What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-30 · 173 added, 151 removed, 310 unchanged (51% of the section changed)

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Overview and Macroeconomic Environment

Demand for our hospitality services is driven primarily by ongoing operations of existing natural resource projects in Australia and Canada.

Historically, initial demand for our hospitality services has been driven by our customers’ capital spending programs related to the construction and development of natural resource projects and associated infrastructure, as well as the exploration for oil and natural gas.

Long-term demand for our services has been driven by natural resource production, maintenance and operation of those facilities as well as expansion of those sites.

In general, industry capital spending programs are based on the outlook for commodity prices, production costs, economic growth, global commodity supply/demand, reserve replacement, estimates of resource production and the expectations of our customers' shareholders.

As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore, and the resultant impact of these commodity price expectations on our customers' spending.

Other factors that can affect our business and financial results include the general global economic environment, including inflationary pressures, supply chain disruptions and labor shortages, volatility affecting the banking system and financial markets, availability of capital to the natural resource industry and regulatory changes in Canada, Australia and other markets, including governmental measures introduced to fight climate change.

In general, industry capital spending programs are based on the outlook for commodity prices, production costs, economic growth, global commodity supply/demand, reserve replacement, estimates of resource production, annual maintenance requirements and the expectations of our customers' shareholders.

As a result, demand for our hospitality services is sensitive to expected commodity prices, principally related to oil, metallurgical (met) coal, iron ore and liquefied natural gas (LNG), and the resultant impact of these commodity price expectations on our customers' spending.

Commodity Prices

There is continued uncertainty around commodity price levels, driven by many factors including rising fears of a recession resulting from severe inflation and higher interest rates, the impact of inflationary pressures, actions taken by Organization of the Petroleum Exporting Countries Plus (OPEC+) to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine and Middle East conflicts and rising geopolitical risks in the Middle East, United States (U.S.) oil production levels and regulatory implications on such prices.

In particular, these items could cause our Canadian oil sands and

pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.

There is continued uncertainty around commodity price levels, driven by many factors including rising fears of a recession resulting from lingering inflation and higher interest rates, an economic slowdown in China and resultant economic stimulus by the Chinese government, the impact of inflationary pressures, actions taken by Organization of the Petroleum Exporting Countries Plus (OPEC+) to adjust oil production levels, geopolitical events such as the ongoing Russia/Ukraine

conflict and rising conflict and geopolitical risks in the Middle East, United States (U.S.) oil production levels and regulatory implications on such prices.

In particular, these items could cause our Canadian oil sands and pipeline customers to delay expansionary and maintenance spending and defer additional investments in their oil sands assets and in extreme cases reduce production.

Recent Commodity Prices.

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(per tonne) Iron

Third Quarter through July 26, 2024

Fourth Quarter through October 25, 2024

$ 72.34 $ 59.40 $ 204.98 $ 96.34

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6/30/2023 73.54 60.25 243.54 106.98

3/31/2023 75.96 56.61 341.08 117.08

WTI crude prices are from U.S.

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In an effort to support the price of oil amidst demand concerns, OPEC+ countries have extended their 2023 oil production cuts through the remainder of 2024 and into 2025.

These production cuts, coupled with the rising geopolitical risks in the Middle East, resulted in rising oil prices during the first half of 2024 following a decline in prices in the latter part of the fourth quarter of 2023.

These production cuts, coupled with the rising geopolitical risks in the Middle East, resulted in rising oil prices during the first half of 2024.

Oil prices decreased during the third quarter of 2024 due to increased market concerns over economic growth and demand.

In Canada, WCS crude is the benchmark price for our oil sands customers.

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Certain expansionary oil pipeline projects have the potential to both drive incremental demand for mobile assets and to improve take-away capacity for Canadian oil sands producers over the longer term, most notably the Trans Mountain Pipeline expansion, which began operating in the second quarter of 2024.

WCS prices in the second quarter of 2024 averaged $67.24 per barrel compared to an average of $60.25 in the second quarter of 2023.

The WCS Differential decreased from $19.35 per barrel at the end of the fourth quarter of 2023 to $15.27 at the end of the second quarter of 2024.

As of July 26, 2024, the WTI price was $77.16 and the WCS price was $60.26, resulting in a WCS Differential of $16.90

In Australia, 84% of our rooms are located in the Bowen Basin of Queensland, Australia and primarily serve met coal mines in that region.

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the level of global steel production, which remained flat through June 2024 compared to the same period of 2023.

Production stability was the result of steady production in China and continued growth in India, which offset weaker production in the U.S., Japan and South Korea.

As of July 26, 2024, met coal spot prices were $217.00 per tonne.

WCS prices in the third quarter of 2024 averaged $59.97 per barrel compared to an average of $66.20 in the third quarter of 2023.

The WCS Differential decreased from $19.35 per barrel at the end of the fourth quarter of 2023 to $13.66 at the end of the third quarter of 2024.

As of October 25, 2024, the WTI price was $71.99 and the WCS price was $59.33, resulting in a WCS Differential of $12.66.

In Australia, 84% of our Australian owned rooms are located in the Bowen Basin of Queensland, Australia and primarily serve met coal mines in that region.

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the level of global steel production.

Following negative growth in both July and August 2024, steel production through September 2024 has weakened by 1.9% when compared to the same period of 2023.

