SEC Filing | Civeo Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

cveo-20200630

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


☐			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 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			4
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019			5
Consolidated Balance Sheets – as of June 30, 2020 (unaudited) and December 31, 2019			6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019			7
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019			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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Service and other	$	110,006	$	112,719	$	239,405	$	212,798
Rental	3,865		7,625		10,044		14,115
Product	831		1,809		4,045		3,790
	114,702		122,153		253,494		230,703
Costs and expenses:
Service and other costs	78,860		77,659		174,904		150,303
Rental costs	3,615		6,357		8,428		11,507
Product costs	658		1,224		3,114		3,060
Selling, general and administrative expenses	11,490		12,530		25,427		28,626
Depreciation and amortization expense	22,205		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 income	4		22		20		49
Other income	12,642		1,055		12,667		4,033
Income (loss) before income taxes	6,951		(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 interest	222		—		480		—
Net income (loss) attributable to Civeo Corporation	6,607		(14,849)		(139,463)		(31,888)
Less: Dividends attributable to Class A preferred shares	471		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:
Basic	169,812		167,532		169,165		166,437
Diluted	169,990		167,532		169,165		166,437

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

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 taxes	29,385		1,084		(19,156)		6,463

Comprehensive income (loss)	36,214		(13,765)		(158,139)		(25,425)
Less: Comprehensive income attributable to noncontrolling interest	303		—		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.

CIVEO CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Thousands, Excluding Share Amounts)


	June 30, 2020		December 31, 2019
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	7,311	$	3,331
Accounts receivable, net	85,553		99,493
Inventories	7,683		5,877
Prepaid expenses	7,482		7,247
Other current assets	9,910		7,904
Assets held for sale	—		7,589
Total current assets	117,939		131,441

Property, plant and equipment, net	486,815		590,309
Goodwill	7,778		110,173
Other intangible assets, net	100,423		111,837
Operating lease right-of-use assets	21,065		24,876
Other noncurrent assets	563		1,276
Total assets	$	734,583	$	969,912

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	35,168	$	36,971
Accrued liabilities	16,910		21,755
Income taxes	571		328
Current portion of long-term debt	33,510		35,080
Deferred revenue	7,853		7,165
Other current liabilities	5,484		8,741
Total current liabilities	99,496		110,040

Long-term debt, less current maturities	264,522		321,792
Deferred income taxes	—		9,452
Operating lease liabilities	18,541		21,231
Other noncurrent liabilities	17,781		16,592
Total liabilities	400,340		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 capital	1,575,788		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’ equity	333,619		490,143
Noncontrolling interest	624		662
Total shareholders’ equity	334,243		490,805
Total liabilities and shareholders’ equity	$	734,583	$	969,912

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, 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 shares	461		—		—		(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 shares	471		—		—		(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 shares	920		—		—		(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 shares	939		—		—		(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, 2019	9,042	169,556
Stock-based compensation	—	1,022
Balance, June 30, 2020	9,042	170,578

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

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Six Months Ended June 30,
	2020		2019
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 amortization	47,707		61,778
Impairment charges	144,120		5,546

Deferred income tax benefit	(8,941)		(7,855)
Non-cash compensation charge	3,539		5,029
Gains on disposals of assets	(1,819)		(1,371)
Provision (benefit) for loss on receivables, net of recoveries	25		(56)
Other, net	(3,240)		1,444
Changes in operating assets and liabilities:
Accounts receivable	10,231		(18,616)
Inventories	(1,895)		(3)
Accounts payable and accrued liabilities	(4,583)		135
Taxes payable	251		244
Other current and noncurrent assets and liabilities, net	(1,094)		(4,427)
Net cash flows provided by operating activities	45,318		9,960

Cash flows from investing activities:
Capital expenditures	(3,847)		(21,208)

Proceeds from disposition of property, plant and equipment	1,897		4,448
Other, net	4,619		1,762
Net cash flows provided by (used in) investing activities	2,669		(14,998)

Cash flows from financing activities:
Revolving credit borrowings	122,320		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 equivalents	3,980		1,087
Cash and cash equivalents, beginning of period	3,331		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.

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.

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,
	2020		2019		2020		2019
Canada
Accommodation revenues	$	40,204	$	66,183	$	106,270	$	123,835
Mobile facility rental revenues	6,072		1,819		8,580		2,600
Food service and other services revenues	6,710		9,086		17,484		17,423
Manufacturing revenues	—		1,014		—		1,014
Total Canada revenues	52,986		78,102		132,334		144,872

Australia
Accommodation revenues	$	34,933	$	30,996	$	67,518	$	59,417
Food service and other services revenues	22,138		—		38,666		—
Total Australia revenues	57,071		30,996		106,184		59,417

U.S.
Accommodation revenues	$	242	$	4,775	$	1,498	$	9,699
Mobile facility rental revenues	3,870		7,626		10,057		14,223
Manufacturing revenues