Civeo Corp 10-Q

ITEM 1. Financial Statements CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) Three Months Ended March 31, 2021 2020 Revenues: Service and other $ 121,996 $ 129,399 Rental 3,064 6,179 Product 370 3,214 125,430 138,792 Costs and expenses: Service and other costs 96,462 96,044 Rental costs 2,970 4,813 Product costs 378 2,456 Selling, general and administrative expenses 14,181 13,937 Depreciation and amortization expense 21,269 25,502 Impairment expense — 144,120 Other operating expense 71 989 135,331 287,861 Operating loss ( 9,901 ) ( 149,069 ) Interest expense ( 3,362 ) ( 5,595 ) Interest income — 16 Other income 4,914 25 Loss before income taxes ( 8,349 ) ( 154,623 ) Income tax (expense) benefit ( 1,076 ) 8,811 Net loss ( 9,425 ) ( 145,812 ) Less: Net income attributable to noncontrolling interest 59 258 Net loss attributable to Civeo Corporation ( 9,484 ) ( 146,070 ) Less: Dividends attributable to Class A preferred shares 478 468 Net loss attributable to Civeo common shareholders $ ( 9,962 ) $ ( 146,538 ) Per Share Data (see Note 7) (1) Basic net loss per share attributable to Civeo Corporation common shareholders $ ( 0.70 ) $ ( 10.43 ) Diluted net loss per share attributable to Civeo Corporation common shareholders $ ( 0.70 ) $ ( 10.43 ) Weighted average number of common shares outstanding: Basic 14,211 14,043 Diluted 14,211 14,043 (1) Reflects our 1-for-12 reverse share split that became effective November 19, 2020. See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. 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 March 31, 2021 2020 Net loss $ ( 9,425 ) $ ( 145,812 ) Other comprehensive income (loss), net of taxes: Foreign currency translation adjustment, net of zero taxes ( 1,627 ) ( 48,541 ) Total other comprehensive loss, net of taxes ( 1,627 ) ( 48,541 ) Comprehensive loss ( 11,052 ) ( 194,353 ) Less: Comprehensive income attributable to noncontrolling interest 49 163 Comprehensive loss att ributable to Civeo Corporation $ ( 11,101 ) $ ( 194,516 ) The accompanying notes are an integral part of these financial statements. 5 CIVEO CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands, Excluding Share Amounts) March 31, 2021 December 31, 2020 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,455 $ 6,155 Accounts receivable, net 87,783 89,782 Inventories 6,677 6,181 Prepaid expenses 4,312 7,020 Other current assets 4,433 6,165 Assets held for sale — 3,910 Total current assets 108,660 119,213 Property, plant and equipment, net 468,961 486,930 Goodwill 8,601 8,729 Other intangible assets, net 99,269 99,749 Operating lease right-of-use assets 22,338 22,606 Other noncurrent assets 2,349 3,626 Total assets $ 710,178 $ 740,853 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 42,336 $ 42,056 Accrued liabilities 20,801 27,349 Income taxes 255 203 Current portion of long-term debt 35,047 34,585 Deferred revenue 5,983 6,812 Other current liabilities 6,354 5,760 Total current liabilities 110,776 116,765 Long-term debt, less current maturities 200,756 214,000 Operating lease liabilities 18,941 19,834 Other noncurrent liabilities 15,566 14,897 Total liabilities 346,039 365,496 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, respectively; aggregate liquidation preference of $ 95,991,601 and $ 95,514,031 as of March 31, 2021 and December 31, 2020) 60,494 60,016 Common shares ( no par value; 46,000,000 shares authorized, 14,613,464 shares and 14,478,878 shares issued, respectively, and 14,292,866 shares and 14,215,169 shares outstanding, respectively) (1) — — Additional paid-in capital 1,579,342 1,578,315 Accumulated deficit ( 917,689 ) ( 907,727 ) Common shares held in treasury at cost, 320,598 and 263,709 shares, respectively ( 8,050 ) ( 6,930 ) Accumulated other comprehensive loss ( 350,606 ) ( 348,989 ) Total Civeo Corporation shareholders’ equity 363,491 374,685 Noncontrolling interest 648 672 Total shareholders’ equity 364,139 375,357 Total liabilities and shareholders’ equity $ 710,178 $ 740,853 (1) Reflects our 1-for-12 reverse share split that became effective November 19, 2020. See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. The accompanying notes are an integral part of these financial statements. 