While there is positive growth in India and Europe, a decline in production during July and August in China more than offset those stronger production results.

As of October 25, 2024, met coal spot prices were $200.70 per tonne.

Steel demand is expected to increase marginally in 2024 compared to 2023, with continued improvements in demand from India.

Met coal prices weakened in March through early April 2024.

Prices have since stabilized in the range of approximately $220 to $250 per tonne and continue to support existing production.

As supply remains steady and with limited prospects in demand growth, analysts forecast prices to average $235 to $245 over the second-half of 2024.

Iron ore prices fluctuated during the first quarter of 2024 and weakened through June 2024, with prices having since stabilized at approximately $105 per tonne.

Analysts expect iron ore prices to average $105 to $110 through the second-half of 2024, with stable supply and steady demand.

Met coal prices stabilized during the second quarter of 2024 in the range of approximately $220 to $250 per tonne.

As steel demand production declined in July and August alongside high met coal inventories, prices for met coal weakened to approximately $190 to $200 per tonne.

With supply remaining steady and muted demand, analysts expect prices to remain under pressure through the second half of 2024, with improvement anticipated in early 2025.

Improved prices remain contingent on a recovery in demand particularly from China.

The decline in Chinese infrastructure spending, along with a weaker Chinese housing market, have impacted prices and are expected to influence near-term outlook.

To mitigate this, the Chinese government has put in place a stimulus package to support the domestic real estate market.

Iron ore prices fluctuated during the first quarter of 2024 and weakened through September 2024, with prices moving between $90 and $100 per tonne.

Analysts expect iron ore prices to average $90 to $100 per tonne through the remainder of 2024 and into 2025, with stable supply and muted demand.

Inflationary Pressures.

During 2023 and through the second quarter of 2024, inflationary pressures and supply chain disruptions have been, and are being, experienced worldwide.

During 2023 and through the third quarter of 2024, inflationary pressures and supply chain disruptions have been, and are being, experienced worldwide.

Price increases resulting from inflation and supply chain concerns have, and are expected to continue to have, a negative impact on our labor and food costs, as well as consumable costs such as fuel.

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In addition to the macro inflationary impacts on labor costs noted above, we continue to be impacted by increased staff costs as a result of hospitality labor shortages in Australia due to significantly reduced migration in and around Australia affecting labor availability, which has subsequently led to an increased reliance on more expensive temporary labor resources.

Our Sitka Lodge supports the LNG Canada project and related pipeline projects.

Our Sitka Lodge supports the LNG Canada (LNGC) project and related pipeline projects, specifically the Coastal GasLink Pipeline, the pipeline constructed to transport natural gas feedstock to LNGC.

LNGC, a joint venture among Shell Canada Energy, an affiliate of Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing the initial phase of a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility).

Construction activity of both Phase 1 of the Kitimat LNG Facility and the Coastal GasLink Pipeline are nearing completion in 2024.

The majority of our contracted commitments associated with the Coastal GasLink Pipeline were completed in the fourth quarter of 2023.

As such, we expect lower occupancy at our Sitka Lodge in the near-term until subsequent phases, or additional construction activity in the region, drive new occupancy demand.

From a macroeconomic standpoint, LNG demand has continued to grow, reinforcing the need for the global LNG industry to expand access to natural gas.

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The conflicts between Russia/Ukraine and in the Middle East have further highlighted the need for secure natural gas supply globally, particularly in Europe.

Accordingly, additional investment in LNG supply will be needed to meet the resulting expected long-term LNG demand growth.

Currently, Western Canada does not have any operational LNG export facilities.

LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility).

The Kitimat LNG Facility is nearing completion and expected to be operational in 2024, with commercial operations beginning in 2025.

British Columbia LNG activity and related pipeline projects are a material driver of activity for our Sitka Lodge, as well as for our mobile assets, which were contracted to serve designated portions of the related pipeline construction activity.

The majority of our contracted commitments associated with the Coastal GasLink Pipeline, the pipeline constructed to transport natural gas feedstock to LNGC, were completed in the fourth quarter of 2023.

Accordingly, experts believe additional investment in LNG supply will be needed to meet the resulting expected long-term LNG demand growth.

McClelland Lake Lodge.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 Change Percentage 2024 2023 Change Percentage

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dollar $0.670 $0.655 $0.02 2.3% $0.662 $0.669 ($0.01) (1.0)%

June 30, 2024 December 31, 2023 Change Percentage

September 30, 2024 December 31, 2023 Change Percentage

Canadian dollar to U.S.

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Results of Operations

Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2024, is based on a comparison to the corresponding period of 2023.

Results of Operations – Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Unless otherwise indicated, discussion of results for the three and nine months ended September 30, 2024, is based on a comparison to the corresponding period of 2023.

Results of Operations – Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Three Months Ended

September 30,

2024 2023 Change

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Interest expense, net (1,675) (3,321) 1,646

Other income 310 427 (117)

Income before income taxes 11,273 7,045 4,228

Income tax expense (3,786) (2,878) (908)

Net income attributable to noncontrolling interest 7,487 4,167 3,320

Net loss attributable to noncontrolling interest (740) (296) (444)

Net income attributable to Civeo Corporation $ 8,227 $ 4,463 $ 3,764

We reported net income attributable to Civeo for the quarter ended June 30, 2024 of $8.2 million, or $0.56 per diluted share compared to net income attributable to Civeo for the quarter ended June 30, 2023 of $4.5 million, or $0.30 per diluted share.

