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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________

Commission File Number: 001-14273

CORE LABORATORIES N.V.

(Exact name of registrant as specified in its charter)


The Netherlands		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Van Heuven Goedhartlaan 7 B
1181 LE Amstelveen
The Netherlands		Not Applicable
(Address of principal executive offices)		(Zip Code)

(31-20) 420-3191

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock (par value EUR 0.02)

CLB

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of common shares of the registrant, par value EUR 0.02 per share, outstanding at April 21, 2023 was 46,664,413.

CORE LABORATORIES N.V.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

INDEX

PART I - FINANCIAL INFORMATION


		Page

Item 1.	Financial Statements

	Consolidated Balance Sheets at March 31, 2023 (Unaudited) and December 31, 2022	3

	Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5

	Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	8

	Notes to the Interim Consolidated Financial Statements (Unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

	Signature	33

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CORE LABORATORIES N.V.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	March 31, 2023			December 31, 2022
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	16,285		$	15,428
Accounts receivable, net of allowance for credit losses of $2,436 and $2,214 at 2023 and 2022, respectively		110,699			106,913
Inventories		67,342			60,445
Prepaid expenses		13,197			15,665
Income taxes receivable		13,781			8,190
Other current assets		6,623			5,061
TOTAL CURRENT ASSETS		227,927			211,702
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $315,027 and $314,737 at 2023 and 2022, respectively		102,341			105,028
RIGHT OF USE ASSETS		56,663			52,379
INTANGIBLES, net of accumulated amortization and impairment of $17,650 and $17,475 at 2023 and 2022, respectively		7,268			7,483
GOODWILL		99,445			99,445
DEFERRED TAX ASSETS, net		67,025			68,570
OTHER ASSETS		32,948			33,747
TOTAL ASSETS	$	593,617		$	578,354
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	38,366		$	45,847
Accrued payroll and related costs		23,484			23,431
Taxes other than payroll and income		3,690			4,822
Unearned revenues		5,952			5,942
Operating lease liabilities		11,073			11,699
Income taxes payable		5,133			3,034
Other current liabilities		7,926			8,360
TOTAL CURRENT LIABILITIES		95,624			103,135
LONG-TERM DEBT, net		180,440			172,386
LONG-TERM OPERATING LEASE LIABILITIES		43,793			38,305
DEFERRED COMPENSATION		29,772			31,814
DEFERRED TAX LIABILITIES, net		22,268			22,877
OTHER LONG-TERM LIABILITIES		21,569			20,883
COMMITMENTS AND CONTINGENCIES
EQUITY:
Preference shares, EUR 0.02 par value; 6,000,000 shares authorized, none issued or outstanding		—			—
Common shares, EUR 0.02 par value; 200,000,000 shares authorized, 46,701,102 issued and 46,634,027 outstanding at 2023 and 46,699,102 issued and 46,631,934 outstanding at 2022		1,194			1,194
Additional paid-in capital		111,235			102,254
Retained earnings		87,855			85,949
Accumulated other comprehensive income (loss)		(3,538	)		(3,777	)
Treasury shares (at cost), 67,075 at 2023 and 67,168 at 2022		(1,360	)		(1,362	)
Total Core Laboratories N.V. shareholders' equity		195,386			184,258
Non-controlling interest		4,765			4,696
TOTAL EQUITY		200,151			188,954
TOTAL LIABILITIES AND EQUITY	$	593,617		$	578,354

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

Return to Index

CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
REVENUE:
Services	$	91,076		$	84,723
Product sales		37,280			30,577
Total revenue		128,356			115,300
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		70,934			68,857
Cost of product sales, exclusive of depreciation expense shown below		30,594			28,095
General and administrative expense, exclusive of depreciation expense shown below		16,331			12,545
Depreciation		3,939			4,384
Amortization		105			173
Other (income) expense, net		(28	)		1,637
OPERATING INCOME (LOSS)		6,481			(391	)
Interest expense		3,429			2,644
Income (loss) before income taxes		3,052			(3,035	)
Income tax expense (benefit)		610			(1,196	)
Net income (loss)		2,442			(1,839	)
Net income (loss) attributable to non-controlling interest		69			49
Net income (loss) attributable to Core Laboratories N.V.	$	2,373		$	(1,888	)

