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

☒

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

For the quarterly period ended ~~March 31,~~ June 30, 2021

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

☐

~~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 LEAmstelveen
The Netherlands		Not Applicable
(Address of principal executive offices)		(Zip Code)

~~(31-20)~~ (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
Common Stock (par value EUR 0.02)	CLB	Euronext Amsterdam 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,~~July 28, 2021 was ~~46,306,196.~~

46,331,168.

CORE LABORATORIES N.V.

FORM 10-Q FOR THE QUARTER ENDED ~~MARCH 31,~~JUNE 30, 2021

INDEX

PART I - FINANCIAL INFORMATION


		Page

Item 1.	Financial Statements

	Consolidated Balance Sheets (Unaudited) at ~~March 31,~~June 30, 2021 and December 31, 2020	3

	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020	4

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020	56

	Consolidated Statements of Changes in Equity (Unaudited) for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020	67
	��
	Consolidated Statements of Cash Flows (Unaudited) for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020	89

	Notes to the Unaudited Interim Consolidated Financial Statements	910

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2021

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3235

Item 4.	Controls and Procedures	3235


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	3436

Item 1A.	Risk Factors	3436

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3436

Item 6.	Exhibits	3537

	Signature	3638

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, 2021			December 31, 2020			June 30, 2021			December 31, 2020
ASSETS	(Unaudited)						(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	27,806		$	13,806		$	33,617		$	13,806
Accounts receivable, net of allowance for credit losses of $3,919 and $4,068 at 2021 and 2020, respectively		86,567			83,192
Accounts receivable, net of allowance for credit losses of $3,809 and $4,068 at 2021 and 2020, respectively								93,217			83,192
Inventories		39,117			38,151			38,946			38,151
Prepaid expenses		13,107			14,797			12,231			14,797
Income taxes receivable		13,374			9,675			16,951			9,675
Other current assets		5,846			6,227			6,187			6,227
TOTAL CURRENT ASSETS		185,817			165,848			201,149			165,848
PROPERTY, PLANT AND EQUIPMENT, net		113,491			115,293
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $301,485 and $293,978 at 2021 and 2020, respectively								112,398			115,293
RIGHT OF USE ASSETS		70,295			66,385			66,482			66,385
INTANGIBLES, net		8,423			8,583
INTANGIBLES, net of accumulated amortization of $17,195 and $16,833 at 2021 and 2020, respectively								8,317			8,583
GOODWILL		99,445			99,445			99,445			99,445
DEFERRED TAX ASSETS, net		67,966			72,775			70,083			72,775
OTHER ASSETS		39,009			40,250			40,551			40,250
TOTAL ASSETS	$	584,446		$	568,579		$	598,425		$	568,579
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	25,500		$	23,028		$	30,383		$	23,028
Accrued payroll and related costs		23,063			26,526			20,477			26,526
Taxes other than payroll and income		4,497			6,556			7,230			6,556
Unearned revenues		5,864			5,457			6,410			5,457
Operating lease liabilities		12,357			11,437			12,150			11,437
Income taxes payable		7,423			8,347			7,392			8,347
Other current liabilities		6,829			8,399			6,812			8,399
TOTAL CURRENT LIABILITIES		85,533			89,750			90,854			89,750
LONG-TERM DEBT, net		208,166			259,433			208,305			259,433
LONG-TERM OPERATING LEASE LIABILITIES		58,635			56,108			55,121			56,108
DEFERRED COMPENSATION		38,005			39,145			38,846			39,145
DEFERRED TAX LIABILITIES, net		20,480			20,585			20,677			20,585
OTHER LONG-TERM LIABILITIES		27,581			27,985			30,278			27,985
COMMITMENTS AND CONTINGENCIES
EQUITY:
Preference shares, EUR 0.02 par value; 6,000,000 shares authorized, NaN issued or outstanding		0			0			0			0
Common shares, EUR 0.02 par value; 200,000,000 shares authorized, 46,454,264 issued and 46,240,481 outstanding at 2021 and 44,796,252 issued and 44,572,801 outstanding at 2020		1,188			1,148
Common shares, EUR 0.02 par value; 200,000,000 shares authorized, 46,454,264 issued and 46,325,530 outstanding at 2021 and 44,796,252 issued and 44,572,801 outstanding at 2020								1,188			1,148
Additional paid-in capital		103,358			41,184			98,255			41,184
Retained earnings		58,115			50,456			65,712			50,456
Accumulated other comprehensive income (loss)		(7,861	)		(7,200	)		(10,138	)		(7,200	)
Treasury shares, at cost, 213,783 at 2021 and 223,451 at 2020		(12,916	)		(14,075	)
Treasury shares, at cost, 128,734 at 2021 and 223,451 at 2020								(4,992	)		(14,075	)
Total Core Laboratories N.V. shareholders' equity		141,884			71,513			150,025			71,513
Non-controlling interest		4,162			4,060			4,319			4,060
TOTAL EQUITY		146,046			75,573			154,344			75,573
TOTAL LIABILITIES AND EQUITY	$	584,446		$	568,579		$	598,425		$	568,579

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						Three Months Ended
	March 31,						June 30,
	2021			2020			2021			2020
	(Unaudited)						(Unaudited)
REVENUE:
Services	$	83,982		$	109,967		$	86,263		$	91,009
Product sales		24,401			42,433			32,482			24,727
Total revenue		108,383			152,400			118,745			115,736
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		63,533			80,941			67,098			67,054
Cost of product sales, exclusive of depreciation expense and impairment and other charges shown below		20,617			34,190
Cost of product sales, exclusive of depreciation expense and inventory write-down shown below								26,743			23,626
General and administrative expense, exclusive of depreciation expense shown below		8,461			19,567			9,670			9,221
Depreciation		4,633			5,042			4,576			5,069
Amortization		238			399			175			356
Impairments and other charges		—			122,204
Inventory write-down								0			9,932
Other (income) expense, net		(721	)		(970	)		(2,317	)		3,045
OPERATING INCOME (LOSS)		11,622			(108,973	)		12,800			(2,567	)
Interest expense		1,363			3,411			2,530			3,369
Income (loss) from continuing operations before income tax expense		10,259			(112,384	)
Income (loss) from continuing operations before income taxes								10,270			(5,936	)
Income tax expense (benefit)		2,052			(4,046	)		2,053			(261	)
Income (loss) from continuing operations		8,207			(108,338	)		8,217			(5,675	)
Income (loss) from discontinued operations, net of income taxes		—			—			0			0
Net income (loss)		8,207			(108,338	)		8,217			(5,675	)
Net income attributable to non-controlling interest		102			83
Net income (loss) attributable to non-controlling interest								157			41
Net income (loss) attributable to Core Laboratories N.V.	$	8,105		$	(108,421	)	$	8,060		$	(5,716	)

EARNINGS (LOSS) PER SHARE INFORMATION:
Basic earnings (loss) per share from continuing operations	$	0.18		$	(2.44	)	$	0.18		$	(0.13	)
Basic earnings (loss) per share from discontinued operations	$	—		$	—		$	0		$	0
Basic earnings (loss) per share attributable to Core Laboratories N.V.	$	0.18		$	(2.44	)	$	0.17		$	(0.13	)

Diluted earnings (loss) per share from continuing operations	$	0.18		$	(2.44	)	$	0.17		$	(0.13	)
Diluted earnings (loss) per share from discontinued operations	$	—		$	—		$	0		$	0
Diluted earnings (loss) per share attributable to Core Laboratories N.V.	$	0.18		$	(2.44	)	$	0.17		$	(0.13	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		45,177			44,447			46,319			44,470
Assuming Dilution		45,964			44,447			47,103			44,470

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)~~OPERATIONS

(In ~~thousands)~~thousands, except per share data)

Three Months Ended

March 31,

2021

2020

(Unaudited)

Net income (loss)

$
8,207

$
(108,338
)
Other comprehensive income (loss):

Derivatives:

Gain (loss) on fair value of interest rate swaps

(298
)

(2,329
)
Interest rate swap amount reclassified to net income (loss)

(341
)

47

Income tax expense (benefit) on interest rate swaps reclassified to net income (loss)

(22
)

373

Total interest rate swaps

(661
)

(1,909
)
Total other comprehensive income (loss)

(661
)

(1,909
)
Comprehensive income (loss)

7,546

(110,247
)
Comprehensive income (loss) attributable to non-controlling interest

102

83

Comprehensive income (loss) attributable to Core Laboratories N.V.

$
7,444

$
(110,330
)


	Six Months Ended
	June 30,
	2021			2020
	(Unaudited)
REVENUE:
Services	$	170,245		$	200,976
Product sales		56,883			67,160
Total revenue		227,128			268,136
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		130,631			147,995
Cost of product sales, exclusive of depreciation expense and inventory write-down shown below		47,360			57,816
General and administrative expense, exclusive of depreciation expense shown below		18,131			28,788
Depreciation		9,209			10,111
Amortization		413			755
Impairments and other charges		0			122,204
Inventory write-down		0			9,932
Other (income) expense, net		(3,038	)		2,075
OPERATING INCOME (LOSS)		24,422			(111,540	)
Interest expense		3,893			6,780
Income (loss) from continuing operations before income taxes		20,529			(118,320	)
Income tax expense (benefit)		4,105			(4,307	)
Income (loss) from continuing operations		16,424			(114,013	)
Income (loss) from discontinued operations, net of income taxes		0			0
Net income (loss)		16,424			(114,013	)
Net income (loss) attributable to non-controlling interest		259			124
Net income (loss) attributable to Core Laboratories N.V.	$	16,165		$	(114,137	)

EARNINGS (LOSS) PER SHARE INFORMATION:
Basic earnings (loss) per share from continuing operations	$	0.36		$	(2.57	)
Basic earnings (loss) per share from discontinued operations	$	0		$	0
Basic earnings (loss) per share attributable to Core Laboratories N.V.	$	0.35		$	(2.57	)

Diluted earnings (loss) per share from continuing operations	$	0.35		$	(2.57	)
Diluted earnings (loss) per share from discontinued operations	$	0		$	0
Diluted earnings (loss) per share attributable to Core Laboratories N.V.	$	0.35		$	(2.57	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		45,751			44,459
Assuming Dilution		46,514			44,459

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~~COMPREHENSIVE INCOME (LOSS)

(In ~~thousands, except share and per share data)~~thousands)

Three Months Ended

March 31,

2021

2020

(Unaudited)

Common Shares

Balance at Beginning of Period

$
1,148

$
1,148

New share issuance

40

—

Balance at End of Period

$
1,188

$
1,148

Additional Paid-In Capital

Balance at Beginning of Period

$
41,184

$
51,872

Stock-based compensation

3,075

9,110

New share issuance

59,099

—

Balance at End of Period

$
103,358

$
60,982

Retained Earnings

Balance at Beginning of Period

$
50,456

$
160,539

Dividends paid

(446
)

(11,111
)
Net income (loss) attributable to Core Laboratories N.V.

8,105

(108,421
)
Balance at End of Period

$
58,115

$
41,007

Accumulated Other Comprehensive Income (Loss)

Balance at Beginning of Period

$
(7,200
)

$
(6,330
)
Interest rate swaps, net of tax

(661
)

(1,909
)
Balance at End of Period

$
(7,861
)

$
(8,239
)

Treasury Shares

Balance at Beginning of Period

$
(14,075
)

$
(29,364
)
Stock-based compensation

1,330

1,420

Repurchase of common shares

(171
)

(1,238
)
Balance at End of Period

$
(12,916
)

$
(29,182
)

Non-Controlling Interest

Balance at Beginning of Period

$
4,060

$
4,275

Net income (loss) attributable to non-controlling interest

102

83

Balance at End of Period

$
4,162

$
4,358

Total Equity

Balance at Beginning of Period

$
75,573

$
182,140

Stock-based compensation

4,405

10,530

Repurchase of common shares

(171
)

(1,238
)
Dividends paid

(446
)

(11,111
)
New share issuance

59,139

—

Interest rate swaps, net of tax

(661
)

(1,909
)
Net income (loss)

8,207

(108,338
)
Balance at End of Period

$
146,046

$
70,074

Cash Dividends per Share

$
0.01

$
0.25


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(Unaudited)
Net income (loss)	$	8,217		$	(5,675	)	$	16,424		$	(114,013	)
Other comprehensive income (loss):
Derivatives:
Gain (loss) on fair value of interest rate swaps		(2,910	)		(461	)		(3,208	)		(2,790	)
Interest rate swap amount reclassified to net income (loss)		0			176			(341	)		223
Income tax expense (benefit) on interest rate swaps reclassified to net income (loss)		633			166			611			539
Total interest rate swaps		(2,277	)		(119	)		(2,938	)		(2,028	)
Total other comprehensive income (loss)		(2,277	)		(119	)		(2,938	)		(2,028	)
Comprehensive income (loss)		5,940			(5,794	)		13,486			(116,041	)
Comprehensive income (loss) attributable to non-controlling interest		157			41			259			124
Comprehensive income (loss) attributable to Core Laboratories N.V.	$	5,783		$	(5,835	)	$	13,227		$	(116,165	)