Consolidated revenues increased $9.9 million, or 6%, in the second quarter of 2024 compared to the second quarter of 2023.

This increase was primarily due to (i) increased activity at our Civeo owned villages in the Australian Bowen Basin, (ii) new business in our integrated services villages in Western Australia and (iii) increased year-over-year occupancy in our Canadian oil sands lodges.

These items were partially offset by declined occupancy associated with the sale of the McClelland Lake Lodge and reduced mobile asset activity from pipeline projects in Canada which were largely completed in 2023.

Other income (expense) 204 (4,709) 4,913

Income (loss) before income taxes (1,427) 8,009 (9,436)

Income tax (expense) benefit (3,862) 1,214 (5,076)

Net income (loss) attributable to noncontrolling interest (5,289) 9,223 (14,512)

Net income (loss) attributable to noncontrolling interest (198) 201 (399)

Net income (loss) attributable to Civeo Corporation $ (5,091) $ 9,022 $ (14,113)

We reported net loss attributable to Civeo for the quarter ended September 30, 2024 of $5.1 million, or $0.36 per diluted share, compared to net income attributable to Civeo for the quarter ended September 30, 2023 of $9.0 million, or $0.61 per diluted share.

As further discussed below, net income for the quarter ended September 30, 2023 included $4.9 million of expenses associated with the sale of the McClelland Lake Lodge in Canada.

Consolidated revenues decreased $7.2 million, or 4%, in the third quarter of 2024 compared to the third quarter of 2023.

This decrease was primarily due to (i) reduced mobile asset activity from pipeline projects in Canada which were largely completed in 2023, (ii) lower year-over-year occupancy in our oil sands lodges in Canada due to the timing and extent of maintenance activity by our customers, (iii) lower occupancy associated with the sale of the McClelland Lake Lodge in Canada and (iv) lower occupancy at our Sitka Lodge in Canada.

These items were partially offset by increased activity at our Civeo owned villages in the Australian Bowen Basin and new business in our integrated services villages in Western Australia.

See the discussion of segment results of operations below for further information.

Cost of Sales and Services.

Our consolidated cost of sales and services increased $9.4 million, or 7%, in the second quarter of 2024 compared to the second quarter of 2023.

Our consolidated cost of sales and services increased $8.2 million, or 6%, in the third quarter of 2024 compared to the third quarter of 2023.

This increase was primarily due to increased occupancy at our Civeo owned villages in the Australian Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

These items were partially offset by decreased mobile asset activity from pipeline projects in Canada which were largely completed in 2023 and lower costs at certain lodges, including the McClelland Lake Lodge, in Canada.

These items were partially offset by decreased mobile asset activity from pipeline projects in Canada which were largely completed in 2023 and lower costs at various lodges in Canada due to reduced occupancy levels.

See the discussion of segment results of operations below for further information.

Selling, General and Administrative Expenses.

SG&A expenses increased $1.0 million, or 6%, in the second quarter of 2024 compared to the second quarter of 2023.

This increase was primarily due to higher compensation expense of $1.3

million and higher travel and entertainment costs of $0.4 million.

The increase in compensation expense was primarily due to severance costs and increased staff and associated recruitment costs.

These items were partially offset by lower incentive compensation costs of $0.7 million in the second quarter of 2024 compared to the second quarter of 2023.

SG&A expenses decreased $0.6 million, or 3%, in the third quarter of 2024 compared to the third quarter of 2023.

This decrease was primarily due to lower incentive compensation cost of $3.4 million.

This item was partially offset by higher compensation expense of $1.1 million and higher professional fees of $1.1 million.

The increase in compensation expense was primarily due to increased staff and associated recruitment costs in the third quarter of 2024 compared to the third quarter of 2023.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $3.6 million, or 18%, in the second quarter of 2024 compared to the second quarter of 2023.

The decrease was primarily due to certain assets becoming fully depreciated in Canada, including the McClelland Lake Lodge, in the second quarter of 2023.

Depreciation and amortization expense increased $0.5 million, or 3%, in the third quarter of 2024 compared to the third quarter of 2023.

The increase was primarily due to additional property, plant and equipment placed in service during 2024.

Operating Income.

Consolidated operating income increased $2.9 million, or 29%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to higher activity levels in Australia and lower depreciation and amortization expense in the second quarter of 2024 compared to the second quarter of 2023.

These items were partially offset by reduced mobile asset activity in Canada in the second quarter of 2024 compared to the second quarter of 2023.

Consolidated operating income decreased $16.0 million, or 100%, in the third quarter of 2024 compared to the third quarter of 2023, primarily due to reduced mobile asset activity and lower lodge occupancy in Canada in the third quarter of 2024 compared to the third quarter of 2023.

These items were partially offset by higher activity levels in Australia in the third quarter of 2024 compared to the third quarter of 2023.

Interest Expense, net.

Net interest expense decreased by $1.4 million, or 40%, in the second quarter of 2024 compared to the second quarter of 2023, primarily related to lower average debt levels during 2024 compared to 2023, partially offset by higher interest rates on credit facility borrowings.