6 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, December 31, 2019 $ 58,129 $ — $ 1,572,249 $ ( 771,590 ) $ ( 5,472 ) $ ( 363,173 ) $ 662 $ 490,805 Net income (loss) — — — ( 146,070 ) — — 258 ( 145,812 ) Currency translation adjustment — — — — — ( 48,446 ) ( 95 ) ( 48,541 ) Dividends paid — — — — — — ( 273 ) ( 273 ) Dividends attributable to Class A preferred shares 468 — — ( 468 ) — — — — Share-based compensation — — 2,208 — ( 1,442 ) — — 766 Balance, March 31, 2020 $ 58,597 $ — $ 1,574,457 $ ( 918,128 ) $ ( 6,914 ) $ ( 411,619 ) $ 552 $ 296,945 Balance, December 31, 2020 $ 60,016 $ — $ 1,578,315 $ ( 907,727 ) $ ( 6,930 ) $ ( 348,989 ) $ 672 $ 375,357 Net income (loss) — — — ( 9,484 ) — — 59 ( 9,425 ) Currency translation adjustment — — — — — ( 1,617 ) ( 10 ) ( 1,627 ) Dividends paid — — — — — — ( 73 ) ( 73 ) Dividends attributable to Class A preferred shares 478 — — ( 478 ) — — — — Share-based compensation — — 1,027 — ( 1,120 ) — — ( 93 ) Balance, March 31, 2021 $ 60,494 $ — $ 1,579,342 $ ( 917,689 ) $ ( 8,050 ) $ ( 350,606 ) $ 648 $ 364,139 Preferred Shares Common Shares (in thousands) (1) Balance, December 31, 2020 9,042 14,215 Share-based compensation — 78 Balance, March 31, 2021 9,042 14,293 (1) Reflects our 1-for-12 reverse share split that became effective November 19, 2020. See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. The accompanying notes are an integral part of these financial statements. 7 CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 9,425 ) $ ( 145,812 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 21,269 25,502 Impairment charges — 144,120 Deferred income tax expense (benefit) 1,041 ( 8,941 ) Non-cash compensation charge 1,027 2,208 Gains on disposals of assets ( 1,902 ) ( 21 ) Provision for credit losses, net of recoveries 193 54 Other, net 716 693 Changes in operating assets and liabilities: Accounts receivable 1,806 ( 1,496 ) Inventories ( 526 ) ( 740 ) Accounts payable and accrued liabilities ( 5,287 ) 6,280 Taxes payable 51 133 Other current and noncurrent assets and liabilities, net 3,854 ( 1,143 ) Net cash flows provided by operating activities 12,817 20,837 Cash flows from investing activities: Capital expenditures ( 3,372 ) ( 2,651 ) Proceeds from disposition of property, plant and equipment 6,651 72 Net cash flows provided by (used in) investing activities 3,279 ( 2,579 ) Cash flows from financing activities: Revolving credit borrowings 78,628 74,287 Revolving credit repayments ( 85,319 ) ( 80,367 ) Term loan repayments ( 8,872 ) ( 8,109 ) Taxes paid on vested shares ( 1,120 ) ( 1,442 ) Net cash flows used in financing activities ( 16,683 ) ( 15,631 ) Effect of exchange rate changes on cash ( 113 ) ( 400 ) Net change in cash and cash equivalents ( 700 ) 2,227 Cash and cash equivalents, beginning of period 6,155 3,331 Cash and cash equivalents, end of period $ 5,455 $ 5,558 Non-cash financing activities: Preferred dividends paid-in-kind $ 478 $ 468 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 provide hospitality services to the natural resources industry in Canada, Australia and the U.S. We provide a full suite of hospitality services for our guests, including 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 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, 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. Reverse Share Split On November 19, 2020, we effected a reverse share split where each twelve issued and outstanding common shares were converted into one common share. Our common shares began trading on a reverse share split adjusted basis on November 19, 2020. A total of 14,215,169 common shares were issued and outstanding immediately after the reverse share split. No fractional shares were outstanding following the reverse share split. In lieu of any fractional share, the aggregate number of common shares that a holder was entitled to was, if the fraction was less than half a common share, rounded down to the next closest whole number of common shares, and if the fraction was at least half of a common share, rounded up to one whole common share. The reverse share split did not affect the number of authorized or issued and outstanding shares of our preferred shares. As a result of the reverse share split, the conversion price for the Company’s outstanding Class A Series 1 preferred shares (Series A preferred shares) was automatically increased to $ 39.60 for each Series A preferred share (previously it was $ 3.30 per Series A preferred share). All authorized, issued and outstanding shares and per share amounts contained in the accompanying consolidated financial statements have been adjusted to reflect this reverse share split for all prior periods presented. 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. 9 CIVEO CORPORATION NOTES TO UNAUDITED 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, 2020. 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 December 2019, the FASB issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 remove certain exceptions to the general principles in Accounting Standards Codification Topic 740. The amendments also clarify and amend existing guidance to improve consistent application. The amendments are effective for financial statements issued for reporting periods beginning after December 15, 2020 and interim periods within the reporting periods. The transition method (retrospective, modified retrospective or prospective basis) related to the amendments depends on the applicable guidance, and all amendments for which there is no transition guidance specified are to be applied on a prospective basis. We adopted ASU 2019-12 on January 1, 2021 and have applied the prospective basis. The adoption of this new standard did not have an impact on our consolidated financial statements. 