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,						Three Months Ended						Six Months Ended
	2021			2020			June 30,						June 30,
Common Shares - Number of shares issued	(Unaudited)
							2021			2020			2021			2020
							(Unaudited)
Common Shares
Balance at Beginning of Period		44,796,252			44,796,252		$	1,188		$	1,148		$	1,148		$	1,148
New share issuance		1,658,012			—			—			—			40			—
Balance at End of Period		46,454,264			44,796,252		$	1,188		$	1,148		$	1,188		$	1,148

Treasury Shares - Number of shares
Additional Paid-In Capital
Balance at Beginning of Period							$	103,358		$	60,982		$	41,184		$	51,872
Stock-based compensation								(5,103	)		(81	)		(2,028	)		9,029
New share issuance								—			—			59,099			—
Balance at End of Period							$	98,255		$	60,901		$	98,255		$	60,901

Retained Earnings
Balance at Beginning of Period							$	58,115		$	41,007		$	50,456		$	160,539
Dividends paid								(463	)		(445	)		(909	)		(11,556	)
Net income (loss) attributable to Core Laboratories N.V.								8,060			(5,716	)		16,165			(114,137	)
Balance at End of Period							$	65,712		$	34,846		$	65,712		$	34,846

Accumulated Other Comprehensive Income (Loss)
Balance at Beginning of Period							$	(7,861	)	$	(8,239	)	$	(7,200	)	$	(6,330	)
Interest rate swaps, net of income taxes								(2,277	)		(119	)		(2,938	)		(2,028	)
Balance at End of Period							$	(10,138	)	$	(8,358	)	$	(10,138	)	$	(8,358	)

Treasury Shares
Balance at Beginning of Period		(223,451	)		(330,690	)	$	(12,916	)	$	(29,182	)	$	(14,075	)	$	(29,364	)
Stock-based compensation		14,449			12,356			8,784			2,946			10,114			4,366
Repurchase of common shares		(4,781	)		(33,741	)		(860	)		(198	)		(1,031	)		(1,436	)
Balance at End of Period		(213,783	)		(352,075	)	$	(4,992	)	$	(26,434	)	$	(4,992	)	$	(26,434	)

Common Shares - Number of shares outstanding
Non-Controlling Interest
Balance at Beginning of Period		44,572,801			44,465,562		$	4,162		$	4,358		$	4,060		$	4,275
New share issuance		1,658,012			—
Non-controlling interest dividends								—			(355	)		—			(355	)
Net income (loss) attributable to non-controlling interest								157			41			259			124
Balance at End of Period							$	4,319		$	4,044		$	4,319		$	4,044

Total Equity
Balance at Beginning of Period							$	146,046		$	70,074		$	75,573		$	182,140
Stock-based compensation		14,449			12,356			3,681			2,865			8,086			13,395
Repurchase of common shares		(4,781	)		(33,741	)		(860	)		(198	)		(1,031	)		(1,436	)
Dividends paid								(463	)		(445	)		(909	)		(11,556	)
Non-controlling interest dividends								—			(355	)		—			(355	)
New share issuance								—			—			59,139			—
Interest rate swaps, net of income taxes								(2,277	)		(119	)		(2,938	)		(2,028	)
Net income (loss)								8,217			(5,675	)		16,424			(114,013	)
Balance at End of Period		46,240,481			44,444,177		$	154,344		$	66,147		$	154,344		$	66,147

Cash Dividends per Share							$	0.01		$	0.01		$	0.02		$	0.26

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~~CHANGES IN EQUITY (Continued)

(In ~~thousands)~~

Three Months Ended

March 31,

2021

2020

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Income (loss) from continuing operations

$
8,207

$
(108,338
)
Income (loss) from discontinued operations, net of tax

—

—

Net income (loss)

8,207

(108,338
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock-based compensation

4,405

10,530

Depreciation and amortization

4,871

5,441

Changes to value of life insurance policies

496

2,328

Deferred income taxes

4,704

(7,374
)
Impairments and other charges

—

122,204

Other non-cash items

(632
)

201

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable

(3,180
)

4,784

Inventories

(400
)

(2,285
)
Prepaid expenses and other current assets

(1,628
)

1,724

Other assets

(850
)

4,931

Accounts payable

2,265

132

Accrued expenses

(8,012
)

(3,163
)
Unearned revenues

407

(2,171
)
Other liabilities

(2,666
)

(6,919
)
Net cash provided by operating activities

7,987

22,025

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(2,772
)

(3,340
)
Patents and other intangibles

(78
)

(77
)
Proceeds from sale of assets

218

—

Premiums on life insurance policies

1,562

(467
)
Net cash used in investing activities

(1,070
)

(3,884
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of long-term debt

(119,000
)

(20,000
)
Proceeds from long-term debt

68,000

17,000

Proceeds from issuance of common stock

59,139

—

Dividends paid

(446
)

(11,111
)
Repurchase of common shares

(171
)

(1,238
)
Other financing activities

(439
)

6

Net cash provided by (used in) financing activities

7,083

(15,343
)
NET CHANGE IN CASH AND CASH EQUIVALENTS

14,000

2,798

CASH AND CASH EQUIVALENTS, beginning of period

13,806

11,092

CASH AND CASH EQUIVALENTS, end of period

$
27,806

$
13,890

Supplemental disclosures of cash flow information:

Cash payments for interest

$
3,739

$
4,523

Cash payments for income taxes

$
1,429

$
3,117

thousands, except share and per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Common Shares - Number of shares issued	(Unaudited)
Balance at Beginning of Period		46,454,264			44,796,252			44,796,252			44,796,252
New share issuance		—			—			1,658,012			—
Balance at End of Period		46,454,264			44,796,252			46,454,264			44,796,252

Treasury Shares - Number of shares
Balance at Beginning of Period		(213,783	)		(352,075	)		(223,451	)		(330,690	)
Stock-based compensation		114,131			46,849			128,580			59,205
Repurchase of common shares		(29,082	)		(13,759	)		(33,863	)		(47,500	)
Balance at End of Period		(128,734	)		(318,985	)		(128,734	)		(318,985	)

Common Shares - Number of shares outstanding
Balance at Beginning of Period		46,240,481			44,444,177			44,572,801			44,465,562
New share issuance		—			—			1,658,012			—
Stock-based compensation		114,131			46,849			128,580			59,205
Repurchase of common shares		(29,082	)		(13,759	)		(33,863	)		(47,500	)
Balance at End of Period		46,325,530			44,477,267			46,325,530			44,477,267

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

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CORE LABORATORIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Six Months Ended
	June 30,
	2021			2020
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations	$	16,424		$	(114,013	)
Income (loss) from discontinued operations, net of income taxes		0			0
Net income (loss)		16,424			(114,013	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation		8,086			13,395
Depreciation and amortization		9,622			10,866
Changes to value of life insurance policies		1,501			1,490
Deferred income taxes		2,732			(7,554	)
Impairments, inventory write-down and other charges		0			132,136
Gain on sale of business		(1,012	)		0
Other non-cash items		(1,170	)		927
Changes in assets and liabilities, net of effect of acquisitions and divestures:
Accounts receivable		(10,013	)		29,072
Inventories		480			(1,298	)
Prepaid expenses and other current assets		(4,084	)		956
Other assets		(3,479	)		2,634
Accounts payable		6,536			(12,211	)
Accrued expenses		(7,795	)		2,294
Unearned revenues		953			(2,868	)
Other liabilities		(1,308	)		(6,805	)
Net cash provided by operating activities		17,473			49,021
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(5,657	)		(6,406	)
Patents and other intangibles		(146	)		(272	)
Proceeds from sale of assets		276			435
Net proceeds (premiums) on life insurance policies		1,636			(913	)
Proceeds from sale of business, net of cash sold		513			0
Net cash used in investing activities		(3,378	)		(7,156	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt		(119,000	)		(46,000	)
Proceeds from long-term debt		68,000			27,000
Proceeds from issuance of common stock		59,139			0
Dividends paid		(909	)		(11,556	)
Repurchase of common shares		(1,031	)		(1,436	)
Other financing activities		(483	)		(7	)
Net cash provided by (used in) financing activities		5,716			(31,999	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		19,811			9,866
CASH AND CASH EQUIVALENTS, beginning of period		13,806			11,092
CASH AND CASH EQUIVALENTS, end of period	$	33,617		$	20,958

Supplemental disclosures of cash flow information:
Cash payments for interest	$	5,489		$	5,911
Cash payments for income taxes	$	5,069		$	4,370

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

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CORE LABORATORIES N.V.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

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, 2020 was derived from the 2020 audited consolidated financial statements. Accordingly, these financial statements do not include all of the information and footnote disclosures required by U.S. GAAP 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 Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report"). Core Laboratories N.V.'s balance sheet information for the year ended December 31, 2020 was derived from the 2020 audited consolidated financial statements but does not include all disclosures in accordance with U.S. GAAP.

Core Laboratories N.V. uses the equity method of accounting for investments in which it has less than a majority interest and over which it does not exercise control but does exert significant influence. We use the cost method to record certain other investments in which we own less than ~~20%~~20% of the outstanding equity and do not exercise control or exert significant influence. Non-controlling interests have been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than ~~100%~~100% owned. 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 and six months ended ~~March 31,~~June 30, 2021 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2021.

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

We operate our business in 2 reportable segments. These complementary segments provide different services and products and utilize different technologies for 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.

•

Production Enhancement: Includes services and manufactured products relating to reservoir well completions, perforations, stimulation and production. 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.

•

~~Reservoir Description:~~ Encompasses the characterization of petroleum reservoir rock, fluid and gas samples to increase production and improve recovery of oil and gas from our clients' reservoirs. We provide laboratory based analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry. We also provide proprietary and joint industry studies based on these types of analysis.

•

~~Production Enhancement:~~ Includes services and products relating to reservoir well completions, perforations, stimulations and production. 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.

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 and six months ended ~~March 31,~~June 30, 2020.

2. SIGNIFICANT ACCOUNTING POLICIES UPDATE

Our significant accounting policies are detailed in "Note 2: Summary of Significant Accounting Policies" of our 2020 Annual Report.

3. CONTRACT ASSETS AND CONTRACT LIABILITIES

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


	June 30, 2021		December 31, 2020
Contract assets
Current	$	2,015	$	1,238
	$	2,015	$	1,238
Contract liabilities
Current	$	1,167	$	953
Non-current		511		293
	$	1,678	$	1,246


	June 30, 2021
Estimate of when contract liabilities will be recognized as revenue:
Within 12 months	$	1,167
Within 12 to 24 months		511
Greater than 24 months		0

3.The current portion of contract assets are included in our accounts receivable as of June 30, 2021 and 2020.

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 0t recognize any impairment losses on our receivables and contract assets for the three and six months ended June 30, 2021 and 2020.

4. ACQUISITIONS AND DIVESTURES

We had 0 significant business acquisitions or divestures during the three and six months ended June 30, 2021 and 2020.

5. INVENTORIES

Inventories consisted of the following (in thousands):


	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Finished goods	$	17,921	$	16,461	$	18,009	$	16,461
Parts and materials		18,241		19,098		17,337		19,098
Work in progress		2,955		2,592		3,600		2,592
Total inventories	$	39,117	$	38,151	$	38,946	$	38,151

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

6. LEASES

~~4. CONTRACT ASSETS AND CONTRACT LIABILITIES~~We have operating leases primarily consisting of offices and lab space, machinery and equipment and vehicles. The components of lease expense are as follows (in thousands):

~~The balance of contract assets and contract liabilities consisted~~11

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Operating lease expense	$	4,283		$	4,286		$	8,632		$	8,629
Short-term lease expense		460			402			831			864
Variable lease expense		339			351			771			771
Total lease expense	$	5,082		$	5,039		$	10,234		$	10,264
Other information:
Operating cash flows from operating leases	$	4,329		$	4,431		$	8,198		$	8,942
Right of use assets obtained in exchange for new operating lease obligations	$	1,237		$	(728	)	$	3,649		$	3,008
Weighted-average remaining lease term - operating leases	8.14 years			8.71 years			8.14 years			8.71 years
Weighted-average discount rate - operating leases		4.66	%		4.90	%		4.66	%		4.90	%

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


	June 30, 2021
Remainder of 2021	$	7,205
2022		13,613
2023		11,392
2024		9,035
2025		7,903
Thereafter		31,635
Total undiscounted lease payments		80,783
Less: Imputed interest		(13,512	)
Total operating lease liabilities	$	67,271

March 31,
2021

December 31,
2020

Contract assets

Current

$
1,180

$
1,238

Non-Current

—

—

$
1,180

$
1,238

Contract Liabilities

Current

$
1,074

$
953

Non-current

249

293

$
1,323

$
1,246

March 31,
2021

Estimate of when contract liabilities will be recognized as revenue

within 12 months

$
1,074

within 12 to 24 months

249

greater than 24 months

0

~~The current portion of contract assets are included in our accounts receivable as of March 31, 2021 and 2020.~~

The current portion of contract liabilities is included in unearned revenue and the non-current portion of contract liabilities is included in other long-term liabilities on the consolidated balance sheet. We did 0t recognize any impairment losses on our receivables and contract assets for the three months ended March 31, 2021 and 2020.