Income Tax Expense.

Our income tax expense for the three months ended June 30, 2024 totaled $3.8 million, or 33.6% of pretax income, compared to an income tax expense of $2.9 million, or 40.9% of pretax income, for the three months ended June 30, 2023.

Our effective tax rate for each of the three months ended June 30, 2024 and 2023 was impacted by Canada and the U.S.

Net interest expense decreased by $1.6 million, or 50%, in the third quarter of 2024 compared to the third quarter of 2023, primarily related to lower average debt levels and lower interest rates on credit facility borrowings during 2024 compared to 2023.

Other Income (expense).

The third quarter of 2023 included expenses of $4.9 million associated with the demobilization of the McClelland Lake Lodge to prepare the assets for sale.

Income Tax (Expense) Benefit.

Our income tax expense for the three months ended September 30, 2024 totaled $3.9 million, or (270.6)% of pretax loss, compared to an income tax benefit of $1.2 million, or (15.2)% of pretax income, for the three months ended September 30, 2023.

Our effective tax rate for the three months ended September 30, 2024 was impacted by Canada and the U.S.

being considered loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Our effective tax rate for the three months ended September 30, 2023 was impacted by considering the U.S.

a loss jurisdiction that was removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Other Comprehensive Income.

Other comprehensive income decreased $0.5 million in the second quarter of 2024 compared to the second quarter of 2023, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

Other comprehensive income increased $14.0 million in the third quarter of 2024 compared to the third quarter of 2023, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

The Canadian dollar exchange rate compared to the U.S.

dollar decreased 1% in the second quarter of 2024 compared to a 2% increase in the second quarter of 2023.

dollar increased 1% in the third quarter of 2024 compared to a 2% decrease in the third quarter of 2023.

The Australian dollar exchange rate compared to the U.S.

dollar increased 2% in the second quarter of 2024 compared to a 1% decrease in the second quarter of 2023.

dollar increased 4% in the third quarter of 2024 compared to a 3% decrease in the third quarter of 2023.

Segment Results of Operations – Canadian Segment

Three Months Ended

September 30,

2024 2023 Change

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(5) Billed rooms represents total billed days for owned assets for the periods presented.

Our Canadian segment reported revenues in the second quarter of 2024 that were $15.9 million, or 17%, lower than the second quarter of 2023.

The revenue decrease was driven by reduced mobile asset activity from pipeline projects which were largely completed in 2023.

Lower mobile asset activity was partially offset by increased year-over-year occupancy in our oil sands lodges with billed rooms up 3.9% due to the timing and extent of maintenance activity by our customers, with some offset from declined occupancy associated with the sale of the McClelland Lake Lodge.

Our Canadian segment cost of sales and services decreased $13.0 million, or 18%, in the second quarter of 2024 compared to the second quarter of 2023.

The cost of sales and services decrease was driven by lower costs related to reduced mobile asset activity from pipeline projects which were largely completed in 2023 and lower costs at certain lodges including the McClelland Lake Lodge resulting from the sale.

Our Canadian segment gross margin as a percentage of revenues increased from 24.7% in the second quarter of 2023 to 26.0% in the second quarter of 2024.

This was primarily driven by improved margins at our lodges due to improved efficiencies at higher occupancy levels and the removal of certain fixed costs with the sale of the McClelland Lake Lodge, partially offset by reduced mobile asset activity from pipeline projects which were largely completed in 2023 and mobile camp demobilization costs of approximately $1.4 million which were incurred in the second quarter of 2024.

Our Canadian segment reported revenues in the third quarter of 2024 that were $37.4 million, or 39%, lower than the third quarter of 2023.

The revenue decrease was driven by (i) reduced mobile asset activity from pipeline projects which were largely completed in 2023, (ii) lower occupancy associated with the sale of the McClelland Lake Lodge and (iii) lower year-over-year occupancy in our oil sands lodges due to the timing and extent of maintenance activity by our customers.

In addition, our Sitka Lodge had lower occupancy as the Kitimat LNG facility nears completion.

Our Canadian segment cost of sales and services decreased $15.9 million, or 24%, in the third quarter of 2024 compared to the third quarter of 2023.

Our Canadian segment gross margin as a percentage of revenues decreased from 30.7% in the third quarter of 2023 to 13.3% in the third quarter of 2024.

This was primarily driven by lower margins at our lodges due to reduced efficiencies at lower occupancy level and reduced mobile asset activity from pipeline projects which were largely completed in 2023.

Segment Results of Operations – Australian Segment

Three Months Ended

September 30,

2024 2023 Change

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(4) Billed rooms represent total billed days for owned assets for the periods presented.

Our Australian segment reported revenues in the second quarter of 2024 that were $26.1 million, or 32%, higher than the second quarter of 2023.

The increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia.

Billed rooms in Civeo owned villages were up 6.4% in the second quarter of 2024 due to increased activity in both the Bowen Basin and Gunnedah Basin coupled with recent contract renewals and extensions.

Our Australian segment cost of sales and services increased $22.5 million, or 38%, in the second quarter of 2024 compared to the second quarter of 2023.

