Item 1.01 Entry into a Material Definitive Agreement
On June 22, 2020, Core Laboratories N.V. ("Core Laboratories") and Core
Laboratories (U.S.) Interests Holdings, Inc. ("Core Laboratories U.S.") as
borrowers, Bank of America, N.A., as Administrative Agent, Swing Line Lender and
Letter of Credit Issuer, Wells Fargo Bank, National Association as Syndication
Agent, and the other lenders party thereto entered into that certain Amendment
No. 1 (the "Amendment") to the Seventh Amended and Restated Credit Agreement,
dated as of June 19, 2018 (as amended, the "Credit Facility").
The Amendment provided, among other things, an increase to the maximum leverage
ratio permitted under the Credit Facility for certain periods. Pursuant to the
terms of the Amendment, the maximum leverage ratio permitted under the Credit
Facility is equal to (a) 3.00 to 1.00 from the fiscal quarter ending June 30,
2020 through and including the fiscal quarter ending June 30, 2021; (b) 2.75 to
1.00 for the fiscal quarter ending September 30, 2021; and (c) 2.50 to 1.00 for
the fiscal quarter ending December 31, 2021 and thereafter. Moreover, the
Amendment modified the range of variable interest rates that the Credit Facility
may bear to be a range from LIBOR plus 1.500% to LIBOR plus 2.875%, and included
the addition of a LIBOR floor of 0.50%. In addition, pursuant to the Amendment,
the aggregate borrowing commitment under the facility was reduced to $225
million and the amount by which we may elect to increase the facility size was
reduced from $100 million to $50 million, subject to the satisfaction of certain
conditions.
The Credit Facility remains unsecured, and contains customary representations,
warranties, terms and conditions for similar types of facilities.
The foregoing description does not purport to be complete and is qualified in
its entirety by reference to the Amendment, which is filed as Exhibit 10.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On June 23, 2020, Core Laboratories issued a press release announcing the
Amendment and additional cost reduction initiatives. The full text of the press
release is set forth in Exhibit 99.1 attached hereto.
The information presented herein under Item 7.01 of this Current Report on Form
8-K is being "furnished" and shall not be deemed to be "filed" for the purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise subject to the liability of that section, and is not to be
incorporated by reference into any filing of Core Laboratories under the
Securities Act or the Exchange Act.
Item 8.01 Other Events
Core Laboratories is supplementing the risk factors previously disclosed in its
Annual Report on Form 10-K for the year ended December 31, 2019 filed with the
Securities and Exchange Commission on February 10, 2020 and subsequent periodic
reports on Form 10-Q with the following risk factors:
Events beyond Core Lab's control, including a global or domestic health crisis,
have resulted and may continue to result in unexpected adverse operating and
financial results.
The effects of the COVID-19 pandemic have resulted in a significant and swift
reduction in international and U.S. economic activity. The reduced demand for
oil caused by this unprecedented global health and economic crisis, coupled with
an oversupply of oil, has had, and is reasonably likely to continue to have, a
material adverse impact on the demand for Core Lab's services and products and
consequently upon its results of operations. The severity, magnitude and
duration of the current COVID-19 outbreak is uncertain, rapidly changing and
hard to predict. While the full impact of this virus and the long-term worldwide
reaction to it and impact from it remains unknown at this time, government
reaction to the pandemic and restrictions and limitations applied by the
government as a result, continued widespread growth in infections, travel
restrictions,
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quarantines, or site closures as a result of the virus could, among other
things, impact the ability of Core Lab's employees and contractors to perform
their duties, cause increased technology and security risk due to extended and
company-wide telecommuting, lead to disruptions in Core Lab's logistics and
negatively affect customer relationships as a result. All of these factors may
impact the timing of the recognition of revenue and results of operations for a
particular quarter.
In particular, the COVID-19 outbreak has significantly impacted and could
continue to negatively impact Core Lab's business in numerous ways, including,
but not limited to, the following:
• the economic recession caused by the outbreak has led to a decrease in the
demand for oil and natural gas that many experts predict may be prolonged;
such a decrease in demand and the resulting impact on price, which was
exacerbated by lack of consensus among OPEC members leading to oversupply
and unprecedented buildup of stored oil, has caused some of Core Lab's
customers to reduce their spending, including on Core Lab's products and
services, and such reductions could become more widespread and deeper,
having a further material adverse effect on Core Lab's results of operations
and financial condition;
• the disruptions to the global supply chain of air freight and other
supporting vendors have resulted in and could continue to result in delayed
shipments of product to certain of our international markets, delaying Core
Lab's recognition of revenue;
• Core Lab's operations have been disrupted or impaired and may continue to be
disrupted or impaired if a significant portion of its employees or
contractors are unable to work due to illness or if its operations are
suspended or temporarily shut-down or restricted due to control measures
designed to contain the outbreak; and
• the operations of Core Lab's customers, on whom it relies to use its
products and services in their drilling, completion, production and other
projects, may be disrupted or suspended in response to containing the
outbreak.
The COVID-19 pandemic may also have the effect of heightening many of the other
risks, such as those relating to Core Lab's financial performance and debt
obligations or to counterparty litigation due to economic downturns. The rapid
development and fluidity of this situation precludes any prediction as to the
ultimate adverse impact of COVID-19 on Core Lab's business, which will depend on
numerous evolving factors and future developments that it is not able to
predict, including the length of time that the pandemic continues, its effect on
the demand for oil and natural gas, the response of the overall economy and the
financial markets as well as the effect of governmental actions taken in
response to the pandemic. Any of those outcomes could have a material adverse
effect on Core Lab's business, financial condition, results of operations and
cash flows.
Any cost reduction initiatives that Core Lab undertakes may not deliver the
results it expects, and these actions may adversely affect its business.
In response to the financial risks presented by COVID-19, Core Lab implemented a
variety of cost-cutting measures which began in March 2020, continued during the
second quarter of 2020 and may need to implement additional cost-cutting
measures that may adversely affect its business. These cost-cutting measures
have included reductions in the quarterly dividend, base salaries of senior
executives and annual capital expenditures, employee furloughs, workforce
reductions, among other reductions of corporate and operating costs. There can
be no assurance that all of the cost cutting measures identified can be fully
implemented, that any actions to support response to customer needs stemming
from the COVID-19 pandemic and related economic crisis will not impact the
achievement of cost reduction goals, or that other developments will not arise
in the interim to make these cost cutting measures less feasible or have less
impact. Any reductions achieved may not be sufficient to prevent a material
adverse impact on our results of operations and cash flows.
In addition, these initiatives could result in disruptions to Core Lab's
operations. Any cost-cutting measures could also negatively impact Core Lab's
business by delaying the introduction of new products or technologies,
interrupting service of additional products, or impacting employee retention. In
addition, there can be no assurance that additional costs will not offset any
such reductions of its operations. If Core Lab's operating costs are higher than
expected, or if it does not maintain adequate control of its costs and expenses,
Core Lab's results of operations will suffer. If Core Lab is unable to mitigate
these or other potential risks related to its cost cutting initiatives, it may
disrupt Core Lab's business or could have a material adverse effect on its
financial condition and results of operations.
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 Amendment No. 1 to Credit Agreement, by and among Core Laboratories N.V.,
Core Laboratories (U.S.) Interests Holding, Inc., and the lenders party
thereto and Bank of America, N.A., as administrative agent, dated June 22,
2020.
99.1 Press release issued on June 23, 2020
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
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CORE LABORATORIES N.V.
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