~~5. ACQUISITIONS~~

~~We had 0 significant acquisitions during the three months ended March 31, 2021 and 2020.~~

6.7. LONG-TERM DEBT, NET

We have 0 financing lease obligations.

Long-term debt is as follows (in thousands):


	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
2011 Senior Notes	$	150,000		$	150,000		$	150,000		$	150,000
2021 Senior Notes		60,000			—			60,000			0
Credit Facility		—			111,000			0			111,000
Total debt		210,000			261,000
Total long-term debt								210,000			261,000
Less: Debt issuance costs		(1,834	)		(1,567	)		(1,695	)		(1,567	)
Long-term debt, net	$	208,166		$	259,433		$	208,305		$	259,433

~~Return to Index~~

We have 4 series of senior notes outstanding with an aggregate principal amount of ~~$210~~$210 million issued ~~through~~in private placement transactions. Two series of the notes were issued in 2011 (“2011 Senior Notes”). Series A of the 2011 Senior Notes consists of ~~$75~~$75 million in aggregate principal amount of notes that bear interest at a fixed rate of ~~4.01%~~4.01% and are due in full on September 30, ~~2021.~~2021. Because we intend to draw on our Credit Facility (as defined below) as needed to retire Series A of the 2011 Senior Notes and our Credit Facility is classified as long-term debt, we have continued to classify the 2011 Senior Notes as long-term. Series B of the 2011 Senior Notes consists of ~~$75~~$75 million in aggregate principal amount of notes that bear interest at a fixed rate of ~~4.11%~~4.11% and are due in full on September 30, ~~2023.~~2023. Interest on each series of the 2011 Senior Notes is payable semi-annually on March 30 and September 30.

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On October 16, 2020, we, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. as issuer, entered into 2 new series of senior notes with aggregate principal amount of ~~$60~~$60 million in a private placement transaction (“2021 Senior Notes” and together with the 2011 Senior Notes, the “Senior Notes”). The 2021 Senior Notes were issued and funded on January 12, 2021. Series A of the 2021 Senior Notes consists of ~~$45~~$45 million in aggregate principal amount that bear interest at a fixed rate of ~~4.09%~~4.09% and are due in full on January 12, ~~2026.~~2026. Series B of the 2021 Senior Notes consists of ~~$15~~$15 million in aggregate principal amount that bear interest at a fixed rate of ~~4.38%~~4.38% and are due in full on January 12, ~~2028.~~2028. Interest on each series of the ~~2020~~2021 Senior Notes is payable semi-annually on June 30 and December 30, commencing on June 30, 2021.

On June 22, 2020, we entered into Amendment No. 1 (the “Amendment”) to the Seventh Amended and Restated Credit Agreement, dated June 19, 2018 (as amended, the “Credit Facility”). The Amendment increases 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 as follows:


Quarter ending	Maximum leverage ratio permitted
June 30, 2020 up to and including June 30, 2021		3.00
September 30, 2021		2.75
December 31, 2021 and thereafter		2.50

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%~~1.500% to LIBOR plus ~~2.875%~~2.875% and included the addition of a LIBOR floor of ~~0.50%~~0.500%. The Amendment also reduced the aggregate borrowing commitment under the Credit Facility to ~~$225~~$225 million and the amount by which we may elect to increase the facility size, known as the “accordion” feature, to ~~$50~~$50 million, subject to the satisfaction of certain conditions. Interest payment terms are variable depending upon the specific type of borrowing under the Credit Facility.

Any outstanding balance under the Credit Facility is due on maturity on June 19, ~~2023.~~2023. Our available capacity at any point in time is reduced by outstanding borrowings and outstanding letters of credit which totaled ~~$11.1~~$10.6 million at ~~March 31,~~June 30, 2021, resulting in an available borrowing capacity under the Credit Facility of ~~$213.9~~$214.4 million. In addition to indebtedness under the Credit Facility, we had ~~$6.0~~$6.3 million of outstanding letters of credit and performance guarantees and bonds from other sources as ~~at March 31,~~of June 30, 2021.

The Credit Facility isremains unsecured, and contains customary representations, warranties, terms and conditions for similar types of facilities.

The terms of the Credit Facility ~~requires~~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 agreement. The Credit Facility has more restrictive covenants with a minimum interest coverage ratio of 3.0 to 1.0 and ~~permit~~permits a maximum leverage ratio as described above. 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

~~Return to Index~~

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 ~~2.33~~2.18, and our interest coverage ratio is ~~5.58~~7.04, each for the period ended ~~March 31,~~June 30, 2021. We believe that we are in compliance with all covenants contained in our Credit Facility. Certain of our material, wholly-owned subsidiaries, are guarantors or co-borrowers under the Credit Facility.

We entered into 2 interest rate swap agreements for a total notional amount of $50 million, one of which was entered into during 2020. These 2 interest rate swap agreements were terminated and settled during the three months ended March 31, 2021. See Note ~~15,~~ 16, Derivative Instruments and Hedging Activities for additional ~~information.~~

~~We entered into 2 forward~~information regarding interest rate swap agreements ~~for a total notional amount of $35 million during 2020. The purpose of these forward interest rate swap agreements are~~we have entered to fix the underlying risk-free rate ~~that would be associated with the anticipated issuance of new long-term debt by the Company. These 2 forward interest rate swap agreements were terminated~~on our Credit Facility and ~~settled during the three months ended March 31, 2021.~~Senior Notes.

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The estimated fair value of total debt at ~~March 31,~~June 30, 2021 and December 31, 2020 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

~~7. PENSION~~

~~Defined Benefit Plan~~

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. During 2019 and 2018, there were curtailments of the Dutch Plan for our Dutch employees whose pension benefit was based on years of service and final pay or career average pay, depending on when the employee began participating. 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. There have been 0 further contributions to fund the Dutch Plan since December 31, 2019.

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Interest cost	$	82		$	168		$	164		$	336
Expected return on plan assets		(78	)		(154	)		(156	)		(308	)
Net periodic pension cost	$	4		$	14		$	8		$	28

Three Months Ended

March 31,

2021

2020

Interest cost

$
82

$
168

Expected return on plan assets

(78
)

(154
)
Net periodic pension cost

$
4

$
14

8.9. 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 and 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 6, 7, Long-term Debt, net for amounts committed under letters of credits and performance guarantees and bonds.

10. EQUITY

~~9. EQUITY~~

On December 17, 2020, we entered into an Equity Distribution Agreement with Wells Fargo Securities, LLC (the “Equity Distribution Agreement”) for the issuance and sale of up to ~~$60.0~~$60.0 million of our common shares. Under the terms of the Equity Distribution Agreement, sales of our common shares ~~may be~~were made by any method deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of ~~1933 (the “ATM program”).~~1933. The Company ~~elects~~elected when to issue a placement

~~Return to Index~~

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. ~~During the three months ended March 31, 2021, we~~We completed the program and sold 1,658,012 common shares during the first quarter of 2021, which generated aggregate proceeds of ~~$59.1~~$59.1 million, net of commissions and other associated costs. Proceeds were used to reduce outstanding debt on the Company’s Credit Facility during the first quarter of 2021.

During the three and six months ended ~~March 31,~~June 30, 2021, we distributed ~~14,449~~114,131 and 128,580 treasury shares upon vesting of stock-based awards. In connection with issuing the shares for vested stock-based awards, we repurchased ~~4,781~~29,082 and 33,863 of our common shares for ~~$0.2~~$0.9 million and $1.0 million, respectively, which were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens that may result 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.

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In February and May 2021, we paid a quarterly dividend of ~~$0.01~~$0.01 per common share. In addition, on ~~April 21,~~July 28, 2021 we declared a quarterly dividend of ~~$0.01~~$0.01 per common share for shareholders of record on ~~May 3,~~August 9, 2021 and payable on ~~May 18, 2021.~~August 24, 2021.

Accumulated other comprehensive loss, net of income ~~tax,~~taxes, consisted of the following (in thousands):


	June 30, 2021			December 31, 2020
Pension and other postretirement benefit plans - unrecognized prior service costs and net actuarial loss	$	(5,375	)	$	(5,375	)
Interest rate swaps - net fair value loss		(4,763	)		(1,825	)
Total accumulated other comprehensive loss	$	(10,138	)	$	(7,200	)

March 31,
2021

December 31,
2020

Pension and other postretirement benefit plans - unrecognized prior service costs and net actuarial loss

$
(5,375
)

$
(5,375
)
Interest rate swaps - net fair value loss

(2,486
)

(1,825
)
Total accumulated other comprehensive loss

$
(7,861
)

$
(7,200
)

~~10.~~11. 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 ~~common and potential common shares include additional shares in the weighted average~~ share ~~calculations associated with~~includes the incremental effect of ~~dilutive~~contingently issuable shares from performance and restricted stock awards, ~~and contingently issuable shares,~~ as determined using the treasury stock method. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands):

Three Months Ended

March 31,

2021

2020

Weighted average basic common shares outstanding

45,177

44,447

Effect of dilutive securities:

Performance shares

516

—

Restricted stock

271

—

Weighted average diluted common and potential common shares outstanding

45,964

44,447


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Weighted average common shares outstanding - basic		46,319		44,470		45,751		44,459
Effect of dilutive securities:
Performance shares		578		0		566		0
Restricted shares		206		0		197		0
Weighted average common shares outstanding - assuming dilution		47,103		44,470		46,514		44,459

For the three and six months ended ~~March 31,~~June 30, 2020, the number of outstanding performance and restricted shares of Core Laboratories N.V. common ~~stock~~shares that were excluded from the diluted earnings per share calculation, as their impact would be antidilutive, were as follows (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Performance shares		187		315
Restricted shares		51		60

	~~Three Months Ended~~
	~~March 31, 2020~~
~~Performance shares~~		~~398~~
~~Restricted stock~~		9

~~Return to Index~~

~~11.~~12. IMPAIRMENTS AND OTHER CHARGES

The coronavirus disease 2019 (“COVID-19”) global pandemic resulted in government mandated shut-downs, cross-border travel restrictions, home sheltering and social distancing efforts to contain the virus and mitigate the incidence of infection. The COVID-19 mitigation efforts globally resulted in a sharp decline in the consumption of crude-oil and refined petroleum products, which in turn led to a significant decrease in spot and forward commodity prices. These events resulted in substantial declines in the valuation of companies operating in the oil and gas services industry, including Core Laboratories. As a result, in March 2020, we determined that it was more likely than not that the fair value of our reporting units was less than their carrying value, which triggered an updated impairment assessment by the Company as of March 31, 2020. We performed an impairment test in accordance with ASC Topic 360 Impairment or Disposal of Long-Lived Assets and ASC Topic 350 Intangibles-Goodwill and Other, as updated by ASU 2017-04 Simplifying the Test for Goodwill Impairment, on our indefinite-lived and long-lived assets related to asset groups, and our reporting units.

Return to Index

We have 2 reporting units that are the same as our 2 reportable segments, with goodwill balances aggregating ~~$213.4~~$213.4 million as of March 31, 2020. We performed a detailed quantitative impairment assessment of our reporting units. We determined that the fair value of one of the reporting units, our Production Enhancement segment representing approximately ~~$114.0~~$114.0 million of the goodwill, was less than the carrying value. As a result, we concluded that the goodwill associated with our Production Enhancement segment was fully impaired, resulting in a ~~$114.0~~$114.0 million goodwill impairment charge in March of 2020. We determined that the Reservoir Description reporting unit’s fair value was above the carrying value, which represented the remaining balance of ~~$99.4~~$99.4 million of goodwill as of March 31, 2020.

We identified a triggering event for one of the asset groups under the Production Enhancement reporting ~~unit.~~unit during the first quarter of 2020. The estimated fair value, based on applying the income approach model, of one of the asset groups was determined to be below its carrying value. As of March 31, 2020, we recorded a charge of ~~$8.2~~$8.2 million to impair the intangible assets relating to the business acquisition of Guardian Technology in 2018.

During the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~we determined that~~ there ~~were~~have been no triggering events which would require the Company to perform ~~further~~an impairment assessment for any of its reporting units or asset groups.

13. INVENTORY WRITE-DOWN

~~12.~~During the six months ended June 30, 2020, as a result of the continuing adverse impact of COVID-19 pandemic and significant reduction in rig count and completions that affect the current consumption and anticipated demand for certain of our products, we recorded an additional inventory obsolescence and write-down of $9.9 million in our Production Enhancement segment.

There is 0 inventory write-down for the three and six months ended June 30, 2021.