The increase in cost of sales and services in the Australian segment was largely driven by increased occupancy at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

Our Australian segment gross margin as a percentage of revenues decreased to 25.4% in the second quarter of 2024 from 29.1% in the second quarter of 2023.

Our Australian segment reported revenues in the third quarter of 2024 that were $28.7 million, or 33%, higher than the third quarter of 2023.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 2.3% in the third quarter of 2024 compared to the third quarter of 2023 resulted in a $2.5 million period-over-period increase in revenues.

On a constant currency basis, the Australian segment experienced a 30% period-over-period increase in revenues.

Excluding the impact of the stronger Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia.

Billed rooms in Civeo owned villages were up 3.8% in the third quarter of 2024 due to increased activity in the Bowen Basin coupled with recent contract renewals and extensions.

Our Australian segment cost of sales and services increased $23.5 million, or 37%, in the third quarter of 2024 compared to the third quarter of 2023.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 2.3% in the third quarter of 2024 compared to the third quarter of 2023 resulted in a $1.9 million period-over-period increase in cost of sales and services.

Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services in the Australian segment was largely driven by increased occupancy at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

Our Australian segment gross margin as a percentage of revenues decreased to 25.3% in the third quarter of 2024 from 27.6% in the third quarter of 2023.

This was primarily driven by an increased relative revenue contribution from our integrated services business, which has a service-only business model, and generates lower overall gross margins than our accommodation business.

The reduced gross margin was partially offset by improved profitability across the integrated services villages in the second quarter of 2024.

Results of Operations – Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Six Months Ended

The reduced gross margin was partially offset by improved profitability across the integrated services villages in the third quarter of 2024.

Results of Operations – Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Nine Months Ended

September 30,

2024 2023 Change

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Interest expense, net (6,141) (10,499) 4,358

Other income 763 2,877 (2,114)

Other income (expense) 967 (1,832) 2,799

Income before income taxes 6,201 9,976 (3,775)

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Net income (loss) attributable to Civeo Corporation $ (1,997) $ 7,132 $ (9,129)

We reported net income attributable to Civeo for six months ended June 30, 2024 of $3.1 million, or $0.21 per diluted share.

As further discussed below, net income included (i) $6.0 million of net gains associated with the sale of the McClelland Lake Lodge in Canada and (ii) a $7.8 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

We reported net loss attributable to Civeo for the six months ended June 30, 2023 of $1.9 million, or $0.13 per diluted share.

Consolidated revenues increased $8.4 million, or 2%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

We reported net loss attributable to Civeo for nine months ended September 30, 2024 of $2.0 million, or $0.14 per diluted share.

As further discussed below, net loss included $5.8 million of net gains associated with the sale of the McClelland Lake Lodge in Canada and a $7.8 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

We reported net income attributable to Civeo for the nine months ended September 30, 2023 of $7.1 million, or $0.47 per diluted share.

As further discussed below, net income included $4.9 million of expenses associated with the sale of the McClelland Lake Lodge in Canada.

Consolidated revenues increased $1.2 million, or 0.2%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase was primarily due to increased activity at our Civeo owned villages in the Australian Bowen Basin and new business in our integrated services villages in Western Australia.

These items were partially offset by decreased mobile asset activity from pipeline projects in Canada which were largely completed in 2023 and a weaker Australian dollar relative to the U.S.

dollar in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

These items were partially offset by decreased mobile asset activity from pipeline projects in Canada which were largely completed in 2023 and lower year-over-year occupancy at certain lodges in Canada in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

See the discussion of segment results of operations below for further information.

Cost of Sales and Services.

Our consolidated cost of sales and services increased $6.3 million, or 2%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Our consolidated cost of sales and services increased $14.6 million, or 4%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase was primarily due to increased occupancy at our Civeo owned villages in our Australian Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

These items were partially offset by the decrease in cost of sales and services largely driven by (i) reduced mobile asset activity from pipeline projects in Canada which were largely completed in 2023, (ii) lower costs at certain lodges in Canada and (iii) a weaker Australian dollar relative to the U.S.

dollar in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

These items were partially offset by the decrease in cost of sales and services largely driven by reduced mobile asset activity from pipeline projects in Canada which were largely

completed in 2023 and lower costs at certain lodges in Canada in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

See the discussion of segment results of operations below for further information.

Selling, General and Administrative Expenses.

SG&A expenses increased $3.4 million, or 10%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

SG&A expenses increased $2.8 million, or 5%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase was primarily due to higher compensation expense of $4.1 million, higher travel and entertainment costs of $1.1 million and higher professional fees of $1.8 million.

The increase in compensation expense was primarily due to $1.1 million in severance costs related to the departure of our former Chief Financial Officer, other severance costs and increased staff and associated recruitment costs.

These items were partially offset by lower share-based compensation expense of $1.1 million and a weaker Australian dollar relative to the U.S.

dollar in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The decrease in share-based compensation expense was primarily due to forfeitures during 2024 compared to 2023, partially offset by the changes in our share price during 2024 compared to 2023.