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 March 31, 2021 2020 Canada Accommodation revenues $ 46,530 $ 66,066 Mobile facility rental revenues 10,499 2,508 Food service and other services revenues 4,856 10,774 Total Canada revenues 61,885 79,348 Australia Accommodation revenues $ 33,675 $ 32,585 Food service and other services revenues 25,962 16,528 Total Australia revenues 59,637 49,113 U.S. Accommodation revenues $ 772 $ 1,256 Mobile facility rental revenues 3,067 6,187 Manufacturing revenues 63 2,863 Food service and other services revenues 6 25 Total U.S. revenues 3,908 10,331 Total revenues $ 125,430 $ 138,792 Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when our performance obligations are satisfied is not significant. Payment terms are generally within 30 days and do not extend beyond 60 days, unless otherwise agreed to. We do not have significant financing components or significant payment terms. As of March 31, 2021, 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): 10 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ending December 31, 2021 2022 2023 Thereafter Total Revenue expected to be recognized as of March 31, 2021 $ 85,246 $ 79,365 $ 16,194 $ 1,992 $ 182,797 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. 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 March 31, 2021 and December 31, 2020, 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. During the first quarter of 2020, we recorded goodwill impairment charges related to one of our reporting units. Our estimates of fair value required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future circumstances that might directly impact each of the relevant asset groups’ operations in the future and are therefore uncertain. These assumptions with respect to future circumstances included future cash flows, oil, met coal and natural gas prices, anticipated spending by our customers, the cost of capital, and industry and/or local market conditions. We estimated the fair value when conducting the goodwill impairment test primarily using an income approach. The discount rates used to value our reporting units for the goodwill impairment test ranged between 10.5 % and 14.0 %. During the first quarter of 2020, we wrote down certain long-lived assets to fair value. We estimated the fair value when conducting the long-lived asset impairment tests primarily using an income approach. We used a variety of unobservable inputs and underlying assumptions consistent with those discussed above for purposes of our goodwill impairment test. The discount rates used to value our Canadian and U.S. segments long-lived asset impairment analysis ranged between 11.0 % and 14.0 %. See Note 6 – Impairment Charges for further information. 5. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS Additional information regarding selected balance sheet accounts at March 31, 2021 and December 31, 2020 is presented below (in thousands): March 31, 2021 December 31, 2020 Accounts receivable, net: Trade $ 60,116 $ 66,071 Unbilled revenue 26,122 22,565 Other (1) 2,003 1,421 Total accounts receivable 88,241 90,057 Allowance for credit losses ( 458 ) ( 275 ) Total accounts receivable, net $ 87,783 $ 89,782 11 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) As of March 31, 2021 and December 31, 2020, Other accounts receivable included a $ 1.7 million and $ 1.1 million receivable, respectively, related to the Canada Emergency Wage Subsidy (CEWS), a subsidy implemented by the Canadian government in response to the COVID-19 pandemic. Other income related to the CEWS during the three months ended March 31, 2021 and 2020 was $ 2.8 million and zero , respectively. March 31, 2021 December 31, 2020 Inventories: Finished goods and purchased products $ 4,944 $ 5,047 Work in process 559 45 Raw materials 1,174 1,089 Total inventories $ 6,677 $ 6,181 Estimated Useful Life (in years) March 31, 2021 December 31, 2020 Property, plant and equipment, net: Land $ 47,506 $ 47,751 Accommodations assets 3 — 15 1,723,838 1,737,620 Buildings and leasehold improvements 7 — 20 28,840 28,831 Machinery and equipment 4 — 15 13,183 12,784 Office furniture and equipment 3 — 7 63,662 61,850 Vehicles 3 — 5 14,450 15,363 Construction in progress 4,844 5,523 Total property, plant and equipment 1,896,323 1,909,722 Accumulated depreciation ( 1,427,362 ) ( 1,422,792 ) Total property, plant and equipment, net $ 468,961 $ 486,930 As of December 31, 2020, assets held for sale included $ 3.9 million related to our modular construction and manufacturing plant near Edmonton, Alberta, Canada. During the first quarter 