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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 June 30, 2020
OR
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, Canada98-1253716
(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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Shares, no par valueCVEONew 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).
YesNo
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 FilerAccelerated 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).
YesNo

The Registrant had 170,578,068 common shares outstanding as of July 24, 2020.



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 Six Months Ended June 30, 2020 and 2019 
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019
Consolidated Balance Sheets – as of June 30, 2020 (unaudited) and December 31, 2019
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 
Notes to Unaudited Consolidated Financial Statements
Cautionary Statement Regarding Forward-Looking Statements
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
Item 4.   Controls and Procedures
Part II -- OTHER INFORMATION
Item 1.     Legal Proceedings
Item 1A.  Risk Factors
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.     Exhibits
(a) Index of Exhibits
Signature Page

3


PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements

CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Revenues:    
Service and other$110,006  $112,719  $239,405  $212,798  
Rental3,865  7,625  10,044  14,115  
Product831  1,809  4,045  3,790  
 114,702  122,153  253,494  230,703  
Costs and expenses:
Service and other costs78,860  77,659  174,904  150,303  
Rental costs3,615  6,357  8,428  11,507  
Product costs658  1,224  3,114  3,060  
Selling, general and administrative expenses11,490  12,530  25,427  28,626  
Depreciation and amortization expense22,205  30,996  47,707  61,778  
Impairment expense  5,546  144,120  5,546  
Other operating expense (income)(285) (103) 704  (168) 
116,543  134,209  404,404  260,652  
Operating loss(1,841) (12,056) (150,910) (29,949) 
Interest expense(3,854) (6,720) (9,449) (13,355) 
Interest income4  22  20  49  
Other income12,642  1,055  12,667  4,033  
Income (loss) before income taxes6,951  (17,699) (147,672) (39,222) 
Income tax (expense) benefit(122) 2,850  8,689  7,334  
Net income (loss)6,829  (14,849) (138,983) (31,888) 
Less: Net income attributable to noncontrolling interest222    480    
Net income (loss) attributable to Civeo Corporation6,607  (14,849) (139,463) (31,888) 
Less: Dividends attributable to Class A preferred shares471  461  939  920  
Net income (loss) attributable to Civeo common shareholders$6,136  $(15,310) $(140,402) $(32,808) 
Per Share Data (see Note 8)
Basic net income (loss) per share attributable to Civeo Corporation common shareholders$0.03  $(0.09) $(0.83) $(0.20) 
Diluted net income (loss) per share attributable to Civeo Corporation common shareholders$0.03  $(0.09) $(0.83) $(0.20) 
Weighted average number of common shares outstanding:
Basic169,812  167,532  169,165  166,437  
Diluted169,990  167,532  169,165  166,437  
The accompanying notes are an integral part of these financial statements.

4


CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Net income (loss)$6,829  $(14,849) $(138,983) $(31,888) 
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of zero taxes
29,385  1,084  (19,156) 6,463  
Total other comprehensive income (loss), net of taxes29,385  1,084  (19,156) 6,463  
Comprehensive income (loss)36,214  (13,765) (158,139) (25,425) 
Less: Comprehensive income attributable to noncontrolling interest303    466    
Comprehensive income (loss) attributable to Civeo Corporation
$35,911  $(13,765) $(158,605) $(25,425) 
The accompanying notes are an integral part of these financial statements.

5


CIVEO CORPORATION
 
CONSOLIDATED BALANCE SHEETS
(In Thousands, Excluding Share Amounts)
 