These items were partially offset by lower incentive compensation costs of $3.5 million, lower share-based compensation expense of $1.2 million and a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The decrease in share-based compensation expense was primarily due to forfeitures and reduced performance share expense due to a lower probability of achieving performance criteria during 2024 compared to 2023, partially offset by the changes in our share price during 2024 compared to 2023.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $8.5 million, or 20%, in six months ended June 30, 2024 compared to the six months ended June 30, 2023 The decrease was primarily due to certain assets becoming fully depreciated in Canada, including the McClelland Lake Lodge, in the six months ended June 30, 2023 and lower depreciation and amortization expense due to a weaker Australian dollar relative to the U.S.

dollar in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Depreciation and amortization expense decreased $8.0 million, or 14%, in nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The decrease was primarily due to certain assets becoming fully depreciated in Canada, including the McClelland Lake Lodge, in the nine months ended September 30, 2023 and lower depreciation and amortization expense due to a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

These items were partially offset by higher depreciation and amortization expense due to additional property, plant and equipment placed in service during 2024.

Impairment Expense.

We recorded pre-tax impairment expense of $7.8 million in six months ended June 30, 2024 associated with long-lived assets in Australia and the U.S.

We recorded pre-tax impairment expense of $7.8 million in nine months ended September 30, 2024 associated with long-lived assets in Australia and the U.S.

See Note 3 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Gain on Sale of McClelland Lake Lodge Assets, net.

We recorded $6.0 million in the six months ended June 30, 2024 related to net gains associated with the sale of the McClelland Lake Lodge.

We recorded $5.8 million in net gains associated with the sale of the McClelland Lake Lodge in the nine months ended September 30, 2024.

Operating Income.

Consolidated operating income increased $5.1 million, or 81%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to a net gain on sale of McClelland Lake Lodge assets, higher activity levels in Australia and lower depreciation and amortization expense in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

These items were partially offset by reduced mobile asset activity in Canada and impairment expenses in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Consolidated operating income decreased $10.9 million, or 49%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to reduced mobile asset activity and lower lodge occupancy in Canada and impairment expenses in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

These items were partially offset by higher activity levels in Australia and lower depreciation and amortization expense in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Interest Expense, net.

Net interest expense decreased by $2.7 million, or 38%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily related to lower average debt levels during 2024 compared to 2023, partially offset by higher interest rates on credit facility borrowings.

Net interest expense decreased by $4.4 million, or 42%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily related to lower average debt levels during 2024 compared to 2023, which decreased approximately 51%, partially offset by higher interest rates on credit facility borrowings.

Other Income.

Consolidated other income decreased $2.1 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to higher gain on the sale of assets related to the sale of our Louisiana accommodation assets in the U.S.

in the six months ended June 30, 2023 compared to the six months ended June 30, 2024.

Consolidated other income increased $2.8 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to expenses of $4.9 million associated with the demobilization of the McClelland Lake Lodge to prepare the assets for sale, partially offset by higher gain on the sale of assets related to the sale of our Louisiana accommodation assets in the U.S.

in the nine months ended September 30, 2023.

Income Tax Expense.

Our income tax expense for the six months ended June 30, 2024 totaled $5.3 million, or 70.0% of pretax income, compared to an income tax expense of $4.1 million, or 209.0% of pretax income, for the six months ended June 30, 2023.

Our effective tax rate for each of the six months ended June 30, 2024 and 2023 was impacted by Canada and the U.S.

Our income tax expense for the nine months ended September 30, 2024 totaled $9.2 million, or 148.3% of pretax income, compared to an income tax expense of $2.9 million, or 29.0% of pretax income, for the nine months ended September 30, 2023.

Our effective tax rate for the nine months ended September 30, 2024 was impacted by Canada and the U.S.

being considered loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Our effective tax rate for the nine months ended September 30, 2023 was impacted by considering the U.S.

a loss jurisdiction that was removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Other Comprehensive Loss.

Other comprehensive loss increased $8.5 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

Other comprehensive loss decreased $5.5 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

The Canadian dollar exchange rate compared to the U.S.

dollar decreased 3% in the six months ended June 30, 2024 compared to a 2% increase in the six months ended June 30, 2023.

dollar decreased 2% in the nine months ended September 30, 2024 compared to a 0.2% increase in

the nine months ended September 30, 2023.

The Australian dollar exchange rate compared to the U.S.

dollar decreased 2% in the six months ended June 30, 2024 compared to a 2% decrease in the six months ended June 30, 2023.

dollar increased 2% in the nine months ended September 30, 2024 compared to a 5% decrease in the nine months ended September 30, 2023.

Segment Results of Operations – Canadian Segment

Six Months Ended

Nine Months Ended

September 30,

2024 2023 Change

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(5) Billed rooms represents total billed days for owned assets for the periods presented.

Our Canadian segment reported revenues in the six months ended June 30, 2024 that were $38.2 million, or 21%, lower than the six months ended June 30, 2023.

The revenue decrease was driven by reduced mobile asset activity from pipeline projects which were largely completed in 2023.

Our Canadian segment cost of sales and services decreased $29.6 million, or 20%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Our Canadian segment gross margin as a percentage of revenues decreased from 21.2% in the six months ended June 30, 2023 to 20.8% in the six months ended June 30, 2024.

This was primarily driven by reduced mobile asset activity from pipeline projects which were largely completed in 2023 and mobile camp demobilization costs of approximately $3.2 million which were incurred in the first six months of 2024, partially offset by improved margins at our lodges due to improved efficiencies and the removal of certain fixed costs with the sale of the McClelland Lake Lodge.