14. OTHER (INCOME) EXPENSE, NET

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
(Gain) loss on sale of assets	$	(47	)	$	(354	)	$	(119	)	$	(350	)
Results of non-consolidated subsidiaries		(3	)		(183	)		30			(209	)
Foreign exchange (gain) loss, net		352			(98	)		(56	)		(674	)
Rents and royalties		(153	)		(107	)		(281	)		(242	)
Return on pension assets and other pension costs		(77	)		(154	)		(155	)		(307	)
Gain on sale of business		(1,012	)		0			(1,012	)		0
Curtailment		0			0			0			(1,034	)
Loss on lease abandonment		0			626			0			626
Cost reduction and other charges		0			2,789			0			3,943
Insurance settlement		(750	)		0			(750	)		0
Other, net		(627	)		526			(695	)		322
Total other (income) expense, net	$	(2,317	)	$	3,045		$	(3,038	)	$	2,075

Three Months Ended

March 31,

2021

2020

(Gain) loss on sale of assets

$
(72
)

$
4

Results of non-consolidated subsidiaries

33

(26
)
Foreign exchange (gain) loss, net

(408
)

(576
)
Rents and royalties

(128
)

(135
)
Return on pension assets and other pension costs

(78
)

168

Curtailment

—

(1,187
)
Cost reduction and other charges

—

1,154

Other, net

(68
)

(372
)
Total other (income) expense, net

$
(721
)

$
(970
)

Foreign exchange gains and losses are summarized in the following table (in thousands):


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2021			2020			2021			2020			2021			2020
British Pound	$	86		$	(88	)	$	(143	)	$	100		$	(57	)	$	12
Canadian Dollar		1			723			(36	)		(419	)		(35	)		304
Euro		(353	)		2			162			(90	)		(191	)		(88	)
Russian Ruble								119			426			41			(388	)
Other currencies, net		(142	)		(1,213	)		250			(115	)		186			(514	)
Foreign exchange (gain) loss, net	$	(408	)	$	(576	)	$	352		$	(98	)	$	(56	)	$	(674	)

Return to Index

~~13.~~15. INCOME TAX EXPENSE (BENEFIT)

The Company recorded an income tax expense of ~~$2.1~~$2.1 million and $4.1 million for the three and six months ended June 30, 2021, respectively, compared to an income tax benefit of ~~$4.0~~$0.3 million and $4.3 million for the three and six months ended ~~March 31, 2021 and~~June 30, 2020, respectively. The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 was ~~20% recorded on income from continuing operations before taxes of $10.3 million.~~20% in these periods.

The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2020 were 4.4% and 3.6%, respectively, was ~~3.6%~~ recorded on a loss from continuing operations before tax of ~~$112.4 million.~~$5.9 million and $118.3 million, respectively, during those periods. The ~~effective~~ tax ~~rate~~benefit for the ~~first quarter of~~three and six months ended June 30, 2020, was primarily impacted by the impairment of goodwill and intangible assets and other charges recorded during these periods which were largely not deductible for tax purposes. The tax benefit associated with the ~~$122.2~~$122.2 million impairment charge was limited to ~~$5.5~~$5.5 million.

~~14. LEASES~~

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

��

Three Months Ended

March 31,

2021

2020

Operating lease expense

$
4,349

$
4,340

Short-term lease expense

371

462

Variable lease expense

432

423

Total lease expense

$
5,152

$
5,225

Other information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases

$
3,919

$
4,336

Right-of-use assets obtained in exchange for new lease obligations:

Operating leases

$
1,881

$
3,073

Weighted-average remaining lease term- operating leases

8.32 years

8.79 years

Weighted-average discount rate - operating leases

4.59
%

4.99
%

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

March 31,
2021

Remainder of 2021
$
11,309

2022

13,537

2023

11,413

2024

9,151

2025

8,071

Thereafter

33,196

Total undiscounted lease payments

86,677

Less: Imputed interest

(15,685
)
Total operating lease liabilities
$
70,992

~~15.~~16. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

~~Return to Index~~

Interest Rate Risk

~~Our Credit Facility bears interest at variable rates from LIBOR plus 1.500% to a maximum of LIBOR plus 2.875% and includes the addition of a LIBOR floor of 0.50%.~~

~~We entered into 2 interest~~Interest rate swap agreements for a total notional amount of $50 million to hedge changes in the variable rate interest expense on $50 million of our existing or replacement LIBOR-priced debt. In 2014, we entered into the first 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 the second swap agreement with a notional amount of $25 million, and the LIBOR portion of the interest rate was fixed at 1.3% through February 28, 2025. Each swap is measured at fair value and recorded in our Consolidated Balance Sheet as an asset or liability. Theyswaps that are designated and qualify as cash flow hedging instruments are carried at fair value and ~~are highly effective. Unrealized losses are deferred to shareholders' equity as a component of accumulated other comprehensive gain (loss) and are recognized~~recorded in ~~income~~our consolidated balance sheets as an ~~increase~~asset or decrease to interest expense in the period in which the related cash flows being hedged are recognized in expense. At March 31, 2021, the outstanding balance on our Credit Facility had been reduced to zero, as such these interest rate swap agreements discussed above were terminated, dedesignated and settled.

During the three months ended March 31, 2021, we entered into a new forward interest rate swap agreement for a notional amount of $60 million, and carried the fair market value of the 2014 Variable-to-Fixed Swap 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. Risk associated with future changes in the 10-year LIBOR interest rates have been fixed up to a notional amount of $60 million with this instrument. Upon issuing new long-term debt in future periods, this forward interest rate swap agreement would be settled and value of the agreement at settlement would be amortized as interest expense in association with recognition of interest expense on the new fixed rate debt instrument.

We entered into 2 forward interest rate swap agreements for a total notional amount of $35 million during 2020. The purpose of these forward interest rate swap agreements are to fix the underlying risk-free rate, that would be associated with the anticipated issuance of new long-term debt by the Company. These 2 forward interest rate swap agreements were terminated and settled during the three months ended March 31, 2021.

~~At March 31, 2021, we had fixed rate long-term debt aggregating $210 million and 0 variable rate long-term debt.~~

~~The fair values of outstanding derivative instruments are as follows (in thousands):~~

Fair Value of Derivatives

March 31,
2021

December 31,
2020

Balance Sheet
Classification
Derivatives designated as hedges:

5 year interest rate swap

$
—

$
(368
)

Other long-term (liabilities)
10 year interest rate swap

—

(2,123
)

Other long-term (liabilities)
10 year forward interest rate swap

(2,386
)

—

Other long-term (liabilities)

$
(2,386
)

$
(2,491
)

~~The fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or can be derived from or corroborated by observable data (Level 2).~~

~~Return to Index~~

~~The effect of the interest rate swaps on the consolidated statement of operations was as follows (in thousands):~~

Three Months Ended

March 31,

2021

2020

Income Statement
Classification
Derivatives designated as hedges:

5 year interest rate swap

$
(831
)

$
(6
)

Increase (decrease) to interest expense
10 year interest rate swap

490

52

Increase (decrease) to interest expense

$
(341
)

$
46

liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. ~~Therefore,~~

Unrealized (gains) losses are deferred in shareholders' equity as a component of accumulated other comprehensive income (loss). Interest rate swaps that are highly effective are recognized in income as an increase or decrease to interest expense in the period in which the related cash flows being hedged are recognized in expense.

Our Credit Facility bears interest at variable rates from LIBOR plus 1.500% to a maximum of LIBOR plus 2.875% and includes a LIBOR floor of 0.500%.

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. At March 31, 2021, the outstanding balance on our Credit Facility had been reduced to zero, as such these interest rate swap agreements discussed above were terminated, dedesignated and settled.

In March 2020, we entered into 2 forward interest rate swap agreements for a total notional amount of $35 million to be effective beginning in September 2021. The purpose of these forward interest rate swap agreements were to fix the underlying risk-free rate that would be associated with the anticipated issuance of new long-term debt by the Company. These 2 forward interest rate swap agreements were terminated and settled in March 2021 and a gain of $1.4 million was recognized directly in the statement of operations.

In March 2021, we entered into a new forward interest rate swap agreement for a notional amount of $60 million and carried the fair market 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 ~~classified~~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. Risk associated with future changes in the 10-year LIBOR interest rates have been fixed up to a notional amount of $60 million with this instrument. The interest rate swap qualifies as a ~~non-current asset.~~cash flow hedging instrument. Upon issuing new long-term debt in future

~~16.~~Return to Index

periods, this forward interest rate swap agreement will be recognized as an increase or decrease to interest expense in the period in which the related cash flows being hedged are recognized in expense.

At June 30, 2021, we had fixed rate long-term debt aggregating $210 million and 0 variable rate long-term debt.

The fair values of outstanding derivative instruments are as follows (in thousands):


	Fair Value of Derivatives
	June 30, 2021			December 31, 2020			Balance Sheet Classification
Derivatives designated as hedges:
5 year interest rate swap	$	0		$	(368	)	Other long-term (liabilities)
10 year interest rate swap		0			(2,123	)	Other long-term (liabilities)
10 year forward interest rate swap		(5,400	)		0		Other long-term (liabilities)
	$	(5,400	)	$	(2,491	)

The fair value of all outstanding derivatives was determined using a model with inputs that are observable in the market or can be derived from or corroborated by observable data (Level 2).

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021			2020		Income Statement Classification
Derivatives designated as hedges:
5 year interest rate swap	$	0	$	51	$	(831	)	$	45	Increase (decrease) to interest expense
10 year interest rate swap		0		125		490			178	Increase (decrease) to interest expense
	$	0	$	176	$	(341	)	$	223

Return to Index

17. 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 ~~at fair value~~ 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. Gains and losses related to the fair value of the interest rate and forward interest swaps are recorded in other comprehensive income.

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


			Fair Value Measurement at
			June 30, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	31,326	$	—	$	31,326	$	—
	$	31,326	$	—	$	31,326	$	—
Liabilities:
Deferred compensation liabilities	$	23,829	$	—	$	23,829	$	—
10 year forward interest rate swap		5,400		—		5,400		—
	$	29,229	$	—	$	29,229	$	—


			Fair Value Measurement at
			December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	30,985	$	—	$	30,985	$	—
	$	30,985	$	—	$	30,985	$	—
Liabilities:
Deferred compensation liabilities	$	22,559	$	—	$	22,559	$	—
5 year interest rate swap		368		—		368		—
10 year interest rate swap		2,123		—		2,123		—
	$	25,050	$	—	$	25,050	$	—

Fair Value Measurement at

March 31, 2021

Total

Level 1

Level 2

Level 3

Assets:

Company owned life insurance policies ⁽¹⁾

$
29,908

$
—

$
29,908

$
—

$
29,908

$
—

$
29,908

$
—

Liabilities:

Deferred compensation liabilities

$
23,275

$
—

$
23,275

$
—

10 year forward interest rate swap

2,386

—

2,386

—

$
25,661

$
—

$
25,661

$
—

(1)

Company owned life insurance policies are intended to assist in the funding of the deferred compensation liabilities.

Fair Value Measurement at

December 31, 2020

Total

Level 1

Level 2

Level 3

Assets:

Company owned life insurance policies ⁽¹⁾

$
30,985

$
—

$
30,985

$
—

$
30,985

$
—

$
30,985

$
—

Liabilities:

Deferred compensation liabilities

$
22,559

$
—

$
22,559

$
—

5 year interest rate swap

368

—

368

—

10 year interest rate swap

2,123

—

2,123

—

$
25,050

$
—

$
25,050

$
—

~~(1)~~

~~Company owned life insurance policies are intended to assist in the funding of the deferred compensation liabilities.~~

~~Return to Index~~

~~17.~~18. DISCONTINUED OPERATIONS

In a continuing effort to streamline our business and align our business strategy for further integration of services and products, the Company committed to divest the business of our full range of permanent downhole monitoring systems and related services, which had been part of our Production Enhancement segment.

~~On June 7,~~In 2019, we entered into a definitive purchase agreement to sell this business unit for ~~approximately $16.6 million in cash. A pre-tax gain of $8.3 million was recognized in connection with this transaction,~~cash consideration, subject to adjustments for working capital ~~purposes and is classified as Income from discontinued operations in the Consolidated Statements of Operations.~~purposes. The purchase agreement also ~~provides~~provided for additional proceeds ~~of up to $2.5 million~~ based on the results of operations of the sold business in 2019 and ~~2020, none of which has been recognized.~~2020. We completed the divestment of this business in 2019 and we concluded final adjustments to the purchase ~~agreement~~price in 2020. We determined there were 0 additional proceeds based on the results of operations of the sold business.

~~The~~Any associated results of operations are separately reported as ~~Discontinued Operations~~discontinued operations for all periods presented on the ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations.

Return to Index

There are 0 activities or net cash provided by operating activities or discontinued operations recorded for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. There are 0 balances recorded for the discontinued operations as of ~~March 31,~~June 30, 2021 and ~~2020.~~

~~There are 0 net cash provided by operating activities of discontinued operations for the three months ended March~~December 31, ~~2021 and~~ 2020.

