participating securities as described above. No such adjustment is made during periods with a net loss, as the adjustment would be anti-dilutive.

Diluted earnings per share is computed under the two-class method by dividing diluted net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of share-based awards. In addition, we calculate the potential dilutive effect of any outstanding dilutive security under both the two-class method and the “if-converted” method, and we report the more dilutive of the methods as our diluted earnings per share. We also apply the treasury stock method with respect to certain share-based awards in the calculation of diluted earnings per share, if dilutive.

The calculation of earnings per share attributable to Civeo common shareholders is presented below for the periods indicated (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to Civeo common shareholders	$	5,225	$	62	$	15,226	$	(10,367)
Less: income allocated to participating securities	(794)		(9)		(2,297)		—
Basic net income (loss) attributable to Civeo Corporation common shareholders	$	4,431	$	53	$	12,929	$	(10,367)
Add: undistributed income attributable to participating securities	794		9		2,297