 June 30, 2020December 31, 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$7,311  $3,331  
Accounts receivable, net85,553  99,493  
Inventories7,683  5,877  
Prepaid expenses7,482  7,247  
Other current assets9,910  7,904  
Assets held for sale  7,589  
Total current assets117,939  131,441  
Property, plant and equipment, net486,815  590,309  
Goodwill7,778  110,173  
Other intangible assets, net100,423  111,837  
Operating lease right-of-use assets21,065  24,876  
Other noncurrent assets563  1,276  
Total assets$734,583  $969,912  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$35,168  $36,971  
Accrued liabilities16,910  21,755  
Income taxes571  328  
Current portion of long-term debt33,510  35,080  
Deferred revenue7,853  7,165  
Other current liabilities5,484  8,741  
Total current liabilities99,496  110,040  
Long-term debt, less current maturities264,522  321,792  
Deferred income taxes  9,452  
Operating lease liabilities18,541  21,231  
Other noncurrent liabilities17,781  16,592  
Total liabilities400,340  479,107  
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Preferred shares (Class A Series 1, no par value; 50,000,000 shares authorized, 9,042, shares issued and outstanding, respectively; aggregate liquidation preference of $94,566 and $93,627 as of June 30, 2020 and December 31, 2019)
59,068  58,129  
Common shares (no par value; 550,000,000 shares authorized, 173,742,579 shares and 171,656,039 shares issued, respectively, and 170,578,068 shares and 169,556,403 shares outstanding, respectively)
    
Additional paid-in capital1,575,788  1,572,249  
Accumulated deficit(911,992) (771,590) 
Common shares held in treasury at cost, 3,164,511 and 2,099,636 shares, respectively
(6,930) (5,472) 
Accumulated other comprehensive loss(382,315) (363,173) 
Total Civeo Corporation shareholders’ equity333,619  490,143  
Noncontrolling interest624  662  
Total shareholders’ equity334,243  490,805  
Total liabilities and shareholders’ equity$734,583  $969,912  
The accompanying notes are an integral part of these financial statements.
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CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
(In Thousands)
 
Attributable to Civeo
Preferred
Shares
Common
Shares
AmountPar ValueAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Total
Shareholders’
Equity
Balance, March 31, 2019$56,739  $—  $1,564,667  $(728,748) $(5,471) $(365,870) $—  $521,317  
Net income (loss)—  —  —  (14,849) —  —  —  (14,849) 
Currency translation adjustment—  —  —  —  —  1,084  —  1,084  
Dividends paid—  —  —  —  —  —  —  —  
Issuance of shares for acquisitions—  —  —  —  —  —  —  —  
Dividends attributable to Class A preferred shares461  —  —  (461) —  —  —  —  
Share-based compensation—  —  2,495  —  (1) —  —  2,494  
Balance, June 30, 2019$57,200  $—  $1,567,162  $(744,058) $(5,472) $(364,786) $—  $510,046  
Balance, March 31, 2020$58,597  $—  $1,574,457  $(918,128) $(6,914) $(411,619) $552  $296,945  
Net income (loss)—  —  —  6,607  —  —  222  6,829  
Currency translation adjustment—  —  —  —  —  29,304  81  29,385  
Dividends paid—  —  —  —  —  —  (231) (231) 
Dividends attributable to Class A preferred shares471  —  —  (471) —  —  —  —  
Share-based compensation—  —  1,331  —  (16) —  —  1,315  
Balance, June 30, 2020$59,068  $—  $1,575,788  $(911,992) $(6,930) $(382,315) $624  $334,243  
Balance, December 31, 2018$56,280  $—  $1,562,133  $(710,551) $(1,189) $(371,249) $—  $535,424  
Net income (loss)—  —  —  (31,888) —  —  —  (31,888) 
Currency translation adjustment—  —  —  —  —  6,463  —  6,463  
Dividends paid—  —  —  —  —  —  —  —  
Cumulative effect of implementation of ASU 2014-09
—  —  —  (699) —  —  —  (699) 
Dividends attributable to Class A preferred shares920  —  —  (920) —  —  —  —  
Share-based compensation—  —  5,029  —  (4,283) —  —  746  
Balance, June 30, 2019$57,200  $—  $1,567,162  $(744,058) $(5,472) $(364,786) $—  $510,046  
Balance, December 31, 2019$58,129  $—  $1,572,249  $(771,590) $(5,472) $(363,173) $662  $490,805  
Net income (loss)—  —  —  (139,463) —  —  480  (138,983) 
Currency translation adjustment—  —  —  —  —  (19,142) (14) (19,156) 
Dividends paid—  —  —  —  —  —  (504) (504) 
Dividends attributable to Class A preferred shares939  —  —  (939) —  —  —  —  
Share-based compensation—  —  3,539  —  (1,458) —  —  2,081  
Balance, June 30, 2020$59,068  $—  $1,575,788  $(911,992) $(6,930) $(382,315) $624  $334,243  
 Preferred
Shares (in
thousands)
Common
Shares (in
thousands)
Balance, December 31, 20199,042  169,556  
Stock-based compensation  1,022  
Balance, June 30, 20209,042  170,578  
The accompanying notes are an integral part of these financial statements.
7


CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
Six Months Ended
June 30,
 20202019
Cash flows from operating activities:  
Net loss$(138,983) $(31,888) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization47,707  61,778  
Impairment charges144,120  5,546  
Deferred income tax benefit(8,941) (7,855) 
Non-cash compensation charge3,539  5,029  
Gains on disposals of assets(1,819) (1,371) 
Provision (benefit) for loss on receivables, net of recoveries25  (56) 
Other, net(3,240) 1,444  
Changes in operating assets and liabilities:
Accounts receivable10,231  (18,616) 
Inventories(1,895) (3) 
Accounts payable and accrued liabilities(4,583) 135  
Taxes payable251  244  
Other current and noncurrent assets and liabilities, net(1,094) (4,427) 
Net cash flows provided by operating activities45,318  9,960  
Cash flows from investing activities:
Capital expenditures(3,847) (21,208) 
Proceeds from disposition of property, plant and equipment1,897  4,448  
Other, net4,619  1,762  
Net cash flows provided by (used in) investing activities2,669  (14,998) 
Cash flows from financing activities:
Revolving credit borrowings122,320  135,862  
Revolving credit repayments(147,950) (108,108) 
Term loan repayments(16,551) (17,398) 
Taxes paid on vested shares(1,458) (4,283) 
Net cash flows provided by (used in) financing activities(43,639) 6,073  
Effect of exchange rate changes on cash(368) 52  
Net change in cash and cash equivalents3,980  1,087  
Cash and cash equivalents, beginning of period3,331  12,372  
Cash and cash equivalents, end of period$7,311  $13,459  
Non-cash financing activities:
Preferred dividends paid-in-kind$939  $920  
The accompanying notes are an integral part of these financial statements.

8

CIVEO CORPORATION
 
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS


1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
Description of the Business
 
We are a hospitality company servicing the natural resources industry in Canada, Australia and the U.S. We provide a full suite of hospitality services for our guests, including lodging, 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 of accommodation facilities, 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 and iron ore producing regions, and our customers include major and independent oil and gas 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, 2019.

2.RECENT ACCOUNTING PRONOUNCEMENTS
 
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the FASB), which are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards or other guidance updates, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption. 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (ASU 2016-13). This new standard changes how companies measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 is effective for financial statements issued for reporting periods beginning after December 15, 2019 and interim periods within the reporting periods. We adopted ASU 2016-13 as of January 1, 2020. The adoption of this new standard did not have a material impact on our consolidated financial statements.

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CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

3.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
June 30,
Six Months Ended
June 30,
 2020201920202019
Canada    
Accommodation revenues$40,204  $66,183  $106,270  $123,835  
Mobile facility rental revenues6,072  1,819  8,580  2,600  
Food service and other services revenues6,710  9,086  17,484  17,423  
Manufacturing revenues  1,014    1,014  
Total Canada revenues52,986  78,102  132,334  144,872  
Australia
Accommodation revenues$34,933  $30,996  $67,518  $59,417  
Food service and other services revenues22,138    38,666    
Total Australia revenues57,071  30,996  106,184  59,417  
U.S.
Accommodation revenues$242  $4,775  $1,498  $9,699  
Mobile facility rental revenues3,870  7,626  10,057  14,223  
Manufacturing revenues524  607