~~18.~~19. SEGMENT REPORTING

We operate our business ~~in2~~in 2 reportable segments. These complementary segments provide different services and products and utilize different technologies for 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

•

~~Production Enhancement:~~ Includes services and manufactured products relating to reservoir well completions, perforations, stimulations and production. 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.

~~Return to Index~~

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


	Reservoir Description		Production Enhancement			Corporate & Other (1)			Consolidated
Three months ended June 30, 2021
Revenue from unaffiliated clients	$	78,252	$	40,493		$	0		$	118,745
Inter-segment revenue		70		41			(111	)		0
Segment operating income (loss)		7,265		3,831			1,704			12,800
Total assets (at end of period)		335,617		134,146			128,662			598,425
Capital expenditures		2,653		214			17			2,884
Depreciation and amortization		3,060		1,444			247			4,751
Three months ended June 30, 2020
Revenue from unaffiliated clients	$	88,442	$	27,294		$	0		$	115,736
Inter-segment revenue		62		88			(150	)		0
Segment operating income (loss)		13,534		(16,324	)		223			(2,567	)
Total assets (at end of period)		321,003		133,133			160,305			614,441
Capital expenditures		1,820		1,198			47			3,065
Depreciation and amortization		3,452		1,706			267			5,425
Six months ended June 30, 2021
Revenue from unaffiliated clients	$	154,738	$	72,390		$	0		$	227,128
Inter-segment revenue		127		77			(204	)		0
Segment operating income (loss)		17,317		5,391			1,714			24,422
Total assets (at end of period)		335,617		134,146			128,662			598,425
Capital expenditures		5,053		518			86			5,657
Depreciation and amortization		6,187		2,891			544			9,622
Six months ended June 30, 2020
Revenue from unaffiliated clients	$	191,144	$	76,992		$	0		$	268,136
Inter-segment revenue		162		404			(566	)		0
Segment operating income (loss)		24,596		(137,623	)		1,487			(111,540	)
Total assets (at end of period)		321,003		133,133			160,305			614,441
Capital expenditures		3,232		3,112			62			6,406
Depreciation and amortization		6,974		3,347			545			10,866

(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations.

Reservoir
Description

Production
Enhancement

Corporate &
Other ¹

Consolidated

Three months ended March 31, 2021

Revenue from unaffiliated clients

$
76,486

$
31,897

$
—

$
108,383

Inter-segment revenue

57

36

(93
)

—

Segment operating income (loss)

10,051

1,560

11

11,622

Total assets (at end of period)

332,429

131,096

120,921

584,446

Capital expenditures

2,400

304

68

2,772

Depreciation and amortization

3,126

1,447

298

4,871

Three months ended March 31, 2020

Revenue from unaffiliated clients

$
102,702

$
49,698

$
—

$
152,400

Inter-segment revenue

100

316

(416
)

—

Segment operating income (loss)

11,062

(121,299
)

1,264

(108,973
)
Total assets (at end of period)

337,406

159,608

149,595

646,609

Capital expenditures

1,412

1,914

14

3,340

Depreciation and amortization

3,521

1,642

278

5,441

(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations.

Return to Index

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

The following discussion highlights the current operating environment and summarizes the financial position of Core Laboratories N.V. and its subsidiaries as of ~~March 31,~~June 30, 2021 and should be read in conjunction with (i) the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and (ii) the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Annual Report").

General

Core Laboratories N.V. is a limited liability company incorporated and domiciled in the Netherlands. It was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description and production enhancement services and products to the oil and gas industry. These services and products can enable our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. Core Laboratories N.V. has over 70 offices in more than 50 countries and employs approximately 3,700 people worldwide.

References to "Core Lab", “Core Laboratories”, the "Company", "we", "our" and similar phrases are used throughout this Quarterly Report and relate collectively to Core Laboratories N.V. and its consolidated affiliates.

We operate our business in two reportable segments: Reservoir Description and Production Enhancement. These complementary segments provide different services and products and utilize different technologies for 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.

•

Production Enhancement: Includes services and manufactured products relating to reservoir well completions, perforations, stimulation, and production. 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.

•

~~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.

•

~~Production Enhancement:~~ Includes services and manufactured products relating to reservoir well completions, perforations, stimulation, and production. 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.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, including those under the headings "Outlook" and "Liquidity and Capital Resources", and in other parts of this Quarterly Report, are forward-looking. In addition, from time to time, we may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. Forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "believe", "expect", "anticipate", "estimate", "continue", or other similar words, including statements as to the intent, belief, or current expectations of our directors, officers, and management with respect to our future operations, performance, or positions or which contain other forward-looking information. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, no assurances can be given that the future results indicated, whether expressed or implied, will be achieved. While we believe that these statements are and will be accurate, our actual results and experience may differ materially from the anticipated results or other expectations expressed in our statements due to a variety of risks and uncertainties.

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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see "Item 1A - Risk Factors" in our 2020 Annual Report and other reports filed by us with the Securities and Exchange Commission ("SEC").

Outlook

The events associated with the COVID-19 pandemic and global government mandated shut-downs, home sheltering and social distancing policies caused a significant decline in the demand for crude oil and associated products during 2020 which has continued in ~~the first quarter of~~ 2021. U.S. land drilling and completion activities have experienced the most significant impact, as the rig count and completion of wells ~~have~~ declined significantly during ~~most of~~ 2020, ~~from previous levels.~~however, although well below pre-pandemic levels, have since partially recovered in 2021. U.S. land drilling and completion ~~activity~~activities began to improve in the ~~second half~~fourth quarter of 2020 and continued to show improvement during the first ~~quarter~~and second quarters of 2021. International activity ~~has~~was also ~~been~~ impacted by disruption to our clients’ operations and lower ~~crude oil~~crude-oil commodity prices. ~~Crude oil~~Crude-oil commodity prices have increased during 2021, and the outlook for the energy industry has become more positive but remains tempered in 2021. As a result, it is anticipated that ~~crude oil~~crude-oil commodity prices will remain ~~at current levels~~fairly stable for the remainder of 2021, however activity associated with the energy markets and our clients will moderately improve and could accelerate infor the ~~second half~~remainder of ~~2021.~~2021 depending on global recovery from the COVID-19 pandemic.

While the full impact of COVID-19 and the long-term worldwide impact still remains ~~unknown,~~uncertain, Core Laboratories has continued to operate as an essential business with timely delivery of products and services to our clients during the COVID-19 pandemic. Continued government restrictions, increasing infection rates in certain international locations and new variant strains of the COVID-19 virus, travel restrictions, quarantines, and site closures have led to business disruptions, which continued during the first ~~quarter~~half of 2021. These disruptions have primarily been associated with operational workflows stemming from travel, product delivery, as well as suspensions and delays in client projects. We have not experienced any significant disruptions in our supply chain, and currently do not anticipate significant disruption in our supply chain. We have also implemented a continuity plan across our global organization to protect the health of employees while servicing our clients. In addition, results during ~~the first quarter of~~ 2021 were impacted by costs associated with disruptions and damage to facilities caused by the North American mid-continent winter storm event in February 2021, which affected operations in the region.

Our major clients continue to focus on capital management, return on invested capital, ~~(“ROIC”),~~ free cash flow, and returning capital to their shareholders, as opposed to a focus on production growth. The companies adopting value versus volume metrics tend to be the more technologically sophisticated operators and form the foundation of Core Lab’s worldwide client base. Considering a longer-term strategy, we expect to be well positioned as our clients continue their focus on employing higher technological solutions in their efforts to optimize production and estimated ultimate recovery in the most cost efficient and environmentally responsible manner.

We believe oil and gas operators will continue to manage their capital spending within reduced budgets and maintain their focus on strengthening the balance sheet and generating free cash. This shift was apparent throughout 2020 and continued in the first ~~quarter~~half of 2021. Our primary customer base, oil and gas operators, made significant reductions to their 2020 and 2021 ~~with significant declines, year-over-year,~~capital expenditures, which has resulted in ~~the~~significantly lower activity levels associated global oil and gas exploration and production when compared to pre-pandemic levels. However, U.S. onshore average rig count ~~U.S. land completion activity,~~for the three-month period ending June 30, 2021 was up sequentially and ~~international rig count.~~year-over-year approximately 16% and 15% respectively. We believe U.S. onshore activity in the remainder of 2021 will continue to improve moderately, though any improvement will continue to be constrained by those factors indicated above.

Core Laboratories expects that reduced operating budgets of oil and gas operators will continue to adversely impact international field development spending ~~will be negatively impacted by reduced operating budgets adversely impacted by COVID-19.~~in 2021. However, more recently, there has been moderate improvement in international activity levels, which is expected to continue for the remainder of 2021. We continue to work with clients and discuss the progression of longer-term international projects. Additionally, the reservoir fluids analysis performed on projects

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associated with current producing fields continues to be critical and ~~will be~~has been less affected by lower commodity prices for crude oil. The adverse impact from COVID-19 has resulted in increased uncertainty associated with the activity levels and revenue opportunities from these international and offshore projects, however most of the larger projects, especially projects that have been commissioned and are in development, are focused on a longer-term forecast rather than a short- to mid-term assessment of ~~crude oil~~crude-oil commodity prices.

As part of our long-term growth strategy, we continue to expand our market presence by opening or expanding facilities in strategic areas and realizing synergies within our business lines consistent with client demand and market conditions. We

~~Return to Index~~

believe our market presence in strategic areas provides us a unique opportunity to serve our clients who have global operations, whether they are international oil companies, national oil companies, or independent oil companies.

In response to market conditions, Core Lab’s Board of Supervisory Directors (the “Supervisory Board”) approved a plan to reduce the Company’s future quarterly dividends to $0.01 per share beginning with the second quarter of 2020 and to focus excess free cash flow towards the reduction of debt. In March 2020, the Company enacted cost control plans and expanded these initiatives in June of 2020, which include: (i) corporate and operating cost reductions; (ii) annual capital expenditures reduced to ~~11.9~~$11.9 million for 2020 and anticipated to be similar to slightly higher level for 2021, and (iii) eliminating all non-essential costs. These initiatives continued in the first and second quarters of 2021. Following increased activity levels during the second quarter of ~~2021. In January~~ 2021, ~~we issued $60 million of senior notes (the “2021 Senior Notes”)~~the Company is progressively reinstating certain employee costs into the Company's cost structure, which will increase overall compensation cost in a private placement transaction. The proceeds from the 2021 Senior Notes were used exclusively to reduce outstanding debt and increase liquidity under our Credit Facility as we work towards our long-term strategy of reducing debt. On December 17, 2020, we entered into an Equity Distribution Agreement with Wells Fargo Securities, LLC for the issuance and sale of up to $60 million of our common shares. Under the terms of the 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. During the three months ended March 31, 2021, we completed the program selling 1,658,012 of common shares at an average price of $36.19 per share, which generated aggregate proceeds of $59.1 million, net of commissions and other associated costs. Proceeds were used to reduce debt under the Credit Facility.2021.

Core Lab believes these immediate actions, as well as continued assessment of market conditions, will allow Core Lab, as it has for over 83 years, to navigate through these challenging times. Core Lab remains focused on preserving the quality of service for its clients and producing returns for its shareholders.