Our Canadian segment reported revenues in the nine months ended September 30, 2024 that were $75.6 million, or 27%, lower than the nine months ended September 30, 2023.

The revenue decrease was driven by (i) reduced mobile asset activity from pipeline projects which were largely completed in 2023, (ii) lower year-over-year occupancy in our oil sands lodges due to the timing and extent of maintenance activity by our customers and (iii) declined occupancy associated with the sale of the McClelland Lake Lodge.

In addition, occupancy at our Sitka Lodge has declined as the Kitimat LNG facility nears completion.

Our Canadian segment cost of sales and services decreased $45.6 million, or 22%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Our Canadian segment gross margin as a percentage of revenues decreased from 24.4% in the nine months ended September 30, 2023 to 18.7% in the nine months ended September 30, 2024.

In addition, margins at our lodges were lower due to reduced efficiencies at lower occupancy levels.

Segment Results of Operations – Australian Segment

Six Months Ended

Nine Months Ended

September 30,

2024 2023 Change

21 unchanged sentences

(4) Billed rooms represent total billed days for owned assets for the periods presented.

Our Australian segment reported revenues in the six months ended June 30, 2024 that were $40.8 million, or 26%, higher than the six months ended June 30, 2023.

The weakening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 2.7% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 resulted in a $5.1 million period-over-period decrease in revenues.

On a constant currency basis, the Australian segment experienced a 29% period-over-period increase in revenues.

Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia.

Billed rooms in Civeo owned villages were up 11.6% in the first half of 2024 due to increased activity in both the Bowen Basin and Gunnedah Basin coupled with recent contract renewals and extensions.

Excluding the weakening Australian dollar, average daily rates for Civeo owned villages were up 4.4% year-over-year.

Our Australian segment cost of sales and services increased $30.3 million, or 26%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The weakening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 2.7% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 resulted in a $3.7 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was largely driven by increased occupancy at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

Our Australian segment gross margin as a percentage of revenues decreased to 26.6% in the six months ended June 30, 2024 from 26.8% in the six months ended June 30, 2023.

Our Australian segment reported revenues in the nine months ended September 30, 2024 that were $69.5 million, or 28%, higher than the nine months ended September 30, 2023.

The increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia.

Billed rooms in Civeo owned villages were up 8.8% in the first nine months of 2024 due to increased activity in the Bowen Basin, Western Australia and the Gunnedah Basin coupled with recent contract renewals and extensions.

Our Australian segment cost of sales and services increased $53.8 million, or 30%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in the Australian segment was largely driven by increased occupancy at our Civeo owned villages in the Bowen Basin and new business in our integrated services villages in Western Australia and the associated overhead costs.

Our Australian segment gross margin as a percentage of revenues decreased to 26.1% in the nine months ended September 30, 2024 from 27.1% in the nine months ended September 30, 2023.

This was primarily driven by an increased relative revenue contribution from our integrated services business, which has a service-only business model and therefore generates lower overall gross margins than our accommodation business.

The reduced gross margin was partially offset by improved profitability across our integrated services villages in the six months ended June 30, 2024.

The reduced gross margin was partially offset by improved profitability across our integrated services villages in the nine months ended September 30, 2024.

Liquidity and Capital Resources

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In addition, capital has been used to repay debt and fund strategic business acquisitions.

Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances.

Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Amended Credit Agreement and proceeds from equity issuances.

In the future, capital may be required to move lodges from one site to another, and we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions or refinance debt.

The following table summarizes our consolidated liquidity position as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

The following table summarizes our consolidated liquidity position as of September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

Lender commitments $ 245,000 $ 200,000

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Total available liquidity $ 211,779 $ 136,416

Cash totaling $38.3 million was provided by operations during the six months ended June 30, 2024, compared to $19.8 million provided by operations during the six months ended June 30, 2023.

During the six months ended June 30, 2024 and 2023, $2.4 million was provided by working capital and $25.2 million was used in working capital, respectively.

The year-over-year increase in cash provided by working capital in 2024 compared to 2023 is largely due to the collection of holdbacks in Canada related to the completion of mobile asset pipeline projects during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Cash was used in investing activities during the six months ended June 30, 2024 in the amount of $0.1 million, compared to cash used in investing activities during the six months ended June 30, 2023 in the amount of $9.0 million.

The decrease in cash used in investing activities was primarily due to higher proceeds from the sale of property, plant and equipment.

We received net proceeds from the sale of property, plant and equipment of $10.6 million during the six months ended June 30, 2024 related to the sale of our McClelland Lake Lodge accommodation assets in Canada and the sale of our Louisiana land in the U.S., compared to $2.7 million during the six months ended June 30, 2023 primarily related to the sale of our Louisiana accommodation assets in the U.S.

Capital expenditures totaled $10.9 million and $11.7 million during the six months ended June 30, 2024 and 2023, respectively.

Cash totaling $74.0 million was provided by operations during the nine months ended September 30, 2024, compared to $56.6 million provided by operations during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024 and 2023, $26.8 million was provided by working capital and $20.0 million was used in working capital, respectively.

The year-over-year increase in cash provided by working capital in 2024 compared to 2023 is largely due to the collection of holdbacks in Canada related to the completion of mobile asset pipeline projects during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, partially offset by decreased accounts payable and accrual balances.