EARNINGS (LOSS) PER SHARE INFORMATION:
Basic earnings (loss) per share	$	0.05		$	(0.04	)
Basic earnings (loss) per share attributable to Core Laboratories N.V.	$	0.05		$	(0.04	)

Diluted earnings (loss) per share	$	0.05		$	(0.04	)
Diluted earnings (loss) per share attributable to Core Laboratories N.V.	$	0.05		$	(0.04	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		46,634			46,298
Diluted		47,481			46,298

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

Return to Index

CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


	Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
Net income (loss)	$	2,442		$	(1,839	)
Other comprehensive income (loss):
Interest rate swaps:
Gain (loss) on fair value of interest rate swaps		—			3,957
Interest rate swap amount reclassified to net income (loss)		266			254
Income tax expense (benefit) on interest rate swaps reclassified to net income (loss)		(56	)		(831	)
Total interest rate swaps		210			3,380
Pension and other postretirement benefit plans:
Amortization of actuarial gain (loss) reclassified to net income (loss)		39			—
Income tax expense (benefit) on pension and other postretirement benefit plans reclassified to net income (loss)		(10	)		—
Total pension and other postretirement benefit plans		29			—
Total other comprehensive income (loss)		239			3,380
Comprehensive income (loss)		2,681			1,541
Comprehensive income (loss) attributable to non-controlling interest		69			49
Comprehensive income (loss) attributable to Core Laboratories N.V.	$	2,612		$	1,492

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

Return to Index

CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share data)


	Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
Common Shares
Balance at Beginning of Period	$	1,194		$	1,188
New share issuance		—			—
Balance at End of Period	$	1,194		$	1,188

Additional Paid-In Capital
Balance at Beginning of Period	$	102,254		$	101,120
Stock-based compensation		8,981			5,968
New share issuance		—			—
Balance at End of Period	$	111,235		$	107,088

Retained Earnings
Balance at Beginning of Period	$	85,949		$	68,349
Dividends paid		(467	)		(463	)
Net income (loss) attributable to Core Laboratories N.V.		2,373			(1,888	)
Balance at End of Period	$	87,855		$	65,998

Accumulated Other Comprehensive Income (Loss)
Balance at Beginning of Period	$	(3,777	)	$	(10,133	)
Interest rate swaps, net of income taxes		210			3,380
Pension and other postretirement benefit plans, net of income taxes		29			—
Balance at End of Period	$	(3,538	)	$	(6,753	)

Treasury Shares
Balance at Beginning of Period	$	(1,362	)	$	(4,075	)
Stock-based compensation		3			259
Repurchase of common shares		(1	)		(1,920	)
Balance at End of Period	$	(1,360	)	$	(5,736	)

Non-Controlling Interest
Balance at Beginning of Period	$	4,696		$	4,552
Net income (loss) attributable to non-controlling interest		69			49
Balance at End of Period	$	4,765		$	4,601

Total Equity
Balance at Beginning of Period	$	188,954		$	161,001
Stock-based compensation		8,984			6,227
Repurchase of common shares		(1	)		(1,920	)
Dividends paid		(467	)		(463	)
New share issuance		—			—
Interest rate swaps, net of income taxes		210			3,380
Pension and other postretirement benefit plans, net of income taxes		29			—
Net income (loss)		2,442			(1,839	)
Balance at End of Period	$	200,151		$	166,386

Cash Dividends per Share	$	0.01		$	0.01

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

Return to Index

CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(In thousands, except share and per share data)


	Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
Common Shares - Number of shares issued
Balance at Beginning of Period		46,699,102			46,454,264
New share issuance		2,000			—
Balance at End of Period		46,701,102			46,454,264

Treasury Shares - Number of shares
Balance at Beginning of Period		(67,168	)		(104,866	)
Stock-based compensation		150			9,299
Repurchase of common shares		(57	)		(75,020	)
Balance at End of Period		(67,075	)		(170,587	)

Common Shares - Number of shares outstanding
Balance at Beginning of Period		46,631,934			46,349,397
New share issuance		2,000			—
Stock-based compensation		150			9,299
Repurchase of common shares		(57	)		(75,020	)
Balance at End of Period		46,634,027			46,283,676