2021, the manufacturing facility was sold. March 31, 2021 December 31, 2020 Accrued liabilities: Accrued compensation $ 16,629 $ 22,475 Accrued taxes, other than income taxes 2,701 3,099 Other 1,471 1,775 Total accrued liabilities $ 20,801 $ 27,349 6. IMPAIRMENT CHARGES Quarter ended March 31, 2020 . During the first quarter of 2020, we recorded impairment expense related to goodwill and long-lived assets. The spread of the COVID-19 coronavirus (COVID-19) and the response thereto during the first quarter of 2020 negatively impacted the global economy. The resulting unprecedented decline in oil demand, coupled with disagreements between Saudi Arabia and Russia about production limits, resulted in a collapse of global oil prices in March 2020, thereby creating unprecedented downward pressure on stock prices in the energy industry, particularly small-cap companies with operations in the U.S. and Canada, such as Civeo. As a result, we experienced a sustained reduction of our share price during the first quarter of 2020. Our market capitalization implied an enterprise value which was significantly less than the sum of the estimated fair values of our reporting units, and we determined that an indicator of a goodwill impairment was present as of March 31, 2020. Accordingly, we performed an interim goodwill impairment test as of March 31, 2020, and the carrying amount of our Canadian reporting unit exceeded the reporting unit's fair value. Based on the results of the impairment test, we reduced the value of our goodwill in our Canadian reporting unit to zero and recognized impairment expense in the first quarter of 2020 of $ 93.6 million. 12 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Furthermore, as a result of the decline in global oil prices and forecasts for a potentially protracted period of lower prices, as well as the goodwill impairment in our Canadian segment, we determined all asset groups within this segment had experienced a trigger that indicated that the carrying values might not be recoverable. Accordingly, we assessed the carrying value of each asset group to determine if it continued to be recoverable based on estimated future cash flows. Based on the assessment, the carrying values of certain asset groups were determined to not be fully recoverable, and we proceeded to compare the estimated fair value of these asset groups to their respective carrying values. As a result, certain asset groups were written down to their estimated fair values of $ 43.5 million and we recorded impairment expense of $ 38.1 million related to certain long-lived assets in our Canadian segment. Also, as a result of the decline in global oil prices and forecasts for a potentially protracted period of lower prices, we reviewed all asset groups in our U.S. segment to determine if an indicator of impairment had occurred that would indicate that the carrying values of the asset groups in the segment might not be recoverable. We determined that certain asset groups within the segment had experienced an indicator of impairment, and thus we assessed the carrying values of our long-lived assets in the U.S. to determine if they continued to be recoverable based on estimated future cash flows. Based on the assessment, the carrying values of certain of our U.S. asset groups were determined to not be recoverable, and we proceeded to compare the estimated fair values of the asset groups to their respective carrying values. Accordingly, these assets were written down to their estimated fair values of $ 12.5 million. We recorded impairment expense of $ 12.4 million during the first quarter of 2020 related to our U.S. segment. 7. EARNINGS PER SHARE As previously disclosed in Note 1 - Description of Business and Basis of Presentation, a 1-for-12 reverse share split became effective on November 19, 2020 for all authorized, issued and outstanding shares of Civeo common shares. Accordingly, all share and per share amounts have been adjusted to reflect this reverse stock split for all prior periods presented. We calculate basic and diluted earnings per share by applying the two-class method because we have participating securities in the form of Class A preferred shares. Participating securities are allocated a proportional share of net income determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities. We also apply the treasury stock method with respect to certain share-based awards in the calculation of diluted earnings per share, if dilutive. 