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Results of Operations

Our results of operations as a percentage of applicable revenue ~~were~~are as follows (in thousands):


	Three Months Ended June 30,								Change
	2021				2020				$			%
REVENUE:
Services	$	86,263		73%	$	91,009		79%	$	(4,746	)	(5)%
Product sales		32,482		27%		24,727		21%		7,755		31%
Total revenue		118,745		100%		115,736		100%		3,009		3%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		67,098		78%		67,054		74%		44		0%
Cost of product sales, exclusive of depreciation expense and inventory write-down shown below*		26,743		82%		23,626		96%		3,117		13%
Total cost of services and product sales		93,841		79%		90,680		78%		3,161		3%
General and administrative expense, exclusive of depreciation expense shown below		9,670		8%		9,221		8%		449		5%
Depreciation and amortization		4,751		4%		5,425		5%		(674	)	(12)%
Inventory write-down		—		—%		9,932		9%		(9,932	)	NM
Other (income) expense, net		(2,317	)	(2)%		3,045		3%		(5,362	)	NM
Operating income (loss)		12,800		11%		(2,567	)	(2)%		15,367		NM
Interest expense		2,530		2%		3,369		3%		(839	)	(25)%
Income (loss) from continuing operations before income taxes		10,270		9%		(5,936	)	(5)%		16,206		NM
Income tax expense (benefit)		2,053		2%		(261	)	—%		2,314		NM
Income (loss) from continuing operations		8,217		7%		(5,675	)	(5)%		13,892		NM
Income (loss) from discontinued operations, net of income taxes		—		—%		—		—%		—		NM
Net income (loss)		8,217		7%		(5,675	)	(5)%		13,892		NM
Net income (loss) attributable to non-controlling interest		157		—%		41		—%		116		NM
Net income (loss) attributable to Core Laboratories N.V.	$	8,060		7%	$	(5,716	)	(5)%	$	13,776		NM

Other Data:
Current ratio (1)	2.21:1				1.93:1
Debt to EBITDA ratio (2)	2.24:1				2.82:1
Debt to Adjusted EBITDA ratio (3)	2.18:1				2.21:1

"NM" means not meaningful

*Percentage based on applicable revenue rather than total revenue

Three Months Ended March 31,

Change

2021

2020

$

%

REVENUE:

Services

$
83,982

77%

$
109,967

72%

$
(25,985
)

(24)%

Product sales

24,401

23%

42,433

28%

(18,032
)

(42)%

Total revenue

108,383

100%

152,400

100%

(44,017
)

(29)%

OPERATING EXPENSES:

Cost of services, exclusive of depreciation
   expense shown below*

63,533

76%

80,941

74%

(17,408
)

(22)%

Cost of product sales, exclusive of depreciation
   expense and impairment and other charges
   shown below*

20,617

84%

34,190

81%

(13,573
)

(40)%

Total cost of services and product sales

84,150

78%

115,131

76%

(30,981
)

(27)%

General and administrative expense, exclusive of depreciation expense shown below

8,461

8%

19,567

13%

(11,106
)

(57)%

Depreciation and amortization

4,871

4%

5,441

4%

(570
)

(10)%

Impairments and other charges

—

—%

122,204

80%

(122,204
)

NM

Other (income) expense, net

(721
)

(1)%

(970
)

(1)%

249

(26)%

Operating income (loss)

11,622

11%

(108,973
)

(72)%

120,595

NM

Interest expense

1,363

1%

3,411

2%

(2,048
)

(60)%

Income (loss) from continuing operations before income tax expense

10,259

9%

(112,384
)

(74)%

122,643

NM

Income tax expense (benefit)

2,052

2%

(4,046
)

(3)%

6,098

NM

Income (loss) from continuing operations

8,207

8%

(108,338
)

(71)%

116,545

NM

Income (loss) from discontinued operations, net of income taxes

—

—%

—

—%

—

NM

Net income (loss)

8,207

8%

(108,338
)

(71)%

116,545

NM

Net income (loss) attributable to non-controlling
   interest

102

—%

83

—%

19

NM

Net income (loss) attributable to Core Laboratories
   N.V.

$
8,105

7%

$
(108,421
)

(71)%

$
116,526

NM

Other Data:

Current ratio ⁽¹⁾

2.17:1

2.03:1

Debt to EBITDA ratio ⁽²⁾

2.37:1

2.35:1

Debt to Adjusted EBITDA ratio⁽³⁾

2.33:1

1.93:1

"NM" means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1)  Current ratio is calculated as follows:  current assets divided by current liabilities.

(2)  Debt to EBITDA ratio is calculated as follows:  debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization and certain non-cash adjustments.

(3)  Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows:  debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

(1)

Current ratio is calculated as follows: current assets divided by current liabilities.

(2)

Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization and certain non-cash adjustments.

(3)

Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

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	Three Months Ended								Change
	June 30, 2021				March 31, 2021				$			%
REVENUE:
Services	$	86,263		73%	$	83,982		77%	$	2,281		3%
Product sales		32,482		27%		24,401		23%		8,081		33%
Total revenue		118,745		100%		108,383		100%		10,362		10%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		67,098		78%		63,533		76%		3,565		6%
Cost of product sales, exclusive of depreciation expense shown below*		26,743		82%		20,617		84%		6,126		30%
Total cost of services and product sales		93,841		79%		84,150		78%		9,691		12%
General and administrative expense, exclusive of depreciation expense shown below		9,670		8%		8,461		8%		1,209		14%
Depreciation and amortization		4,751		4%		4,871		4%		(120	)	(2)%
Other (income) expense, net		(2,317	)	(2)%		(721	)	(1)%		(1,596	)	221%
Operating income (loss)		12,800		11%		11,622		11%		1,178		10%
Interest expense		2,530		2%		1,363		1%		1,167		86%
Income (loss) from continuing operations before income taxes		10,270		9%		10,259		9%		11		0%
Income tax expense (benefit)		2,053		2%		2,052		2%		1		0%
Income (loss) from continuing operations		8,217		7%		8,207		8%		10		0%
Income (loss) from discontinued operations, net of income taxes		—		—%		—		—%		—		NM
Net income (loss)		8,217		7%		8,207		8%		10		0%
Net income (loss) attributable to non-controlling interest		157		—%		102		—%		55		NM
Net income (loss) attributable to Core Laboratories N.V.	$	8,060		7%	$	8,105		7%	$	(45	)	(1)%

Other Data:
Current ratio (1)	2.21:1				2.17:1
Debt to EBITDA ratio (2)	2.24:1				2.37:1
Debt to Adjusted EBITDA ratio (3)	2.18:1				2.33:1

"NM" means not meaningful

*Percentage based on applicable revenue rather than total revenue

Three Months Ended

Change

March 31, 2021

December 31, 2020

$

%

REVENUE:

Services

$
83,982

77%

$
89,195

78%

$
(5,213
)

(6)%

Product sales

24,401

23%

24,554

22%

(153
)

(1)%

Total revenue

108,383

100%

113,749

100%

(5,366
)

(5)%

OPERATING EXPENSES:

Cost of services, exclusive of depreciation
   expense shown below*

63,533

76%

67,484

76%

(3,951
)

(6)%

Cost of product sales, exclusive of depreciation
   expense and inventory write-down shown
   below*

20,617

84%

20,434

83%

183

1%

Total cost of services and product sales

84,150

78%

87,918

77%

(3,768
)

(4)%

General and administrative expense, exclusive of depreciation expense shown below

8,461

8%

(3,692
)

(3)%

12,153

NM

Depreciation and amortization

4,871

4%

4,837

4%

34

1%

Inventory write-down

—

—%

443

—%

(443
)

NM

Other (income) expense, net

(721
)

(1)%

839

1%

(1,560
)

NM

Operating income (loss)

11,622

11%

23,404

21%

(11,782
)

(50)%

Interest expense

1,363

1%

2,920

3%

(1,557
)

(53)%

Income (loss) from continuing operations before income tax expense

10,259

9%

20,484

18%

(10,225
)

(50)%

Income tax expense (benefit)

2,052

2%

6,540

6%

(4,488
)

(69)%

Income (loss) from continuing operations

8,207

8%

13,944

12%

(5,737
)

(41)%

Income (loss) from discontinued operations, net of income taxes

—

—%

(424
)

—%

424

NM

Net income (loss)

8,207

8%

13,520

12%

(5,313
)

(39)%

Net income (loss) attributable to non-controlling
   interest

102

—%

(17
)

—%

119

NM

Net income (loss) attributable to Core Laboratories
   N.V.

$
8,105

7%

$
13,537

12%

$
(5,432
)

(40)%

Other Data:

Current ratio ⁽¹⁾

2.17:1

1.85:1

Debt to EBITDA ratio ⁽²⁾

2.37:1

3.08:1

Debt to Adjusted EBITDA ratio⁽³⁾

2.33:1

2.82:1

"NM" means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1)  Current ratio is calculated as follows:  current assets divided by current liabilities.

(2)  Debt to EBITDA ratio is calculated as follows:  debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.

(3)  Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows:  debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

(1)

Current ratio is calculated as follows: current assets divided by current liabilities.

(2)

Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.

(3)

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	Six Months Ended June 30,								Change
	2021				2020				$			%
REVENUE:
Services	$	170,245		75%	$	200,976		75%	$	(30,731	)	(15)%
Product sales		56,883		25%		67,160		25%		(10,277	)	(15)%
Total revenue		227,128		100%		268,136		100%		(41,008	)	(15)%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		130,631		77%		147,995		74%		(17,364	)	(12)%
Cost of product sales, exclusive of depreciation expense and inventory write-down shown below*		47,360		83%		57,816		86%		(10,456	)	(18)%
Total cost of services and product sales		177,991		78%		205,811		77%		(27,820	)	(14)%
General and administrative expense, exclusive of depreciation expense shown below		18,131		8%		28,788		11%		(10,657	)	(37)%
Depreciation and amortization		9,622		4%		10,866		4%		(1,244	)	(11)%
Impairments and other charges		—		—%		122,204		46%		(122,204	)	NM
Inventory write-down		—		—%		9,932		4%		(9,932	)	NM
Other (income) expense, net		(3,038	)	(1)%		2,075		1%		(5,113	)	NM
Operating income (loss)		24,422		11%		(111,540	)	(42)%		135,962		NM
Interest expense		3,893		2%		6,780		3%		(2,887	)	(43)%
Income (loss) from continuing operations before income taxes		20,529		9%		(118,320	)	(44)%		138,849		NM
Income tax expense (benefit)		4,105		2%		(4,307	)	(2)%		8,412		NM
Income (loss) from continuing operations		16,424		7%		(114,013	)	(43)%		130,437		NM
Income (loss) from discontinued operations, net of income taxes		—		—%		—		—%		—		NM
Net income (loss)		16,424		7%		(114,013	)	(43)%		130,437		NM
Net income (loss) attributable to non-controlling interest		259		—%		124		—%		135		NM
Net income (loss) attributable to Core Laboratories N.V.	$	16,165		7%	$	(114,137	)	(43)%	$	130,302		NM

Other Data:
Current ratio (1)	2.21:1				1.93:1
Debt to EBITDA ratio (2)	2.24:1				2.82:1
Debt to Adjusted EBITDA ratio (3)	2.18:1				2.21:1

"NM" means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1)

Current ratio is calculated as follows: current assets divided by current liabilities.

(2)

Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.

(3)

Operating Results for the Three Months Ended ~~March 31,~~June 30, 2021 ~~Compared~~compared to the Three Months Ended June 30, 2020 and March 31, ~~2020~~2021 and ~~December 31,~~for the Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020

Services Revenue

Services revenue is primarily tied to activities associated with the exploration and production of oil, gas and derived products outside the U.S. For the three months ended ~~March 31,~~June 30, 2021, services revenue of ~~$84.0~~$86.3 million decreased compared to ~~$110.0~~$91.0 million for the three months ended June 30, 2020 and increased compared to $84.0 million for the three months ended March 31, ~~2020 and $89.2~~2021. For the six months ended June 30, 2021, service revenue of $170.2 million decreased compared to $201.0 million for the ~~three~~six months ended ~~December 31,~~June 30, 2020. ~~During the first quarter of 2021, the~~The negative impact on the industry caused by the COVID-19 pandemic ~~continued.~~began in March of 2020 throughout the remainder of 2020, and continued in the first and second quarters of 2021. Global government mandated

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shut-downs, home sheltering and social distancing policies have caused a significant decline in the

~~Return to Index~~

demand for crude oil and associated products, which has also resulted in decreased spending and disrupted activity by our clients. ~~Lower~~Activity levels outside the U.S. continue to remain depressed for the first half of 2021 and continue to experience workflow disruptions and delays. Year-over-year, lower levels of activity have impacted services revenue in both the U.S. and international markets. ~~Additionally, a severe winter storm~~Sequentially, activity levels in ~~North America during~~ the ~~first quarter~~U.S. were relatively flat, international markets increased approximately 4% which was the primary contributor to an overall increase of ~~2021 negatively impacted our operations and our clients, during the first quarter of 2021.~~3% in service revenue.

We continue to focus on large-scale core analyses and reservoir fluids characterization studies in the Eagle Ford, the Permian Basin and the Gulf of Mexico, along with Guyana, Suriname, Malaysia and other international locations such as offshore South America, Australia, and the Middle East, including Kuwait and the United Arab Emirates. Analysis of crude oil derived products also occurs in every major producing region of the world.

Product Sales Revenue

For the three months ended ~~March 31,~~June 30, 2021, product sales revenue, of ~~$24.4~~$32.5 million ~~decreased 42%~~increased 31% from ~~$42.4~~$24.7 million in the three months ended June 30, 2020 and increased 33% from $24.4 million in the three months ended March 31, ~~2020 and was relatively flat compared to the three months ended December 31, 2020.~~2021. Rig count is one indicator of activity levels associated with the exploration and production of oil and gas. The average rig count for ~~North America~~U.S. land increased over 16% sequentially for the second quarter of 2021, and is 82% above its low in 2020. Activity levels in the U.S. land market continued to strengthen in the second quarter of 2021, coupled with the success of new products penetrating the market, led to the growth in product sales revenue during the three months ended June 30, 2021. For the six months ended June 30, 2021, product sales revenue of $56.9 million decreased ~~45%~~compared to $67.2 million from the six months ended June 30, 2020. The decrease in activity levels is primarily due to the continued impact from the COVID-19 pandemic.