Cash was used in investing activities during the nine months ended September 30, 2024 in the amount of $7.5 million, compared to cash used in investing activities during the nine months ended September 30, 2023 in the amount of $14.1 million.

The decrease in cash used in investing activities was primarily due to higher proceeds from the sale of property, plant and equipment and lower capital expenditures.

We received net proceeds from the sale of property, plant and equipment of $10.7 million during the nine months ended September 30, 2024 related to the sale of our McClelland Lake Lodge accommodation assets in Canada and the sale of our Louisiana land in the U.S., compared to $7.1 million during the nine months ended September 30, 2023 primarily related to the sale of our McClelland Lake Lodge accommodation assets in Canada and Louisiana accommodation assets in the U.S.

Capital expenditures totaled $18.4 million and $21.2 million during the nine months ended September 30, 2024 and 2023, respectively.

Capital expenditures in both periods were primarily related to maintenance.

In addition, our 2024 capital expenditures included approximately $2.9 million related to customer-funded infrastructure upgrades in Australia.

In addition, our 2024 capital expenditures included approximately $2.9 million related to customer-funded infrastructure upgrades in Australia compared to $4.4 million in 2023.

We expect our capital expenditures for 2024 to be in the range of $30 million to $35 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments.

Whether planned expenditures will actually be spent in 2024 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing.

We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement.

We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Amended Credit Agreement.

The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction and return of capital to shareholders.

We continue to monitor the global economy, commodity prices, demand for crude oil, met coal, LNG and iron ore, inflation and the resultant impact on the capital spending plans of our customers in order to plan our business activities, and we may adjust our capital expenditure plans in the future.

Net cash of $34.1 million was used in financing activities during the six months ended June 30, 2024 primarily due to net repayments under our revolving credit facilities of $15.8 million, repurchases of our common shares of $9.9 million, dividend payments of $7.4 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.1 million.

Net cash of $6.9 million was used in financing activities during the six months ended June 30, 2023 primarily due

to term loan repayments of $14.9 million and repurchases of our common shares of $8.0 million, partially offset by net borrowings under our revolving credit facilities of $16.0 million.

The following table summarizes the changes in debt outstanding during the six months ended June 30, 2024 (in thousands):

Net cash of $48.3 million was used in financing activities during the nine months ended September 30, 2024 primarily due for repurchases of our common shares of $24.1 million, dividend payments of $11.0 million, net repayments under our revolving credit facilities of $9.2 million, debt issuance costs of $3.0 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.1 million.

Net cash of $42.0 million was used in financing activities during the nine months ended September 30, 2023 primarily due to term loan repayments of $22.3 million, repurchases of our common shares of $9.2 million, net repayments under our revolving credit facilities of $6.7 million and dividend payments of $3.7 million.

The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2024 (in thousands):

Balance at December 31, 2023 $ 65,554

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Translation (6,230)

Balance at June 30, 2024 $ 47,489

Balance at September 30, 2024 $ 50,078

We believe that cash on hand and cash flow from operations will be sufficient to meet our anticipated liquidity needs for the next 12 months.

6 unchanged sentences

In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

In August 2023, our Board of Directors (Board) authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 742,134 common shares, over a twelve month period.

In addition, our Board declared quarterly dividends of $0.25 per common share to shareholders in the first and second quarters of 2024.

The dividend is an eligible dividend pursuant to the Income Tax Act (Canada).

In September 2024, our Board of Directors (Board) authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 710,556 common shares, over a twelve month period.

In addition, our Board declared quarterly dividends of $0.25 per common share to shareholders in the first, second and third quarters of 2024.

These dividends were eligible dividends pursuant to the Income Tax Act (Canada).

See Note 12 – Share Repurchase Programs and Dividends to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Credit Agreement

As of June 30, 2024, our Credit Agreement (as then amended to date, the Credit Agreement) provided for a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, allocated as follows:

Amended Credit Agreement

As of September 30, 2024, the Amended Credit Agreement provides for a $245.0 million revolving credit facility scheduled to mature on August 8, 2028, allocated as follows:

(A) a $10.0 million senior secured revolving credit facility in favor of one of our U.S.

subsidiaries, as borrower;

(B) a $155.0 million senior secured revolving credit facility in favor of Civeo, as borrower;

(B) a $200.0 million senior secured revolving credit facility in favor of Civeo and certain of our U.S.

subsidiaries, as borrower;

and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower.

A C$100.0 million term loan facility provided under the Credit Agreement was fully repaid on December 31, 2023.

As of June 30, 2024, we had outstanding letters of credit of $0.3 million under the U.S.

As of September 30, 2024, we had outstanding letters of credit of $0.3 million under the U.S.

facility, zero under the Australian facility and $0.8 million under the Canadian facility.

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The declaration and amount of all potential future dividends will be at the discretion of our Board and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the Board deems relevant.

In addition, our ability to pay cash dividends on common shares is limited by covenants in the Credit Agreement.

In addition, our ability to pay cash dividends on common shares is limited by covenants in the Amended Credit Agreement.

Future agreements may also limit our ability to pay dividends, and we may incur incremental taxes if we are required to repatriate foreign earnings to pay such dividends.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis