|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
|
Percentage
|
|
2021
|
|
2020
|
|
Change
|
|
Percentage
|
Average Canadian dollar to U.S. dollar
|
$0.794
|
|
$0.751
|
|
0.04
|
|
5.7%
|
|
$0.799
|
|
$0.739
|
|
$0.06
|
|
8.1%
|
Average Australian dollar to U.S. dollar
|
$0.735
|
|
$0.716
|
|
0.02
|
|
2.6%
|
|
$0.759
|
|
$0.677
|
|
$0.08
|
|
12.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30, 2021
|
|
December 31, 2020
|
|
Change
|
|
Percentage
|
Canadian dollar to U.S. dollar
|
$0.785
|
|
$0.785
|
|
—
|
|
—%
|
Australian dollar to U.S. dollar
|
$0.719
|
|
$0.773
|
|
(0.05)
|
|
(7.0)%
|
These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results.
Capital Expenditures. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the price of and demand for crude oil, met coal, LNG and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities. We currently expect that our 2021 capital expenditures, exclusive of any business acquisitions, will total approximately $20 million, compared to 2020 capital expenditures of $10.1 million. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity and the impact of COVID-19. See “Liquidity and Capital Resources” below for further discussion of 2021 capital expenditures.
Results of Operations
Unless otherwise indicated, discussion of results for the three months ended September 30, 2021, is based on a comparison to the corresponding period of 2020.
Results of Operations – Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
|
|
|
|
|
|
|
($ in thousands)
|
Revenues
|
|
|
|
|
|
Canada
|
$
|
84,057
|
|
|
$
|
71,785
|
|
|
$
|
12,272
|
|
Australia
|
65,118
|
|
|
64,685
|
|
|
433
|
|
U.S. and other
|
5,888
|
|
|
6,387
|
|
|
(499)
|
|
Total revenues
|
155,063
|
|
|
142,857
|
|
|
12,206
|
|
Costs and expenses
|
|
|
|
|
|
Cost of sales and services
|
|
|
|
|
|
Canada
|
59,214
|
|
|
51,393
|
|
|
7,821
|
|
Australia
|
46,374
|
|
|
38,529
|
|
|
7,845
|
|
U.S. and other
|
5,842
|
|
|
7,512
|
|
|
(1,670)
|
|
Total cost of sales and services
|
111,430
|
|
|
97,434
|
|
|
13,996
|
|
Selling, general and administrative expenses
|
17,320
|
|
|
13,462
|
|
|
3,858
|
|
Depreciation and amortization expense
|
20,282
|
|
|
24,820
|
|
|
(4,538)
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
—
|
|
Other operating expense
|
21
|
|
|
51
|
|
|
(30)
|
|
Total costs and expenses
|
149,053
|
|
|
135,767
|
|
|
13,286
|
|
Operating income
|
6,010
|
|
|
7,090
|
|
|
(1,080)
|
|
|
|
|
|
|
|
Interest expense, net
|
(3,582)
|
|
|
(4,029)
|
|
|
447
|
|
Other (expense) income
|
364
|
|
|
4,542
|
|
|
(4,178)
|
|
Income before income taxes
|
2,792
|
|
|
7,603
|
|
|
(4,811)
|
|
Income tax (expense)
|
(1,770)
|
|
|
(180)
|
|
|
(1,590)
|
|
Net income
|
1,022
|
|
|
7,423
|
|
|
(6,401)
|
|
Less: Net income attributable to noncontrolling interest
|
478
|
|
|
434
|
|
|
44
|
|
Net income attributable to Civeo Corporation
|
544
|
|
|
6,989
|
|
|
(6,445)
|
|
Less: Dividends attributable to preferred shares
|
482
|
|
|
472
|
|
|
10
|
|
Net income attributable to Civeo common shareholders
|
$
|
62
|
|
|
$
|
6,517
|
|
|
$
|
(6,455)
|
|
We reported net income attributable to Civeo for the quarter ended September 30, 2021 of $0.1 million, or $0.00 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2020 of $6.5 million, or $0.39 per diluted share.