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

Return to Index

CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,442		$	(1,839	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation		8,984			6,227
Depreciation and amortization		4,044			4,557
Changes in value of life insurance policies		(791	)		1,911
Deferred income taxes		936			1,698
Other non-cash items		1,049			391
Changes in assets and liabilities:
Accounts receivable		(4,024	)		(2,831	)
Inventories		(7,126	)		(2,498	)
Prepaid expenses and other current assets		(3,399	)		(3,952	)
Other assets		1,746			(571	)
Accounts payable		(7,078	)		3,693
Accrued expenses		587			4,136
Unearned revenues		10			(163	)
Other liabilities		(549	)		(5,469	)
Net cash provided by (used in) operating activities		(3,169	)		5,290
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(2,208	)		(2,297	)
Patents and other intangibles		90			(13	)
Proceeds from sale of assets		80			81
Proceeds from insurance recovery		—			583
Net proceeds on life insurance policies		—			2,074
Net cash provided by (used in) investing activities		(2,038	)		428
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt		(16,000	)		(14,000	)
Proceeds from long-term debt		24,000			15,000
Dividends paid		(466	)		(463	)
Repurchase of common shares		(1	)		(1,920	)
Equity related transaction costs		(1,285	)		—
Other financing activities		(184	)		(1	)
Net cash provided by (used in) financing activities		6,064			(1,384	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		857			4,334
CASH AND CASH EQUIVALENTS, beginning of period		15,428			17,703
CASH AND CASH EQUIVALENTS, end of period	$	16,285		$	22,037

Supplemental disclosures of cash flow information:
Cash payments for interest	$	2,956		$	2,508
Cash payments for income taxes	$	1,541		$	2,691

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

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CORE LABORATORIES N.V.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

References to "Core Lab", "Core Laboratories", the "Company", "we", "our" and similar phrases are used throughout this Quarterly Report on Form 10-Q ("Quarterly Report") and relate collectively to Core Laboratories N.V. and its consolidated subsidiaries.

We operate our business in two segments: (1) Reservoir Description and (2) Production Enhancement. These complementary operating segments provide different services and products and utilize different technologies for evaluating and improving reservoir performance and increasing oil and gas recovery from new and existing fields. For a description of the types of services and products offered by these operating segments, see Note 16 - Segment Reporting.

On January 17, 2023, the Company filed a proxy statement/prospectus announcing its intention to reorganize the Company’s corporate structure, which will include redomestication (the “Redomestication”) of the parent company from the Netherlands to the United States as Core Laboratories Inc., a Delaware corporation. The Company and its Board of Supervisory Directors believe that the Redomestication will enhance shareholder value over the long-term through simplifying the corporate structure, improving operational efficiencies and reducing administrative costs.

The Redomestication requires a shareholder vote for approval, which was conducted through an extraordinary general meeting of the Company’s shareholders on March 29, 2023, and received an affirmative vote. The transaction is expected to become effective approximately 30 days following the date of the extraordinary general meeting, on May 1, 2023.

The Redomestication will be completed through a series of steps, as follows:

(1) Core Laboratories N.V. will merge with and into Core Laboratories Luxembourg S.A, a wholly owned subsidiary of Core Laboratories N.V., with Core Laboratories Luxembourg S.A. surviving, and

(2) As soon as practicable thereafter, Core Laboratories Luxembourg S.A. will migrate out of Luxembourg and redomesticate into the State of Delaware, as Core Laboratories Inc., which will become the ultimate parent company.

Upon completion of the transaction, Core Laboratories N.V. shareholders will hold one share of common stock of Core Laboratories Inc. for each common share of Core Laboratories N.V. owned immediately prior to the Redomestication. The Company’s shares will continue to trade uninterrupted during and upon completion of the Redomestication. The common shares of Core Laboratories Inc. will remain listed on the New York Stock Exchange under the ticker symbol “CLB” and will be registered with the U.S. Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

2. SIGNIFICANT ACCOUNTING POLICIES UPDATE

Our significant accounting policies are detailed in Note 2 - Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report"). There have been no changes to the accounting policies during the three months ended March 31, 2023.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim consolidated financial statements include the accounts of Core Laboratories N.V. and its subsidiaries for which we have a controlling voting interest and/or a controlling financial interest. These financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Core Laboratories N.V.'s balance sheet information for the year ended December 31, 2022, was derived from the 2022 audited consolidated financial statements. Accordingly, these financial statements do not include all of the information and footnote disclosures required by U.S. GAAP

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for the annual financial statements and should be read in conjunction with the audited financial statements and the summary of significant accounting policies and notes thereto included in our 2022 Annual Report.

Core Laboratories N.V. uses the equity method of accounting for investments in which it has less than a majority interest and does not exercise control but does exert significant influence. Non-controlling interests have been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned. All inter-company transactions and balances have been eliminated in consolidation.

In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods presented have been included in these financial statements. Furthermore, the operating results presented for the three months ended March 31, 2023, may not necessarily be indicative of the results that may be expected for the year ending December 31, 2023.

Certain reclassifications were made to prior period amounts in order to conform to the current period presentation. These reclassifications had no impact on the reported net income or cash flows for the three months ended March 31, 2022.

Property, Plant and Equipment

We review our long-lived assets ("LLA") for impairment when events or changes in circumstances indicate that their net book value may not be recovered over their remaining service lives. Indicators of possible impairment may include significant declines in activity levels in regions where specific assets or groups of assets are located, extended periods of idle use, declining revenue or cash flow or overall changes in general market conditions.

The geopolitical conflict between Russia and Ukraine, which began in February 2022 and has continued through March 31, 2023, has resulted in disruptions to our operations in Ukraine and Russia. The Company has assessed the need for impairment testing for LLA in Russia and Ukraine as of March 31, 2023. As of March 31, 2023, all laboratory facilities, offices, and locations in Russia continued to operate and remained profitable, which formed the basis of our projections for evaluating impairment, and no specific asset impairments were identified. With regard to the Company’s operations and associated fixed assets in Ukraine, there is no damage to our facilities as of March 31, 2023. During the three months ended March 31, 2023, the Company has performed limited operations in Ukraine as the circumstances permit and intends to resume full operations in Ukraine at such time as we believe appropriate and safe for our local employees. Therefore, we determined there was no impairment for LLA in Ukraine as of March 31, 2023.

3. ACQUISITIONS AND DIVESTURES

We had no significant business acquisitions or divestures during the three months ended March 31, 2023 and 2022.

4. CONTRACT ASSETS AND LIABILITIES

The balance of contract assets and liabilities consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Contract assets:
Current	$	569	$	1,148
	$	569	$	1,148
Contract liabilities:
Current	$	794	$	907
Non-current		24		24
	$	818	$	931

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	March 31, 2023
Estimate of when contract liabilities will be recognized as revenue:
Within 12 months	$	794
Within 12 to 24 months		—
Greater than 24 months		24

The current portion of contract assets are included in our accounts receivable. The current portion of contract liabilities is included in unearned revenues and the non-current portion of contract liabilities is included in other long-term liabilities.

We did not recognize any impairment losses on our contract assets during the three months ended March 31, 2023 and 2022.

5. INVENTORIES

Inventories consist of the following (in thousands):


	March 31, 2023		December 31, 2022
Finished goods	$	32,247	$	26,534
Parts and materials		32,173		31,323
Work in progress		2,922		2,588
Total inventories	$	67,342	$	60,445

We include freight costs incurred for shipping inventory to our clients in the cost of product sales caption in the accompanying consolidated statements of operations.

6. LEASES

We have operating leases primarily consisting of office and lab space, machinery and equipment and vehicles. The components of lease expense are as follows (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Operating lease expense	$	4,489		$	4,169
Short-term lease expense		429			424
Variable lease expense		604			413
Total lease expense	$	5,522		$	5,006
Other information:
Operating cash flows - operating leases payments	$	4,165		$	4,621
Right of use assets obtained (released) in exchange for operating lease obligations	$	8,590		$	2,415
Weighted-average remaining lease term - operating leases	8.41 years			7.35 years
Weighted-average discount rate - operating leases		5.18	%		4.59	%

Scheduled undiscounted lease payments for non-cancellable leases consist of the following (in thousands):


	March 31, 2023
Remainder of 2023	$	10,650
2024		10,761
2025		8,730
2026		6,680
2027		5,513
Thereafter		26,772
Total undiscounted lease payments		69,106
Less: Imputed interest		(14,240	)
Total operating lease liabilities	$	54,866

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See Note 13 - Other (income) and expense, net regarding lease abandonments during the three months ended March 31, 2023.

7. LONG-TERM DEBT, NET

We have no significant finance lease obligations. Debt is summarized in the following table (in thousands):


	Interest Rate	Maturity Date	March 31, 2023			December 31, 2022
2011 Senior Notes Series B (1)	4.11%	September 30, 2023	$	75,000		$	75,000
2021 Senior Notes Series A (2)	4.09%	January 12, 2026		45,000			45,000
2021 Senior Notes Series B (2)	4.38%	January 12, 2028		15,000			15,000
Credit Facility				48,000			40,000
Total long-term debt				183,000			175,000
Less: Debt issuance costs				(2,560	)		(2,614	)
Long-term debt, net			$	180,440		$	172,386

(1) Interest is payable semi-annually on March 30 and September 30.

(2) Interest is payable semi-annually on June 30 and December 30.

We, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. ("CLIH") as issuer, have three series of senior notes outstanding with an aggregate principal amount of $135 million that were issued through private placement transactions. Series B of the 2011 Senior Notes was issued in 2011 (the "2011 Senior Notes"). Series A and Series B of the 2021 Senior Notes were issued and funded in 2021 (the "2021 Senior Notes"). The 2021 Senior Notes and the 2011 Senior Notes are collectively the "Senior Notes". We intend to repay the 2011 Senior Notes Series B at maturity in September 2023 using borrowings under our existing long-term credit facility; therefore, we continue to classify them as long-term debt.

We, along with our wholly owned subsidiary CLIH, have a credit facility, the Eighth Amended and Restated Credit Agreement (as amended, the "Credit Facility") for an aggregate borrowing commitment of $135 million with a $50 million “accordion” feature. The Credit Facility is secured by first priority interests in (1) substantially all of the tangible and intangible personal property, and equity interest of CLIH and certain of the Company's U.S. and foreign subsidiary companies; and (2) instruments evidencing intercompany indebtedness owing to the Company, CLIH and certain of the Company's U.S. and foreign subsidiary companies. Under the Credit Facility, the Secured Overnight Financing Rate ("SOFR") plus 2.00% to SOFR plus 3.00% will be applied to outstanding borrowings. Any outstanding balance under the Credit Facility is due at maturity on July 25, 2026, subject to springing maturity on July 12, 2025, if any portion of the Company’s 2021 Senior Notes Series A due January 12, 2026, in the aggregate principal amount of $45 million, remain outstanding on July 12, 2025, unless the Company's liquidity equals or exceeds the principal amount of the 2021 Senior Notes Series A outstanding on such date. The available capacity at any point in time is reduced by outstanding borrowings and outstanding letters of credit which totaled approximately $9 million at March 31, 2023, resulting in an available borrowing capacity under the Credit Facility of approximately $78 million. In addition to indebtedness under the Credit Facility, we had approximately $6 million of outstanding letters of credit and performance guarantees and bonds from other sources as of March 31, 2023.

The terms of the Credit Facility and Senior Notes require us to meet certain covenants, including, but not limited to, an interest coverage ratio (calculated as consolidated EBITDA divided by interest expense) and a leverage ratio (calculated as consolidated net indebtedness divided by consolidated EBITDA), where consolidated EBITDA (as defined in each agreement) and interest expense are calculated using the most recent four fiscal quarters. The Credit Facility and Senior Notes include a cross-default provision, whereby a default under one agreement may trigger a default in the other agreements. The Credit Facility has more restrictive covenants with a minimum interest coverage ratio of 3.00 to 1.00 and permits a maximum leverage ratio of 2.50 to 1.00. The Credit Facility allows non-cash charges such as impairment of assets, stock compensation and other non-cash charges to be added back in the calculation of consolidated EBITDA. The terms of our Credit Facility also allow us to negotiate in good faith to amend any ratio or requirement to preserve the original intent of the agreement if any change in accounting principles would affect the computation of any financial ratio or covenant of the Credit Facility. In accordance with the terms of the Credit Facility, our leverage ratio is 2.18, and our interest coverage ratio is 6.20, each for the period ended

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March 31, 2023. We believe that we are in compliance with all covenants contained in our Credit Facility and Senior Notes. Certain of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility and Senior Notes.

See Note 11 - Derivative Instruments and Hedging Activities for additional information regarding interest rate swap agreements we have entered to fix the underlying risk-free rate on our Credit Facility and long-term debt.

The estimated fair value of total debt at March 31, 2023, and December 31, 2022, approximated the book value of total debt. The fair value was estimated using Level 2 inputs by calculating the sum of the discounted future interest and principal payments through the maturity date.

8. PENSION

Prior to January 2020, we provided a noncontributory defined benefit pension plan covering substantially all of our Dutch employees ("Dutch Plan") who were hired prior to 2000. This pension benefit was based on years of service and final pay or career average pay, depending on when the employee began participating. The Dutch Plan was curtailed prior to January 2020, and these employees have been moved into the Dutch defined contribution plan. However, the unconditional indexation for this group of participants continues for so long as they remain in active service with the Company.

The following table summarizes the components of net periodic pension cost under the Dutch Plan (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Interest cost	$	367		$	154
Expected return on plan assets		(326	)		(145	)
Net periodic pension cost	$	41		$	9

9. COMMITMENTS AND CONTINGENCIES

We have been and may from time to time be named as a defendant in legal actions that arise in the ordinary course of business. These include, but are not limited to, employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with the provision of our services and products. A liability is accrued when a loss is both probable and can be reasonably estimated.

See Note 7 - Long-term Debt, net for amounts committed under letters of credits and performance guarantees and bonds.

10. EQUITY

Common Shares

On June 9, 2022, we entered into an Equity Distribution Agreement with certain banks (the "2022 Equity Distribution Agreement") for the issuance and sale of up to $60.0 million of our common shares. Under the terms of the 2022 Equity Distribution Agreement, sales of our common shares may be made by any method deemed to be an "at-the-market offering" as defined in Rule 415 under the Securities Act of 1933. The Company elects when to issue a placement notice which may, among other sales parameters, specify the number of shares to be sold, the minimum price per share to be accepted, the daily volume of shares that may be sold and the range of dates when shares may be sold. The Company intends to use the net proceeds from any offerings for general corporate purposes. Pending these uses, Core Lab intends to invest the net proceeds in investment-grade interest-bearing obligations, highly liquid cash equivalents, certificates of deposit or direct or guaranteed obligations of the United States of America. As of the date of this report, the Company has not sold any shares under the 2022 Equity Distribution Agreement.

During the three months ended March 31, 2023, we distributed 2,000 common shares upon vesting of stock-based awards.

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Treasury Shares

During the three months ended March 31, 2023, we distributed 150 treasury shares upon vesting of stock-based awards. During the three months ended March 31, 2023, we repurchased 57 of our common shares for $1 thousand, which were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens resulting from the issuance of common shares under that plan. Such common shares, unless canceled, may be reissued for a variety of purposes such as future acquisitions, non-employee director stock awards or employee stock awards.

Dividend Policy

In March 2023, we paid a quarterly cash dividend of $0.01 per common share. In addition, on April 26, 2023, we declared a quarterly dividend of $0.01 per common share for shareholders of record on May 8, 2023, and payable on May 30, 2023.

Accumulated Other Comprehensive Income (Loss)

Amounts recognized, net of income tax, in accumulated other comprehensive income (loss) consist of the following (in thousands):


	March 31, 2023			December 31, 2022
Pension and other post-retirement benefit plans - unrecognized prior service costs and net actuarial loss	$	(5,079	)	$	(5,108	)
Interest rate swaps - net gain (loss) on fair value		1,541			1,331
Total accumulated other comprehensive income (loss)	$	(3,538	)	$	(3,777	)

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risks related to fluctuations in interest rates. To mitigate these risks, we may utilize derivative instruments in the form of interest rate swaps. We do not enter into derivative transactions for speculative purposes.

Under the Company's Credit Facility, the SOFR plus 2.00% to SOFR plus 3.00% will be applied to outstanding borrowings. See Note 7 - Long-Term Debt, Net for additional information. The Company has elected to apply the optional expedient for hedging relationships affected by reference rate reform. Accordingly, no outstanding balance on the Credit Facility with a SOFR rate or future long-term debt will preclude cash flow hedging with existing London Inter-Bank Offer Rate ("LIBOR") hedging instruments.

In August 2014, we entered into a swap agreement with a notional amount of $25 million ("2014 Variable-to-Fixed Swap"), and the LIBOR portion of the interest rate was fixed at 2.5% through August 29, 2024. In February 2020, we entered into a second swap agreement with a notional amount of $25 million ("2020 Variable-to-Fixed Swap"), and the LIBOR portion of the interest rate was fixed at 1.3% through February 28, 2025. These interest rate swap agreements were terminated, dedesignated and settled in March 2021. The hedging relationship is highly effective; therefore, gains and losses on these swaps will be reclassified into interest expense in accordance with the forecasted transactions or the scheduled interest payments on the Credit Facility. Losses on these swaps included in accumulated other comprehensive income (loss) as of March 31, 2023, are $0.8 million of which $0.7 million, is expected to be reclassified into earnings within the next 12 months as interest payments are made on the Company’s Credit Facility.

In March 2021, we entered into a new forward interest rate swap agreement for a notional amount of $60 million and carried the fair value of the terminated 2014 and 2020 Variable-to-Fixed Swaps into the new agreement in a "blend and extend" structured transaction. The purpose of this forward interest rate swap agreement is to fix the underlying risk-free rate, that would be associated with the anticipated issuance of new long-term debt by the Company in future periods. The forward interest rate swap would hedge the risk-free rate on forecasted long-term debt for a maximum of 11 years through March 2033. Risk associated with future changes in the 10-year LIBOR interest rates have been fixed up to a notional amount of $60 million

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with this instrument. The interest rate swap qualifies as a cash flow hedging instrument. This forward interest rate swap agreement was terminated and settled in April 2022. The hedging relationship is highly effective, therefore, the gain on the termination of the forward interest rate swap is included in accumulated other comprehensive income (loss). Upon issuing new long-term debt in future periods, amounts included in accumulated other comprehensive income (loss) will be reclassified into interest expense in accordance with the forecasted transactions or the scheduled interest payments on future long-term fixed rate debt. Gain on this swap included in accumulated other comprehensive income (loss) at March 31, 2023, is $2.3 million.

As of March 31, 2023, the aggregated gains and losses on these interest swaps and forward interest rate swaps that is included in accumulated other comprehensive income (loss) are a net gain of $1.5 million.

At March 31, 2023, we had fixed rate long-term debt aggregating $135 million and variable rate long-term debt aggregating $48 million.

The effect of the interest rate swaps on the consolidated statements of operations is as follows (in thousands):


	Three Months Ended
	March 31,
	2023		2022		Income Statement Classification
Derivatives designated as hedges:
5 year interest rate swap	$	83	$	89	Increase (decrease) to interest expense
10 year interest rate swap		183		165	Increase (decrease) to interest expense
	$	266	$	254

12. FINANCIAL INSTRUMENTS

The Company's only financial assets and liabilities which are measured at fair value on a recurring basis relate to certain aspects of the Company's benefit plans and our derivative instruments. We use the market approach to determine the fair value of these assets and liabilities using significant other observable inputs (Level 2) with the assistance of a third-party specialist. We do not have any assets or liabilities measured at fair value on a recurring basis using quoted prices in an active market (Level 1) or significant unobservable inputs (Level 3). Gains and losses related to the fair value changes in the deferred compensation assets and liabilities are recorded in general and administrative expense in the consolidated statements of operations.

The following table summarizes the fair value balances (in thousands):


			Fair Value Measurement at
			March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	24,579	$	—	$	24,579	$	—
	$	24,579	$	—	$	24,579	$	—
Liabilities:
Deferred compensation liabilities	$	17,347	$	—	$	17,347	$	—
	$	17,347	$	—	$	17,347	$	—

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			Fair Value Measurement at
			December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	23,787	$	—	$	23,787	$	—
	$	23,787	$	—	$	23,787	$	—
Liabilities:
Deferred compensation liabilities	$	16,284	$	—	$	16,284	$	—
	$	16,284	$	—	$	16,284	$	—

(1) Company-owned life insurance policies have cash surrender value and are intended to assist in funding deferred compensation liabilities and other benefit plans.

13. OTHER (INCOME) EXPENSE, NET

The components of other (income) expense, net, are as follows (in thousands):


	Three Months Ended
	March 31,
	2023			2022
(Gain) loss on sale of assets	$	96		$	(157	)
Results of non-consolidated subsidiaries		(137	)		(93	)
Foreign exchange (gain) loss, net		(144	)		(417	)
Rents and royalties		(145	)		(171	)
Return on pension assets and other pension costs		(326	)		(145	)
Loss on lease abandonment and other exit costs		641			—
Assets write-down		1,015			—
Severance and other charges		—			3,332
Insurance and other settlements		(604	)		(669	)
Other, net		(424	)		(43	)
Total other (income) expense, net	$	(28	)	$	1,637

During the three months ended March 31, 2023, we abandoned certain leases in the U.S. and Canada and incurred costs of $0.6 million. We integrated and relocated certain of our facilities in Canada and wrote down related leasehold improvements and right of use assets of $1.0 million.

During the three months ended March 31, 2023, the State of Louisiana expropriated the access road to one of our facilities and paid us a settlement of $0.6 million. During the three months ended March 31, 2022, we received insurance settlement of $0.7 million associated with business interruptions and property losses to certain facilities caused by the North America mid-continent winter storm in February 2021.

Foreign exchange (gain) loss, net by currency is summarized in the following table (in thousands):


	Three Months Ended
	March 31,
	2023			2022
British Pound	$	(251	)	$	(36	)
Canadian Dollar		58			73
Colombian Peso		53			98
Euro		84			(98	)
Russian Ruble		(251	)		(602	)
Other currencies, net		163			148
Foreign exchange (gain) loss, net	$	(144	)	$	(417	)

14. INCOME TAX EXPENSE (BENEFIT)

The Company recorded an income tax expense of $0.6 million and income tax benefit of $1.2 million for the three months ended March 31, 2023, and 2022, respectively. The effective tax rate for the three months ended March 31, 2023, was 20.0%

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recorded on income before income taxes of $3.1 million. The effective tax rate for the three months ended March 31, 2022, was 39.4% recorded on a loss before income taxes of $3.0 million. The tax rate for the three months ended March 31, 2022 was largely impacted by the release of withholding tax related to unrepatriated earnings of our Russian subsidiary, which are not expected to be distributed in the foreseeable future.

15. EARNINGS PER SHARE

We compute basic earnings per common share by dividing net income attributable to Core Laboratories N.V. by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the incremental effect of contingently issuable shares from performance and restricted stock awards, as determined using the treasury stock method. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of basic and diluted earnings per share (in thousands):


	Three Months Ended
	March 31,
	2023		2022
Weighted average common shares outstanding - basic		46,634		46,298
Effect of dilutive securities:
Restricted shares		105		—
Performance shares		742		—
Weighted average common shares outstanding - diluted		47,481		46,298

For the three months ended March 31, 2022, the number of outstanding performance and restricted shares of Core Laboratories N.V. common shares that were excluded from the diluted earnings per share calculation, as their impact would be antidilutive, were as follows (in thousands):

16. SEGMENT REPORTING

Segment Reporting

We operate our business in two segments. These complementary operating segments provide different services and products and utilize different technologies for evaluating and improving reservoir performance and increasing oil and gas recovery from new and existing fields.

•

Reservoir Description: Encompasses the characterization of petroleum reservoir rock and reservoir fluids samples to increase production and improve recovery of crude oil and natural gas from our clients' reservoirs. We provide laboratory-based analytical and field services to characterize properties of crude oil and crude oil-derived products to the oil and gas industry. We also provide proprietary and joint industry studies based on these types of analyses and manufacture associated laboratory equipment. In addition, we provide reservoir description capabilities that support various activities associated with energy transition projects, including services that support carbon capture, utilization and storage, hydrogen storage, geothermal projects, and the evaluation and appraisal of mining activities around lithium and other elements necessary for energy storage.

•

Production Enhancement: Includes services and manufactured products associated with reservoir well completions, perforations, stimulation, production and well abandonment. We provide integrated diagnostic services to evaluate and monitor the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

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We use the same accounting policies to prepare our operating segment results as are used to prepare our consolidated financial statements. All interest and other non-operating income (expense) is attributable to Corporate & Other and is not allocated to specific operating segments. Summarized financial information concerning our operating segments is shown in the following table (in thousands):

Reservoir
Description

Production
Enhancement

Corporate &
Other (1)

Consolidated

Three months ended March 31, 2023

Three Months Ended

March 31, 2022

Restricted shares

Performance shares

CORE LABORATORIES N V 10-Q