13 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 March 31, 2021 2020 Numerator: Net loss attributable to Civeo common shareholders $ ( 9,962 ) $ ( 146,538 ) Less: income allocated to participating securities — — Basic net loss attributable to Civeo Corporation common shareholders $ ( 9,962 ) $ ( 146,538 ) Add: undistributed income attributable to participating securities — — Less: undistributed income reallocated to participating securities — — Diluted net loss attributable to Civeo Corporation common shareholders $ ( 9,962 ) $ ( 146,538 ) Denominator: Weighted average shares outstanding - basic 14,211 14,043 Dilutive shares - share-based awards — — Weighted average shares outstanding - diluted 14,211 14,043 Basic net loss per share attributable to Civeo Corporation common shareholders (1) $ ( 0.70 ) $ ( 10.43 ) Diluted net loss per share attributable to Civeo Corporation common shareholders (1) $ ( 0.70 ) $ ( 10.43 ) (1) Computations may reflect rounding adjustments. For the three months ended March 31, 2021 and 2020, we excluded 0.2 million and 0.5 million share-based awards, respectively, from the computation of diluted earnings per share because their effect was anti-dilutive. When an entity has a net loss from continuing operations, it is prohibited from including potential common shares in the computation of diluted per share amounts. Additionally, for the three months ended March 31, 2021 and 2020, we excluded from the computation the impact of converting the Preferred Shares into 2.4 million and 2.4 million common shares, respectively, since the effect would have been anti-dilutive. 14 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT As of March 31, 2021 and December 31, 2020, long-term debt consisted of the following (in thousands): March 31, 2021 December 31, 2020 Canadian term loan, which matures on May 30, 2023; C$ 11.2 million principal repayable per quarter; weighted average interest rate of 4.0 % for the three month period ended March 31, 2021 $ 180,997 $ 187,530 U.S. revolving credit facility, which matures on May 30, 2023; weighted average interest rate of 5.8 % for the three month period ended March 31, 2021 — — Canadian revolving credit facility, which matures on May 30, 2023; weighted average interest rate of 4.5 % for the three month period ended March 31, 2021 40,317 45,789 Australian revolving credit facility, which matures on May 30, 2023; weighted average interest rate of 3.6 % for the three month period ended March 31, 2021 16,746 17,767 238,060 251,086 Less: Unamortized debt issuance costs 2,257 2,501 Total debt 235,803 248,585 Less: Current portion of long-term debt, including unamortized debt issuance costs, net 35,047 34,585 Long-term debt, less current maturities $ 200,756 $ 214,000 Credit Agreement As of March 31, 2021, our Credit Agreement (as then amended to date, the Credit Agreement) provided for: (i) a $ 167.3 million revolving credit facility scheduled to mature on May 30, 2023, allocated as follows: (A) a $ 10.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers; (B) a $ 122.3 million senior secured revolving credit facility in favor of Civeo and certain of our Canadian subsidiaries, as borrowers; and (C) a $ 35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a $ 194.8 million term loan facility scheduled to mature on May 30, 2023 for certain lenders in favor of Civeo. U.S. dollar amounts outstanding under the facilities provided by the Credit Agreement bear interest at a variable rate equal to the London Inter-Bank Offered Rate (LIBOR) plus a margin of 3.50 % to 4.50 %, or a base rate plus 2.50 % to 3.50 %, in each case based on a ratio of our total debt to consolidated EBITDA (as defined in the Credit Agreement). Canadian dollar amounts outstanding bear interest at a variable rate equal to a Bankers’ Acceptance Discount Rate (as defined in the Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 3.50 % to 4.50 %, or a Canadian Prime rate plus a margin of 2.50 % to 3.50 %, in each case based on a ratio of our total debt to consolidated EBITDA. Australian dollar amounts outstanding under the Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 3.50 % to 4.50 %, based on a ratio of our total debt to consolidated EBITDA. The future transitions from LIBOR and CDOR as interest rate benchmarks is addressed in the Credit Agreement and at such time the transition from LIBOR or CDOR takes place, we will endeavor with the administrative agent to establish an alternate rate of interest to LIBOR or CDOR that gives due consideration to (1) the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time for the replacement of LIBOR and (2) any evolving or then existing convention for similar Canadian Dollar denominated syndicated credit facilities for the replacement of CDOR. The Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict: (i) indebtedness, liens and fundamental changes; (ii) asset sales; (iii) acquisitions of margin stock; (iv) specified acquisitions; (v) certain restrictive agreements; (vi) transactions with affiliates; and (vii) investments and other restricted payments, including dividends and other distributions. In addition, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.00 to 1.00 and our maximum leverage ratio, defined