Revenues. Consolidated revenues increased $12.2 million, or 9%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages, (iv) increased activity levels in certain U.S. markets and (v) a stronger Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. These items were partially offset by (i) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (ii) decreased activity at our Bowen Basin villages and Gunnedah Basin villages in Australia and (iii) decreased activity at our U.S. offshore fabrication business. 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 $14.0 million, or 14%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to (i) increased occupancy at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages and the increased cost of
temporary labor due to ongoing labor shortages in Australia, (iv) increased activity levels in certain U.S. markets and (v) a stronger Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. These items were partially offset by (i) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required and (ii) decreased activity at our U.S. offshore fabrication business. See the discussion of segment results of operations below for further information.
Selling, General and Administrative Expenses. SG&A expense increased $3.9 million, or 29%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to higher share-based compensation expense, compensation expense and professional fees related to the Company's recent debt offering efforts. The increase in share-based compensation expense was due to an increase in our stock price during the third quarter of 2021 compared to the third quarter of 2020.
Depreciation and Amortization Expense. Depreciation and amortization expense decreased $4.5 million, or 18%, in the third quarter of 2021 compared to the third quarter of 2020. The decrease was primarily due to certain assets and intangibles becoming fully depreciated during 2020, partially offset by a stronger Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 2021 compared to the third quarter of 2020.
Operating Income (Loss). Consolidated operating income decreased $1.1 million, or 15%, in the third quarter of 2021 compared to the third quarter of 2020, primarily due to lower occupancy levels in Australia and higher SG&A expenses, partially offset by increased activity levels in Canada and lower depreciation and amortization expense in the third quarter of 2021 compared to the third quarter of 2020.
Interest Expense, net. Net interest expense decreased by $0.4 million, or 11%, in the third quarter of 2021 compared to the third quarter of 2020, primarily related to lower average debt levels on credit facility borrowings during 2021 compared to 2020, partially offset by higher interest rates on credit facility borrowings.
Other Income. Consolidated other income decreased $4.2 million in the third quarter of 2021 compared to the third quarter of 2020, primarily due to $3.6 million of other income related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and higher gains on sale of assets in 2020 compared to 2021.
Income Tax (Expense) Benefit. Our income tax expense for the three months ended September 30, 2021 totaled $1.8 million, or 63.4% of pretax income, compared to an income tax expense of $0.2 million, or 2.4% of pretax income, for the three months ended September 30, 2020. Our effective tax rate for both the three months ended September 30, 2021 and 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. Under ASC 740-270, "Accounting for Income Taxes," the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter's year-to-date provision.
Other Comprehensive (Loss) Income. Other comprehensive income decreased $23.3 million in the third quarter of 2021 compared to the third quarter of 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar decreased 3% in the third quarter of 2021 compared to a 2% increase in the third quarter of 2020. The Australian dollar exchange rate compared to the U.S. dollar decreased 4% in the third quarter of 2021 compared to a 4% increase in the third quarter of 2020.
Segment Results of Operations – Canadian Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
|
|
|
|
|
Accommodation revenue (1)
|
$
|
60,511
|
|
|
$
|
49,798
|
|
|
$
|
10,713
|
|
Mobile facility rental revenue (2)
|
19,075
|
|
|
13,135
|
|
|
5,940
|
|
Food service and other services revenue (3)
|
4,471
|
|
|
8,852
|
|
|
(4,381)
|
|
|
|
|
|
|
|
Total revenues
|
$
|
84,057
|
|
|
$
|
71,785
|
|
|
$
|
12,272
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
|
|
|
|
|
Accommodation cost
|
$
|
41,470
|
|
|
$
|
32,490
|
|
|
$
|
8,980
|
|
Mobile facility rental cost
|
11,144
|
|
|
8,557
|
|
|
2,587
|
|
Food service and other services cost
|
4,007
|
|
|
7,595
|
|
|
(3,588)
|
|
|
|
|
|
|
|
Indirect other costs
|
2,593
|
|
|
2,751
|
|
|
(158)
|
|
Total cost of sales and services
|
$
|
59,214
|
|
|
$
|
51,393
|
|
|
$
|
7,821
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
29.6
|
%
|
|
28.4
|
%
|
|
1.1
|
%
|
|
|
|
|
|
|
Average daily rate for lodges (4)
|
$
|
98
|
|
|
$
|
96
|
|
|
$
|
2
|
|
|
|
|
|
|
|
Total billed rooms for lodges (5)
|
613,017
|
|
|
508,449
|
|
|
104,568
|
|
|
|
|
|
|
|
Average Canadian dollar to U.S. dollar
|
$
|
0.794
|
|
|
$
|
0.751
|
|
|
$
|
0.043
|
|
(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile assets for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
(4)Average daily rate is based on billed rooms and accommodation revenue.