Cost of Services, excluding depreciation

Cost of services was $67.1 million for the three months ended ~~March 31,~~June 30, 2021, ~~when~~relatively flat compared to the same period last ~~year. Although activity levels in the U.S. land market have continued~~year, and a 6% increase compared to ~~strengthen in 2021 overall, the severe winter storm that impacted North America in February 2021 significantly disrupted activity levels.~~

~~Cost of Services, excluding depreciation~~

~~Cost of services was~~ $63.5 million for the three months ended March 31, ~~2021, a 22% decrease compared to $80.9 million in the three months ended March 31, 2020 and a 6% decrease compared to $67.5 million for the three months ended December 31, 2020.~~2021. Cost of services expressed as a percentage of services revenue increased to ~~76%~~78% for the three months ended ~~March 31,~~June 30, 2021, compared to 74% for the three months ended ~~March 31,~~June 30, 2020 and ~~remained flat from~~76% for the three months ended ~~December~~March 31, 2021. The sequential increase in cost of services for the second quarter of 2021 is associated with the restoration of certain cost reduction initiatives during the three months ended June 30, 2021. Cost of services decreased to $130.6 million for the six months ended June 30, 2021 compared to $148.0 million for the six months ended June 30, 2020. Cost of services expressed as a percentage of services increased to 77% for the six months ended June 30, 2021 compared to 74% for the six months ended June 30, 2020. The decrease in cost of services ~~in these periods is associated with and in line with the decrease in revenues~~ during the ~~three~~six months ended ~~March 31,~~June 30, 2021 was primarily due to lower activity levels and ~~comparison periods.~~cost reduction initiatives compared to the same period last year.

Cost of Product Sales, excluding depreciation

Cost of product sales of $26.7 million for the three months ended June 30, 2021 increased when compared to $23.6 million for the three months ended June 30, 2020 and to $20.6 million for the three months ended March 31, 2021 decreased when compared to $34.2 million for the three months ended March 31, 2020 and remained relatively flat compared to $20.4 million for the three months ended December 31, 2020. Given product sales are primarily associated with our Production Enhancement segment and the North American market, cost of sales is impacted by decreased activities associated with clients operating in these segments and geographic markets.2021. Cost of product sales expressed as a percentage of product sales revenue was 82% for the three months ended June 30, 2021, compared to 96% for the three months ended June 30, 2020 and 84% for the three months ended March 31, ~~2021, comparable to the three months ended December 31, 2020 and to 81% for the three months ended March 31, 2020.~~2021. The ~~changes~~decrease in cost of sales as a percentage of product sales revenue is primarily due to ~~absorbing~~increased manufacturing productivity and absorption of fixed ~~costs against changes~~costs. Cost of product sales of $47.4 million for the six months ended June 30, 2021 decreased when compared to $57.8 million for the six months ended June 30, 2020. Cost of product sales expressed as a percentage of product sales revenue was 83% for the six months ended June 30, 2021, compared to 86% for the six months ended June 30, 2020. Lower cost of product sales in ~~revenue base~~the six months ended June 30, 2021 was primarily due to the continued decrease in ~~each quarter.~~activity levels from the COVID-19 pandemic, and the benefit derived from cost reduction initiatives implemented in 2020 and through the first six months of 2021.

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General and Administrative Expense, excluding depreciation

General and administrative ("G&A") expense includes corporate management and centralized administrative services that benefit our operations. G&A expense for the three months ended ~~March 31,~~June 30, 2021 was ~~$8.4~~$9.7 million compared to ~~$19.6~~$9.2 million and ~~$(3.7)~~$8.5 million for the three months ended June 30, 2020 and March 31, ~~2020 and December 31, 2020,~~2021, respectively. The variances are primarily due to changes in ~~stock-based~~ compensation expense during those periods. G&A expense of $18.1 million for the six months ended June 30, 2021 compared to $28.8 million for the six months ended June 30, 2020. The decrease was primarily due to changes in compensation expense during those periods, including acceleration of stock compensation expense of $.0.8 million for the six months ended June 30, 2021 compared to $6.8 million recorded for the six months ended June 30, 2020, for retirement eligible employees.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended ~~March 31,~~June 30, 2021 was ~~$4.9~~$4.8 million compared to $5.4 million and ~~$4.8~~$4.9 million for the three months ended June 30, 2020 and March 31, ~~2020~~2021, respectively. Depreciation and ~~December 31, 2020, respectively.~~

~~Return~~amortization expense for the six months ended June 30, 2021 was $9.6 million compared to ~~Index~~$10.9 million for the six months ended June 30, 2020. The decrease in depreciation and amortization expense for 2021 is primarily due to lower capital expenditures as a result of decreased activity levels associated with the COVID-19 pandemic.

Impairments, inventory write-down and other charges

The events associated with the global spread of COVID-19, and the resulting sharp decrease in the price of crude oil, which caused a sharp ~~decrease~~decline in the consumption and demand for crude oil and refined petroleum products, led to a triggering event in March 2020. In response to the triggering event, the Company updated its analysis associated with future cash flows and the valuation of assets and potential impairment of goodwill and intangible assets. Our updated analysis resulted in the Company recording a charge of $114.0 million for impairment of goodwill and $8.2 million for impairments to intangible assets in March 2020 in our Production Enhancement segment. In ~~December~~June 2020, we recorded a charge of ~~$0.4~~$9.9 million associated with inventory obsolescence and a valuation write-down related to our Production Enhancement segment.

During the three and six months ended ~~March 31,~~June 30, 2021, we determined there were no triggering events which require the Company to perform further impairment assessment for any of its reporting units or asset ~~groups.~~groups and therefore, there is no inventory write-down for the three or six months ended June 30, 2021.

Other (Income) Expense, Net

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
(Gain) loss on sale of assets	$	(47	)	$	(354	)	$	(119	)	$	(350	)
Results of non-consolidated subsidiaries		(3	)		(183	)		30			(209	)
Foreign exchange (gain) loss, net		352			(98	)		(56	)		(674	)
Rents and royalties		(153	)		(107	)		(281	)		(242	)
Return on pension assets and other pension costs		(77	)		(154	)		(155	)		(307	)
Gain on sale of business		(1,012	)		—			(1,012	)		—
Curtailment		—			—			—			(1,034	)
Loss on lease abandonment		—			626			—			626
Cost reduction and other charges		—			2,789			—			3,943
Insurance settlement		(750	)		—			(750	)		—
Other, net		(627	)		526			(695	)		322
Total other (income) expense, net	$	(2,317	)	$	3,045		$	(3,038	)	$	2,075

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

Three Months Ended

March 31,

2021

2020

British Pound

$
86

$
(88
)
Canadian Dollar

1

723

Euro

(353
)

2

Other currencies, net

(142
)

(1,213
)
Foreign exchange (gain) loss, net

$
(408
)

$
(576
)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
British Pound	$	(143	)	$	100		$	(57	)	$	12
Canadian Dollar		(36	)		(419	)		(35	)		304
Euro		162			(90	)		(191	)		(88	)
Russian Ruble		119			426			41			(388	)
Other currencies, net		250			(115	)		186			(514	)
Foreign exchange (gain) loss, net	$	352		$	(98	)	$	(56	)	$	(674	)

Interest Expense

Interest expense for the three months ended ~~March 31,~~June 30, 2021 was ~~$1.4~~$2.5 million compared to $3.4 million and ~~$2.9~~$1.4 million for the three months ended June 30, 2020 and March 31, ~~2020 and December 31, 2020,~~2021, respectively. Interest expense for the six months ended June 30, 2021 was $3.9 million compared to $6.8 million for the six months ended June 30, 2020. The variances are primarily due to changes in the interest rate associated with aggregated variable rate debt and changes in aggregated fixed rate debt in the respective quarters, and the effect of settlement and restructuring of our interest rate swap agreements during the three months ended March 31, 2021. See Note ~~15,~~ 16, Derivative Instruments and Hedging Activities for additional information.

Income Tax Expense (Benefit)

The Company recorded an income tax expense of $2.1 million and $4.1 million for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to an income tax benefit of $4$0.3 million and $4.3 million for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 was 20%. in these periods. The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2020 was 4.4% and 3.6%., respectively, recorded on a loss from continuing operations before tax of $5.9 million and $118.3 million during those periods. The tax benefit for the three and six months ended ~~March~~June 30, 2020 was largely impacted by an impairment of goodwill, intangible assets and other charges recorded during ~~this period~~these periods which were largely not deductible for tax purposes.

~~Return~~The tax benefit associated with the $122.2 million impairment charge was limited to ~~Index~~$5.5 million.

Discontinued Operations

See Note ~~17,~~ 18, Discontinued Operations for additional information.

Segment Analysis

We operate our business in two reportable segments. These complementary segments provide different services and products and utilize different technologies improving reservoir performance and increasing the recovery of oil and gas from new and existing fields. The following tables summarize our results by segment (in thousands):

Three Months Ended March 31,

2021/2020

Three Months Ended December 31,

Q1 / Q4

2021

2020

$ Change

% Change

2020

$ Change

% Change

Revenue:

Reservoir Description

$
76,486

$
102,702

$
(26,216
)

(26)%

$
83,838

$
(7,352
)

(9)%

Production Enhancement

31,897

49,698

(17,801
)

(36)%

29,911

1,986

7%

Consolidated

$
108,383

$
152,400

$
(44,017
)

(29)%

$
113,749

$
(5,366
)

(5)%

Operating income (loss):

Reservoir Description

$
10,051

$
11,062

$
(1,011
)

(9)%

$
19,426

$
(9,375
)

(48)%

Production Enhancement

1,560

(121,299
)

122,859

NM

4,495

(2,935
)

(65)%

Corporate and Other¹

11

1,264

(1,253
)

NM

(517
)

528

NM

Consolidated

$
11,622

$
(108,973
)

$
120,595

NM

$
23,404

$
(11,782
)

NM

(1) "Corporate and Other" represents those items that are not directly related to a particular segment.
"NM" means not meaningful

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	Three Months Ended June 30,					2021/2020				Three Months Ended March 31,		Q2 / Q1
	2021		2020			$ Change			% Change	2021		$ Change			% Change
Revenue:
Reservoir Description	$	78,252	$	88,442		$	(10,190	)	(12)%	$	76,486	$	1,766		2%
Production Enhancement		40,493		27,294			13,199		48%		31,897		8,596		27%
Consolidated	$	118,745	$	115,736		$	3,009		3%	$	108,383	$	10,362		10%
Operating income (loss):
Reservoir Description	$	7,265	$	13,534		$	(6,269	)	(46)%	$	10,051	$	(2,786	)	(28)%
Production Enhancement		3,831		(16,324	)		20,155		NM		1,560		2,271		146%
Corporate and Other (1)		1,704		223			1,481		NM		11		1,693		NM
Consolidated	$	12,800	$	(2,567	)	$	15,367		NM	$	11,622	$	1,178		NM

(1) "Corporate and Other" represents those items that are not directly related to a particular segment.

"NM" means not meaningful


	Six Months Ended June 30,
	2021		2020			$ Change			% Change
Revenue:
Reservoir Description	$	154,738	$	191,144		$	(36,406	)	(19)%
Production Enhancement		72,390		76,992			(4,602	)	(6)%
Consolidated	$	227,128	$	268,136		$	(41,008	)	(15)%
Operating income (loss):
Reservoir Description	$	17,317	$	24,596		$	(7,279	)	(30)%
Production Enhancement		5,391		(137,623	)		143,014		NM
Corporate and Other (1)		1,714		1,487			227		NM
Consolidated	$	24,422	$	(111,540	)	$	135,962		NM

(1) "Corporate and Other" represents those items that are not directly related to a particular segment.

"NM" means not meaningful

Reservoir Description

Revenue from the Reservoir Description segment of $78.3 million for the three months ended June 30, 2021 decreased from $88.4 million for the three months ended June 30, 2020 and increased from $76.5 million for the three months ended March 31, 2021. Revenue from the Reservoir Description segment of $154.7 million for the six months ended June 30, 2021 decreased from ~~$102.7 million and $83.8~~$191.1 million for the ~~three~~six months ended ~~March 31, 2020 and the three months ended December 31, 2020, respectively.~~June 30, 2020. Reservoir Description operations ~~are~~rely heavily ~~exposed to~~on international and offshore activity levels, including ~~the~~ existing producing fields across the globe, with approximately 80% of its revenue sourced from producing fields and development projects outside the U.S. ~~Year-over-year financial performance~~In March of 2020, when the COVID-19 global pandemic began, there were significant decreases in ~~this segment is a result~~the price of ~~delayed~~crude oil which resulted in reduced project activity from our oil and gas clients in 2020 and, thus also reduced our spending and activity planned for 2021. The COVID-19 global pandemic also continues to delay and disrupt progress on longer-term international and offshore ~~projects by clients due to disruptions associated with the COVID-19 pandemic that began in March of 2020.~~projects. The results for the six-month period ended ~~March 31,~~June 30, 2021 were also negatively impacted by the North America winter storm in ~~North America. During~~February 2021. Sequentially, revenue from the ~~three months ended March 31, 2021, crude oil prices were less volatile and averaged between $58 - $61 per barrel as compared to the previous quarter average between $40 - 43 per barrel. However,~~Reservoir Description segment increased 2% primarily due to the ~~seasonal patterns, which historically slow client activity in some regions, and the impact~~adverse effect of the winter storm event ~~described above that affected lab operations from Canada to~~impacting the ~~U.S. Gulf coast, resulted in lower than expected activity levels for the three months ended March 31,~~first quarter of 2021. We continue to focus on large-scale core analysis and reservoir fluids characterization studies in the Asia-Pacific region, offshore Europe and Africa, offshore South America, North America, and the Middle ~~East as well as~~East. We are also engaged on both newly developed fields and brownfield extensions in offshore areas such as Australia, Brazil, Guyana, the Gulf of Mexico, the Middle East and the North Sea. Analysis of crude oil derived products also occurs in every major producing region of the world. In particular, we anticipate increased demand for our proprietary laboratory technological services in the Middle East as a result of several factors, including Core Lab’s completion of a comprehensive reservoir fluid

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laboratory in Doha, Qatar, ~~in 2020,~~ resumption of production from the Wafra oilfield located within the onshore Partitioned Neutral Zone in the southern part of Kuwait, as well as expansion of the North Gas Field in Qatar.