as the ratio of total debt to consolidated EBITDA, of no greater than 3.50 to 1.00. Following a qualified offering of indebtedness with gross proceeds in excess of $ 150.0 million, we will be required to maintain a maximum leverage ratio of no greater than 4.00 to 1.00 and a maximum senior secured ratio less than 2.50 to 1.00. Each of the factors considered in the calculations of these ratios are defined in the Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt 15 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) discount amortization, amortization of intangibles and other non-cash charges. We were in compliance with our covenants as of March 31, 2021. Borrowings under the Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries subject to customary exceptions. The obligations under the Credit Agreement are guaranteed by our significant subsidiaries. As of March 31, 2021, we had eight lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $ 22.4 million to $ 71.1 million. As of March 31, 2021, we had outstanding letters of credit of $ 1.2 million under the U.S. facility, $ 0.1 million under the Australian facility and $ 2.0 million under the Canadian facility. As of March 31, 2021 and December 31, 2020, we also had two bank guarantee facilities totaling A$ 3.0 million which mature on May 31, 2021. We had bank guarantees of A$ 0.9 million and A$ 0.8 million under these facilities outstanding as of March 31, 2021 and December 31, 2020, respectively. 9. INCOME TAXES Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. We operate in three jurisdictions, Canada, Australia and the U.S., where statutory tax rates range from 21 % to 30 %. Our effective tax rate will vary from period to period based on changes in earnings mix between these different jurisdictions. We compute our quarterly taxes under the effective tax rate method by applying an anticipated annual effective rate to our year-to-date income, except for significant unusual or extraordinary transactions. Income taxes for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs. As of March 31, 2021 and 2020, Canada and the U.S. were considered loss jurisdictions for tax accounting purposes and were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Our income tax expense for the three months ended March 31, 2021 totaled $ 1.1 million, or ( 12.9 %) of pretax loss, compared to a tax benefit of $ 8.8 million, or 5.7 % of pretax loss, for the three months ended March 31, 2020. Our effective tax rate for both the three months ended March 31, 2021 and March 31, 2020 was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Additionally, for the three months ended March 31, 2020, we recorded a deferred tax benefit of $ 12.4 million offset by a valuation allowance of $ 3.4 million against the Canadian net deferred tax assets. 10. COMMITMENTS AND CONTINGENCIES We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including warranty and product liability claims as a result of our products or operations. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. 11. ACCUMULATED OTHER COMPREHENSIVE LOSS Our accumulated other comprehensive loss increased $ 1.6 million from $ 349.0 million at December 31, 2020 to $ 350.6 million at March 31, 2021, as a result of foreign currency exchange rate fluctuations. Changes in other comprehensive loss during the first three months of 2021 were primarily driven by the Australian dollar decreasing in value compared to the U.S. dollar, partially offset by the Canadian dollar increasing in value compared to the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$ 160 million and A$ 285 million, respectively, at March 31, 2021. 12. SHARE-BASED COMPENSATION Certain key employees and non-employee directors participate in the Amended and Restated 2014 Equity Participation Plan of Civeo Corporation (the Civeo Plan). The Civeo Plan authorizes our Board of Directors and the Compensation Committee of our Board of Directors to approve grants of options, awards of restricted shares, performance awards, phantom 16 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) share awards and dividend equivalents, awards of deferred shares, and share payments to our employees and non-employee directors. No more than 2.4 million Civeo common shares are authorized to be issued under the Civeo Plan. Outstanding Awards Restricted Share Awards / Restricted Share Units / Deferred Share Awards. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended March 31, 2021 and 2020 totaled $ 0.5 million and $ 1.3 million, respectively. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the three months ended March 31, 2021 and 2020 was $ 1.5 million and $ 2.3 million, respectively. At March 31, 2021, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $ 0.8 million, which is expected to be recognized over a weighted average period of 0.9 years. Phantom Share Awards. On February 22, 2021, we granted 270,079 phantom share awards under the Civeo Plan, which vest in three equal annual installments beginning on February 22, 2022. We also granted 81,774 phantom share awards under the Canadian Long-Term Incentive Plan, which vest in three equal annual installments beginning on February 22, 2022. During the three months ended March 31, 2021 and 2020, we recognized compensation expense associated with phantom shares totaling $ 1.4 million and $ 0.3 million, respectively. At March 31, 2021, unrecognized compensation cost related to phantom shares was $ 9.5 million, as remeasured at March 31, 2021, which is expected to be recognized over a weighted average period of 2.4 years. Performance Awards. On February 22, 2021, we granted 129,754 performance awards under the Civeo Plan, which cliff vest in three years on February 22, 2024. These awards will be earned in amounts between 0 % and 200 % of the participant’s target performance share award, based on (1) the payout percentage associated with Civeo’s relative total shareholder return rank among a peer group that includes 17 other companies and (2) the payout percentage associated with Civeo's cumulative free cash flow over the performance period relative to a preset target. The portion of the performance awards tied to cumulative free cash flow includes a performance-based vesting requirement. The fair value of these awards is based on the closing market price of our common shares on the date of grant. We evaluate the probability of achieving the performance criteria throughout the performance period and will adjust share-based compensation expense based on the number of shares expected to vest based on our estimate of the most probable performance outcome. The ultimate payout of the cumulative free cash flow component of the award can vary from 0 % to 60 % based on actual results. During the three months ended March 31, 2021 and 2020, we recognized compensation expense associated with performance awards totaling $ 0.5 million and $ 0.9 million, respectively. The total fair value of performance share awards that vested during the three months ended March 31, 2021 and 2020 was $ 1.9 million and $ 1.9 million, respectively. At March 31, 2021, unrecognized compensation cost related to performance shares was $ 4.5 million, which is expected to be recognized over a weighted average period of 2.4 years. 13. SEGMENT AND RELATED INFORMATION In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, we have identified the following reportable segments: Canada, Australia and the U.S., which represent our strategic focus on hospitality services and workforce accommodations. 17 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Financial information by business segment for each of the three months ended March 31, 2021 and 2020 is summarized in the following table (in thousands): Total revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Three months ended March 31, 2021 Canada $ 61,885 $ 12,087 $ ( 7,659 ) $ 1,180 $ 721,841 Australia 59,637 8,459 3,307 1,554 265,111 U.S. 3,908 566 ( 2,598 ) 369 27,869 Corporate and eliminations — 157 ( 2,951 ) 269 ( 304,643 ) Total $ 125,430 $ 21,269 $ ( 9,901 ) $ 3,372 $ 710,178 Three months ended March 31, 2020 Canada $ 79,348 $ 14,369 $ ( 136,631 ) $ 610 $ 649,963 Australia 49,113 9,295 6,164 463 242,238 U.S. 10,331 1,583 ( 14,134 ) 1,372 32,758 Corporate and eliminations — 255 ( 4,468 ) 206 ( 205,436 ) Total $ 138,792 $ 25,502 $ ( 149,069 ) $ 2,651 $ 719,523 18 Cautionary Statement Regarding Forward-Looking Statements This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “expect,” “anticipate,” “estimate,” “continue,” “believe” or other similar words. The forward-looking statements in this report include, but are not limited to, the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to our expectations about the macroeconomic environment and industry conditions, including the impact of COVID-19 and the response thereto and the volatility in the price of and demand for oil, as well as our expectations about capital expenditures in 2021 and beliefs with respect to liquidity needs. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of known material factors that could affect our results, please refer to “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020 and our subsequent SEC filings. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on these forward-looking statements, which are based only on our current expectations and are not guarantees of future performance. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except to the extent required by applicable law. In addition, in certain places in this quarterly report, we refer to reports published by third parties that purport to describe trends or developments in the energy industry. We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.