(5)Billed rooms represents total billed days for owned assets for the periods presented.
Our Canadian segment reported revenues in the third quarter of 2021 that were $12.3 million, or 17%, higher than the third quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $4.4 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, the segment experienced an 11% increase in revenues. This increase was driven by higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, revenue was lower from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.
Our Canadian segment cost of sales and services increased $7.8 million, or 15%, in the third quarter of 2021 compared to the third quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $3.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the increased cost of sales and services was driven by increased occupancy at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, cost of sales and services decreased from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.
Our Canadian segment gross margin as a percentage of revenues increased from 28.4% in the third quarter of 2020 to 29.6% in the third quarter of 2021. This was primarily driven by increased mobile asset activity and related operating efficiencies.
Segment Results of Operations – Australian Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
|
|
|
|
|
Accommodation revenue (1)
|
$
|
38,104
|
|
|
$
|
39,470
|
|
|
$
|
(1,366)
|
|
Food service and other services revenue (2)
|
27,014
|
|
|
$
|
25,215
|
|
|
$
|
1,799
|
|
Total revenues
|
$
|
65,118
|
|
|
$
|
64,685
|
|
|
$
|
433
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
|
|
|
|
|
Accommodation cost
|
$
|
18,351
|
|
|
$
|
16,401
|
|
|
$
|
1,950
|
|
Food service and other services cost
|
26,007
|
|
|
21,161
|
|
|
4,846
|
|
Indirect other cost
|
2,016
|
|
|
967
|
|
|
1,049
|
|
Total cost of sales and services
|
$
|
46,374
|
|
|
$
|
38,529
|
|
|
$
|
7,845
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
28.8
|
%
|
|
40.4
|
%
|
|
(11.7)
|
%
|
|
|
|
|
|
|
Average daily rate for villages (3)
|
$
|
78
|
|
|
$
|
77
|
|
|
$
|
1
|
|
|
|
|
|
|
|
Total billed rooms for villages (4)
|
491,218
|
|
|
513,587
|
|
|
(22,369)
|
|
|
|
|
|
|
|
Australian dollar to U.S. dollar
|
$
|
0.735
|
|
|
$
|
0.716
|
|
|
$
|
0.019
|
|
(1)Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to food services and other services, including facilities management for the periods presented.
(3)Average daily rate is based on billed rooms and accommodation revenue.
(4)Billed rooms represent total billed days for owned assets for the periods presented.
Our Australian segment reported revenues in the third quarter of 2021 that were $0.4 million, or 1%, higher than the third quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $1.6 million period-over-period increase in revenues. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced decreased activity at our Bowen Basin villages and Gunnedah Basin villages, partially offset by increased occupancy at our integrated services villages.
Our Australian segment cost of sales and services increased $7.8 million, or 20%, in the third quarter of 2021 compared to the third quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $1.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages.
Our Australian segment gross margin as a percentage of revenues decreased to 28.8% in the third quarter of 2021 from 40.4% in the third quarter of 2020. This was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than the accommodation business. The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins. Reduced occupancy at the Bowen Basin villages and Western Australia villages further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage in Australia which has been exacerbated by state and international border closures due to COVID-19. State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor.
Segment Results of Operations – U.S. Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
$
|
5,888
|
|
|
$
|
6,387
|
|
|
$
|
(499)
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
$
|
5,842
|
|
|
$
|
7,512
|
|
|
$
|
(1,670)
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
0.8
|
%
|
|
(17.6)
|
%
|
|
18.4
|
%
|
Our U.S. segment reported revenues in the third quarter of 2021 that were $0.5 million, or 8%, lower than the third quarter of 2020. This decrease was due to reduced activity in our offshore fabrication business, as two fabrication projects were completed in the third quarter of 2020, that did not recur to the same extent in 2021. This decrease was partially offset by increased occupancy at our West Permian, Killdeer and Acadian Acres lodges.
Our U.S. segment cost of sales and services decreased in the third quarter of 2021 compared to the third quarter of 2020. This decrease was due to reduced activity in our offshore fabrication business, as two fabrication projects were completed in the third quarter of 2020, that did not recur to the same extent in 2021.
Our U.S. segment gross margin as a percentage of revenues increased from (17.6)% in the third quarter of 2020 to 0.8% in the third quarter of 2021 primarily due to increased occupancy at our West Permian, Killdeer and Acadian Acres lodges and related operating efficiencies.
Results of Operations – Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
|
|
|
|
|
|
|
($ in thousands)
|
Revenues
|
|
|
|
|
|
Canada
|
$
|
229,223
|
|
|
$
|
204,119
|
|
|
$
|
25,104
|
|
Australia
|
188,774
|
|
|
170,869
|
|
|
17,905
|
|
U.S. and other
|
16,672
|
|
|
21,363
|
|
|
(4,691)
|
|
Total revenues
|
434,669
|
|
|
396,351
|
|
|
38,318
|
|
Costs and expenses
|
|
|
|
|
|
Cost of sales and services
|
|
|
|
|
|
Canada
|
168,441
|
|
|
158,130
|
|
|
10,311
|
|
Australia
|
134,172
|
|
|
102,995
|
|
|
31,177
|
|
U.S. and other
|
16,629
|
|
|
22,755
|
|
|
(6,126)
|
|
Total cost of sales and services
|
319,242
|
|
|
283,880
|
|
|
35,362
|
|
Selling, general and administrative expenses
|
46,204
|
|
|
38,889
|
|
|
7,315
|
|
Depreciation and amortization expense
|
62,928
|
|
|
72,527
|
|
|
(9,599)
|
|
Impairment expense
|
7,935
|
|
|
144,120
|
|
|
(136,185)
|
|
Other operating expense
|
122
|
|
|
755
|
|
|
(633)
|
|
Total costs and expenses
|
436,431
|
|
|
540,171
|
|
|
(103,740)
|
|
Operating loss
|
(1,762)
|
|
|
(143,820)
|
|
|
142,058
|
|
|
|
|
|
|
|
Interest expense, net
|
(10,343)
|
|
|
(13,458)
|
|
|
3,115
|
|
Other income
|
6,066
|
|
|
17,209
|
|
|
(11,143)
|
|
Loss before income taxes
|
(6,039)
|
|
|
(140,069)
|
|
|
134,030
|
|
Income tax (expense) benefit
|
(2,354)
|
|
|
8,509
|
|
|
(10,863)
|
|
Net loss
|
(8,393)
|
|
|
(131,560)
|
|
|
123,167
|
|
Less: Net income attributable to noncontrolling interest
|
534
|
|
|
914
|
|
|
(380)
|
|
Net loss attributable to Civeo Corporation
|
(8,927)
|
|
|
(132,474)
|
|
|
123,547
|
|
Less: Dividends attributable to preferred shares
|
1,440
|
|
|
1,411
|
|
|
29
|
|
Net loss attributable to Civeo common shareholders
|
$
|
(10,367)
|
|
|
$
|
(133,885)
|
|
|
$
|
123,518
|
|
We reported net loss attributable to Civeo for the nine months ended September 30, 2021 of $10.4 million, or $0.73 per diluted share. As further discussed below, net loss included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.
We reported net loss attributable to Civeo for the nine months ended September 30, 2020 of $133.9 million, or $9.48 per diluted share. As further discussed below, net loss included (i) a $93.6 million pre-tax loss resulting from the impairment of goodwill in our Canada segment included in Impairment expense, (ii) a $38.1 million pre-tax loss resulting from the impairment of long-lived assets in our Canada segment included in Impairment expense and (iii) a $12.4 million pre-tax loss resulting from the impairment of long-lived assets in our U.S. segment included in Impairment expense. Net loss was partially offset by $4.7 million of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income.
Revenues. Consolidated revenues increased $38.3 million, or 10%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages and (iv) a stronger Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. These items were partially offset by (i) lower revenue at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) decreased activity at our U.S. wellsite and offshore businesses. 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 $35.4 million, or 12%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase was primarily due to (i) greater activity at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages and increased cost of temporary labor due to ongoing labor shortages in Australia and (iv) a stronger Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. These items were partially offset by (i) reduced activity at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) lower activity at our U.S. wellsite and offshore businesses. See the discussion of segment results of operations below for further information.
Selling, General and Administrative Expenses. SG&A expense increased $7.3 million, or 19%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase was primarily due to higher incentive compensation costs, share-based compensation expense and compensation expense, partially offset by lower professional fees. In addition, SG&A expense increased approximately $2.2 million due to a stronger Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in share-based compensation was due to an increase in our stock price during 2021 compared to 2020.
Depreciation and Amortization Expense. Depreciation and amortization expense decreased $9.6 million, or 13%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease was primarily due to (i) certain assets and intangibles becoming fully depreciated during 2020, (ii) the impairment of certain long-lived assets in Canada and the U.S. during the first quarter of 2020 and (iii) the extension of the remaining life of certain long-lived assets in the U.S. during the third quarter of 2020. These items were partially offset by a stronger Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Impairment Expense. We recorded pre-tax impairment expense of $7.9 million in the nine months ended September 30, 2021 associated with long-lived assets in our Australian reporting unit.
Impairment expense of $144.1 million in the nine months ended September 30, 2020 included the following items:
•Pre-tax impairment expense of $93.6 million related to the impairment of goodwill in our Canadian reporting unit.
•Pre-tax impairment expense of $38.1 million associated with long-lived assets in our Canadian reporting unit.
•Pre-tax impairment expense of $12.4 million associated with long-lived assets in our U.S. reporting unit.
See Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Operating Loss. Consolidated operating loss decreased $142.1 million, or 99%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to impairment expense of goodwill and long-lived assets in 2020.
Interest Expense, net. Net interest expense decreased by $3.1 million, or 23%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily related to lower average debt levels on term loan and revolving credit facility borrowings during 2021 compared to 2020.
Other Income. Consolidated other income decreased $11.1 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The nine months ended September 30, 2021 included $3.5 million of other income related to proceeds from the CEWS. The nine months ended September 30, 2020 included $9.7 million of other income related to proceeds from the CEWS and $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition. In addition, 2020 included a higher gain on sale of assets compared to 2021.
Income Tax (Expense) Benefit. Our income tax expense for the nine months ended September 30, 2021 totaled $2.4 million, or (39.0)% of pretax loss, compared to an income tax benefit of $8.5 million, or 6.1% of pretax loss, for the nine months ended September 30, 2020. Our effective tax rate for both the nine months ended September 30, 2021 and 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. Our effective tax rate for the nine months ended September 30, 2021 was impacted by an increase in the valuation allowance related to the impairment of land in Australia. Our effective tax rate for the nine months ended September 30, 2020 was impacted by a deferred tax benefit of $9.0 million, offset by a valuation allowance of $0.1 million, against the Canadian net deferred tax assets.
Other Comprehensive Loss. Other comprehensive loss increased $7.4 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar was flat in the nine months ended September 30, 2021 compared to a 3% decrease in the nine months ended September 30, 2020. The Australian dollar exchange rate compared to the U.S. dollar decreased 7% in the nine months ended September 30, 2021 compared to a 2% increase in the nine months ended September 30, 2020.
Segment Results of Operations – Canadian Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
|
|
|
|
|
Accommodation revenue (1)
|
$
|
176,800
|
|
|
$
|
156,068
|
|
|
$
|
20,732
|
|
Mobile facility rental revenue (2)
|
38,240
|
|
|
21,715
|
|
|
16,525
|
|
Food service and other services revenue (3)
|
14,183
|
|
|
26,336
|
|
|
(12,153)
|
|
|
|
|
|
|
|
Total revenues
|
$
|
229,223
|
|
|
$
|
204,119
|
|
|
$
|
25,104
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
|
|
|
|
|
Accommodation cost
|
$
|
124,798
|
|
|
$
|
109,143
|
|
|
$
|
15,655
|
|
Mobile facility rental cost
|
23,562
|
|
|
17,099
|
|
|
6,463
|
|
Food service and other services cost
|
12,583
|
|
|
23,773
|
|
|
(11,190)
|
|
|
|
|
|
|
|
Indirect other costs
|
7,498
|
|
|
8,115
|
|
|
(617)
|
|
Total cost of sales and services
|
$
|
168,441
|
|
|
$
|
158,130
|
|
|
$
|
10,311
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
26.5
|
%
|
|
22.5
|
%
|
|
4.0
|
%
|
|
|
|
|
|
|
Average daily rate for lodges (4)
|
$
|
97
|
|
|
$
|
95
|
|
|
$
|
2
|
|
|
|
|
|
|
|
Total billed rooms for lodges (5)
|
1,816,407
|
|
|
1,626,668
|
|
|
189,739
|
|
|
|
|
|
|
|
Average Canadian dollar to U.S. dollar
|
$
|
0.799
|
|
|
$
|
0.739
|
|
|
$
|
0.060
|
|
(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile assets for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
(4)Average daily rate is based on billed rooms and accommodation revenue.
(5)Billed rooms represents total billed days for owned assets for the periods presented.
Our Canadian segment reported revenues in the nine months ended September 30, 2021 that were $25.1 million, or 12%, higher than the nine months ended September 30, 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 8% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $17.7 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, the revenue increase was due to higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, revenue was lower at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year and from reduced food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.
Our Canadian segment cost of sales and services increased $10.3 million, or 7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 8% in the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020 resulted in a $12.7 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the decreased cost of sales and services was driven by reduced activity at our Sitka Lodge related to the COVID-19 pandemic and reduced food services activity, as an overflow site supporting a LNG related project in 2020 is no longer required. Partially offsetting these items, cost of sales and services increased due to greater activity at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects.
Our Canadian segment gross margin as a percentage of revenues increased from 22.5% in the nine months ended September 30, 2020 to 26.5% in the nine months ended September 30, 2021. This was primarily driven by increased mobile asset activity and related operating efficiencies.
Segment Results of Operations – Australian Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
|
|
|
|
|
Accommodation revenue (1)
|
$
|
109,559
|
|
|
$
|
106,988
|
|
|
$
|
2,571
|
|
Food service and other services revenue (2)
|
79,215
|
|
|
$
|
63,881
|
|
|
$
|
15,334
|
|
Total revenues
|
$
|
188,774
|
|
|
$
|
170,869
|
|
|
$
|
17,905
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
|
|
|
|
|
Accommodation cost
|
$
|
53,538
|
|
|
$
|
46,665
|
|
|
$
|
6,873
|
|
Food service and other services cost
|
75,458
|
|
|
53,627
|
|
|
21,831
|
|
Indirect other cost
|
5,176
|
|
|
2,703
|
|
|
2,473
|
|
Total cost of sales and services
|
$
|
134,172
|
|
|
$
|
102,995
|
|
|
$
|
31,177
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
28.9
|
%
|
|
39.7
|
%
|
|
(10.8)
|
%
|
|
|
|
|
|
|
Average daily rate for villages (3)
|
$
|
79
|
|
|
$
|
72
|
|
|
$
|
7
|
|
|
|
|
|
|
|
Total billed rooms for villages (4)
|
1,382,182
|
|
|
1,487,819
|
|
|
(105,637)
|
|
|
|
|
|
|
|
Australian dollar to U.S. dollar
|
$
|
0.759
|
|
|
$
|
0.677
|
|
|
$
|
0.082
|
|
(1)Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to food services and other services, including facilities management for the periods presented.
(3)Average daily rate is based on billed rooms and accommodation revenue.
(4)Billed rooms represent total billed days for owned assets for the periods presented.
Our Australian segment reported revenues in the nine months ended September 30, 2021 that were $17.9 million, or 10%, higher than the nine months ended September 30, 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 12% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $20.0 million period-over-period increase in revenues. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced reduced revenue due to decreased activity at our Bowen Basin villages and Western Australia villages, partially offset by increased occupancy at our integrated services villages.
Our Australian segment cost of sales and services increased $31.2 million, or 30%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 12% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $14.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages.
Our Australian segment gross margin as a percentage of revenues decreased to 28.9% in the nine months ended September 30, 2021 from 39.7% in the nine months ended September 30, 2020. This decrease was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than
the accommodation business. The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins. Reduced occupancy at the Bowen Basin villages and Western Australia villages, further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage in Australia which has been exacerbated by state and international border closures due to COVID-19. State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor.
Segment Results of Operations – U.S. Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Change
|
Revenues ($ in thousands)
|
$
|
16,672
|
|
|
$
|
21,363
|
|
|
$
|
(4,691)
|
|
|
|
|
|
|
|
Cost of sales and services ($ in thousands)
|
$
|
16,629
|
|
|
$
|
22,755
|
|
|
$
|
(6,126)
|
|
|
|
|
|
|
|
Gross margin as a % of revenues
|
0.3
|
%
|
|
(6.5)
|
%
|
|
6.8
|
%
|
Our U.S. segment reported revenues in the nine months ended September 30, 2021 that were $4.7 million, or 22%, lower than the nine months ended September 30, 2020. This decrease was due to reduced U.S. drilling activity affecting our wellsite business and reduced activity in our offshore fabrication business as a number of projects were completed in 2020 that did not recur to the same extent in 2021. These decreases were partially offset by increased activity at our West Permian, Killdeer and Acadian Acres lodges.
Our U.S. segment cost of sales and services decreased $6.1 million, or 27%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This decrease was due to reduced U.S. drilling activity affecting our wellsite business, reduced activity in our offshore fabrication business as a number of projects were completed in 2020 that did not recur to the same extent in 2021 and reduced costs at our West Permian lodge under a new customer contract.
Our U.S. segment gross margin as a percentage of revenues increased 6.8% from the nine months ended September 30, 2020 to the nine months ended September 30, 2021, primarily due to improved margins at our West Permian lodge under a new customer contract and in our offshore business from product sales, partially offset by reduced operating efficiencies at lower activity levels in our wellsite business.
Liquidity and Capital Resources
Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our hospitality services, developing new lodges and villages, purchasing or leasing land, and for general working capital needs. 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. In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions, refinance debt or retire preferred shares.
The following table summarizes our consolidated liquidity position as of September 30, 2021 and December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Lender commitments
|
$
|
200,000
|
|
|
$
|
167,300
|
|
|
|
|
|
Borrowings against revolving credit capacity
|
(124,595)
|
|
|
(63,556)
|
|
Outstanding letters of credit
|
(2,141)
|
|
|
(4,487)
|
|
Unused availability
|
73,264
|
|
|
99,257
|
|
Cash and cash equivalents
|
4,948
|
|
|
6,155
|
|
Total available liquidity
|
$
|
78,212
|
|
|
$
|
105,412
|
|
Cash totaling $63.2 million was provided by operations during the nine months ended September 30, 2021, compared to $80.7 million provided by operations during the nine months ended September 30, 2020. During the nine months ended September 30, 2021 and 2020, $5.0 million was used in working capital and $4.6 million was provided by working capital, respectively. The decrease in cash provided by working capital in 2021 compared to 2020 is largely due to increased accounts receivable balances, partially offset by increased accounts payable and accrual balances.
Cash was used in investing activities during the nine months ended September 30, 2021 in the amount of $2.1 million, compared to cash provided by investing activities during the nine months ended September 30, 2020 in the amount of $1.7 million. The decrease in cash provided by investing activities was primarily due to $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition and lower capital expenditures during the nine months ended September 30, 2020, partially offset by higher proceeds from the sale of our manufacturing facility and mobile assets in Canada during the nine months ended September 30, 2021. Capital expenditures totaled $9.6 million and $6.2 million during the nine months ended September 30, 2021 and 2020, respectively.
We expect our capital expenditures for 2021, exclusive of any business acquisitions or any growth capital expenditures, to be approximately $20 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts. Whether planned expenditures will actually be spent in 2021 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. 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. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the prices of and demand for crude oil, met coal and iron ore 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 $61.1 million was used in financing activities during the nine months ended September 30, 2021 primarily due to repayments of term loan borrowings of $117.6 million, $1.1 million used to settle tax obligations on vested shares under our share-based compensation plans, debt issuance costs of $4.4 million and $0.4 million used to repurchase our common shares, partially offset by net borrowings under our revolving credit facilities of $62.5 million. Net cash of $79.6 million was used in financing activities during the nine months ended September 30, 2020 primarily due to net repayments under our revolving credit facilities of $44.5 million, repayments of term loan borrowings of $31.1 million, $1.5 million used to settle tax obligations on vested shares under our share-based compensation plans and debt issuance costs of $2.6 million.
The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
|
|
|
|
$
|
251,086
|
|
Borrowings under revolving credit facilities
|
|
|
|
|
|
|
367,622
|
|
Repayments of borrowings under revolving credit facilities
|
|
|
|
|
|
|
(305,148)
|
|
Repayments of term loans
|
|
|
|
|
|
|
(117,595)
|
|
Translation
|
|
|
|
|
|
|
(728)
|
|
Balance at September 30, 2021
|
|
|
|
|
|
|
$
|
195,237
|
|
We believe that cash on hand and cash flow from operations will be sufficient to meet our anticipated liquidity needs in the coming 12 months. If our plans or assumptions change, including as a result of the impact of COVID-19 or the decline in the price of and demand for oil, or are inaccurate, or if we make acquisitions, we may need to raise additional capital. Acquisitions have been, and our management believes acquisitions will continue to be, an element of our long-term business strategy. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances or may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. 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.
Amended and Restated Credit Agreement
As of December 31, 2020, our Amended and Restated 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; (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (D) a $194.8 million term loan facility scheduled to mature on May 30, 2023 for certain lenders in favor of Civeo.
New Syndicated Facility Agreement
On September 8, 2021, we entered into a new Syndicated Facility Agreement (Credit Agreement), which, among other things, as compared to the Amended and Restated Credit Agreement outstanding prior to the effectiveness of the Credit Agreement provided for: (i) a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, 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; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower. In addition, it provided for a C$100.0 million term loan facility scheduled to be fully repaid on December 31, 2023 for certain lenders in favor of Civeo.
As of September 30, 2021, we had outstanding letters of credit of $0.9 million under the U.S. facility, zero under the Australian facility and $1.2 million under the Canadian facility. We also had outstanding bank guarantees of A$0.8 million under the Australian facility.
See Note 9 – Debt to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Dividends
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 or preferred shares is limited by covenants in the 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. If we elect to pay dividends in the future, the amount per share of our dividend payments may be changed, or dividends may be suspended, without advance notice. The likelihood that dividends will be reduced or suspended is increased during periods of market weakness. There can be no assurance that we will pay a dividend in the future.
The preferred shares we issued in the Noralta acquisition are entitled to receive a 2% annual dividend on the liquidation preference (initially $10,000 per share), paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof. Quarterly dividends were paid in-kind on September 30, 2021, thereby increasing the liquidation preference to $10,723 per share as of September 30, 2021. We currently expect to pay dividends on the preferred shares for the foreseeable future through an increase in liquidation preference rather than cash.
Off-Balance Sheet Arrangements
As of September 30, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
For additional information about our contractual obligations, refer to “Liquidity and Capital Resources—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020. As of September 30, 2021, except for
net repayments under our revolving credit facilities, there were no material changes to the disclosure regarding our contractual obligations made in our Annual Report on Form 10-K for the year ended December 31, 2020.
Critical Accounting Policies
For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the audit committee of our Board of Directors. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based.