Operating income of $7.3 million for the three months ended June 30, 2021 decreased 46% year-over-year compared to $13.5 million for the three months ended June 30, 2020 and decreased 28% sequentially compared to $10.1 million for the three months ended March 31, 2021. Operating income of $17.3 million for the six months ended June 30, 2021 decreased 9%30% year-over-year compared to ~~$11.1~~$24.6 million for the ~~three~~six months ended ~~March 31, 2020, and decreased 48% sequentially compared to $19.4 million for the three months ended December 31,~~June 30, 2020. The decrease in operating income ~~year-over year was primarily due~~year-over-year correlates to ~~lower activity levels as delays~~the decrease in ~~international~~revenue discussed above and ~~offshore projects due to continued disruptions associated with the COVID-19 and~~reflects additional costs associated with disruptions and damage to facilities caused by the ~~February 2021~~North America winter storm in ~~North America.~~February 2021. These negative impacts toin the first ~~quarter~~half of 2021 results were partially offset by lower compensation expenses resulting from the cost reduction ~~plan~~plans implemented in 2020. ~~The decrease~~However, the Company began to progressively restore certain temporary cost reduction initiatives in ~~operating income sequentially was primarily due to seasonal patterns and~~ the ~~inclement weather event as described above,~~second quarter 2021, which resulted an increase in ~~addition to $7.4 million of stock compensation expense, previously recognized~~overall costs.

Operating margins were 9% for ~~certain employees’ long-term stock-based performance share award program (“PSAP”) awards, which was reversed during~~ the three months ended ~~December 31, 2020, as the performance targets were not fully achieved.~~

~~Operating margins were~~June 30, 2021, which decreased from 15% and 13% for the three months ended June 30, 2020 and March 31, 2021, ~~which increased from~~respectively. Operating margins were 11% for the ~~three~~six months ended ~~March 31,~~June 30, 2021, which decreased from 13% for the six months ended June 30, 2020. The ~~higher~~lower margin was primarily due to significantly lower activity levels, increased costs related to the North America winter storm, partially offset by lower compensation ~~expenses~~expense resulting from cost reduction initiatives implemented in 2020 despite lower activity levels. Operating margins were 23% for the three months ended December 31, 2020, which is significantly higher compared to the three months ended March 31, 2021, and was primarily due to the stock compensation expense that was reversed during the three months ended December 31, 2020, as described above.2020.

Production Enhancement

Revenue from the Production Enhancement segment, was $40.5 million for the three months ended June 30, 2021, an increase of 48% year-over-year from $27.3 million for the three months ended June 30, 2020 and increased 27% sequentially compared to $31.9 million for the three months ended March 31, ~~2021, a decrease~~2021. Revenue from the Production Enhancement segment of ~~36% year-over-year from $49.7~~$72.4 million for the ~~three~~six months ended ~~March 31, 2020 and increased 7% sequentially compared to $29.9~~June 30, 2021 decreased 6% from $77.0 million for the ~~three~~six months ended ~~December 31,~~June 30, 2020. Production Enhancement operations are largely focused on complex completions in unconventional, tight-oil reservoirs in the U.S. as well as conventional projects across the globe. Drilling and completion activity levels began to significantly decrease starting March of 2020 due to the global pandemic and bottomed out at a historically low level in May of 2020. Activity levels ~~accelerated~~in the U.S. onshore market started to recover in the second half of ~~2020.~~2020, and activity levels for both the U.S. onshore and international markets continued to strengthen in 2021. Activity levels for the U.S. onshore market ~~continued to strengthen in 2021, but were negatively impacted by the winter storm that hit North America in February. Although activity levels for the U.S. onshore~~and international market have partially recovered from the historic lows, and ~~were at comparable levels for~~increased sequentially in the ~~last six months, they are still significantly decreased as compared to the~~second quarter ~~ending March 31, 2020. Notwithstanding the industry downturn, our~~of 2021 by 20% and 36%, respectively. Our clients remain focused on using technological solutions for their projects to optimize and improve daily production and estimated ultimate recovery from their reservoirs. We continue to develop new

~~Return to Index~~

technologies and benefit from our clients' acceptance of new services and products, led by HERO^TM PerFRAC, GoGun^TM, FLOWPROFILER EDS^TM and ReFRAC technologies.

Operating income of $3.8 million for the three months ended June 30, 2021 compared to an operating loss of $16.3 million for the three months ended June 30, 2020, which was primarily impacted by a charge of $9.9 million for inventory write-down, and $1.3 million for cost reductions and other charges. The increase in operating income compared to the $1.6 million for the three months ended March 31, 2021, was primarily due to the sequential increase in activity levels as described above. Operating income of $5.4 million for the six months ended June 30, 2021 compared to the operating loss of ~~$121.3~~$137.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, ~~was primarily impacted by~~which included a charge of $122.2 million for impairment of goodwill and intangible assets, ~~recorded during the three months ended March 31, 2020. The decrease~~ in ~~operating income compared~~addition to ~~the $4.5 million~~additional charges as described above.

Operating margins for the three months ended ~~December 31,~~June 30, 2021 were 9%, compared to negative margin in the three months ended June 30, 2020, ~~was primarily due to~~which included the ~~reversal of previously recognized stock compensation expense associated with certain employee’s PSAP awards of $3.6 million.~~

various one time charges described above. Operating margins for the three months ended March 31, 2021 were 5%, ~~compared to negative margin~~which were negatively impacted by the North America winter storm in ~~the three months ended March 31, 2020, due to the impairment charge recorded, as described above. Operating~~February 2021. Improved operating margins for the three months ended ~~December~~ June 30, 2021 were primarily due to an increase in activity levels resulting in improved manufacturing productivity. Operating margin for the six months ended June 30, 2021 were 7%

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compared to negative margin for the six months ended June 30, 2020, ~~were 15%, which included~~and was primarily due to the ~~effect of reversing $3.6 million of stock compensation expense, as~~impairment charges described above.

Liquidity and Capital Resources

General

We have historically financed our activities through cash on hand, cash flows from operations, bank credit facilities, equity financing and the issuance of debt. Cash flows from operating activities provides the primary source of funds to finance operating needs, capital expenditures, our dividend and share repurchase program. Our ability to maintain and grow our operating income and cash flow depends, to a large extent, on continued investing activities. We believe our future cash flows from operations, supplemented by our borrowing capacity and the ability to issue additional equity and debt, should be sufficient to fund our debt requirements, capital expenditures, working capital, dividend payments and future acquisitions. The Company will continue to monitor and evaluate the availability of debt and equity markets.

In response to market conditions, primarily as a result of the global pandemic, Core Lab’s Supervisory Board approved a plan to reduce the Company’s future quarterly dividends to $0.01 per share beginning with the second quarter of 2020 and to focus excess free cash flow on debt reduction. In March 2020, the Company enacted cost control plans and expanded these initiatives in June of 2020, which include: (i) corporate and operating cost reductions; (ii) annual capital expenditures reduced to $11.9 million for 2020 and similar, or slightly higher, level for 2021, and (iii) eliminating all non-essential costs. The corporate and operating cost reductions include reductions in workforce and reduction of senior executive and employee compensation. These initiatives continued in the first ~~quarter~~half of 2021. With the increases in activity levels during the first half of 2021, the Company is in the process of restoring certain temporary cost reductions associated with employee compensation.

On January 12, 2021, the Company issued the 2021 Senior Notes with aggregate principal amount of $60 million in a private placement. The net proceeds from the 2021 Senior Notes were used exclusively to reduce outstanding debt under the Company’s Credit Facility, which increased the available borrowing capacity and liquidity for Core Lab. We intend to maintain sufficient borrowing capacity under the Credit Facility to both retire maturing debt obligations in September 2021, and provide additional liquidity, should the company require it for other purposes. See Note 6, 7, Long-Term Debt, Net for additional information.

On December 17, 2020, we entered into an Equity Distribution Agreement with Wells Fargo Securities, LLC for the issuance and sale of up to $60.0 million of our common shares. Under terms of the Equity Distribution Agreement, ~~the~~ 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. During the three months ended~~1933 (the "ATM program"). In March ~~31,~~ 2021, we completed the program selling 1,658,012 common shares at an average price of $36.19 per share, which generated aggregate proceeds of $59.1 million, net of commission and other associated ~~cost.~~costs. Proceeds were used to reduce debt on the Company’s Credit Facility.

We are a Netherlands holding company, and therefore we conduct substantially all of our operations through our subsidiaries. Our cash availability is largely dependent upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us. There are no restrictions preventing any of our subsidiaries from repatriating earnings, and there are no restrictions or income taxes associated with distributing cash to the parent company through loans or advances. As of ~~March 31,~~June 30, 2021, ~~$20.1~~$24.5 million of our ~~$27.8~~$33.6 million of cash was held by our foreign subsidiaries.

Cash Flows

~~Return to Index~~

The following table summarizes cash flows (in thousands):

Three Months Ended March 31,

2021/2020

2021

2020

% Change

Cash flows provided by/(used in):

Operating activities

$
7,987

$
22,025

(64)%

Investing activities

(1,070
)

(3,884
)

NM

Financing activities

7,083

(15,343
)

NM

Net change in cash and cash equivalents

$
14,000

$
2,798

400%

Return to Index


	Six Months Ended June 30,						2021/2020
	2021			2020			% Change
Cash flows provided by/(used in):
Operating activities	$	17,473		$	49,021		(64)%
Investing activities		(3,378	)		(7,156	)	(53)%
Financing activities		5,716			(31,999	)	NM
Net change in cash and cash equivalents	$	19,811		$	9,866		101%

Cash flows provided by operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 decreased by approximately ~~$14~~$32.0 million when compared to the same period in 2020. The ~~quarter~~six months ended ~~March 31,~~June 30, 2020 included non-cash charges of $122 million for impairments of goodwill and intangible assets as well as $6.1 million of additional non-cash stock compensation expense and when excluding these non-cash expenses operating profits and net income were approximately $12 million higher in 2020. Additionally, cash from operating activities in 2020 benefited approximately $2.5$12.0 million from a reduction in working capital as operating activity levels declined during the global pandemic while working capital required an investment of ~~$1.3~~$19.0 million for the same period in ~~2021.~~ 2021 as operating levels increased.

The decrease in cash flows used in investing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020 was primarily due ~~to the~~to: 1) lower capital expenditures at $5.7 million in 2021, a reduction of ~~$2.8~~$0.8 million, ~~as compared~~2) $1.6 million net cash proceeds received in 2021 from company owned life insurance policies to ~~$3.3~~fund our deferred compensation program, and 3) $0.8 million net proceeds from the sale of assets and a business in 2021. The six months ended June 30, 2020 included capital expenditures of $6.4 million, proceeds from the sale of assets of $0.4 million and ~~additional premiums on~~investment in life insurance policies of ~~$2.0~~$0.9 million in 2020.

Cash flows provided by financing activities of ~~$7.1~~$5.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, compared to cash flows used in financing activities of ~~$15.3~~$32.0 million for the same period in 2020. Financing activities for the ~~three~~six months ended ~~March 31, 2020 primarily includes~~June 30, 2021 reflect the ~~$0.25 per share~~lower dividend ~~for which $11.1~~payments of $0.9 million ~~was paid~~compared to $11.6 million in the quarter, additionally, cash was used to reduce debt by $3 million. Financing activities for the quarter ended March 31, 2021 include the dividend payment of $0.5 million, which had been reduced to $0.01 per share.2020. Additionally, financing activities in 2021 included $59.1 million of cash raised by ~~selling~~issuing shares through the ATM program and $58.9 million net cash raised through the issuance of the ~~2020~~2021 Senior Notes. ~~The proceeds~~Proceeds from ~~the 2020 Senior Notes and~~both the ATM program and the 2021 Senior Notes were used to ~~reduce debt on~~repay $111.0 million of outstanding borrowings under the ~~Company’s~~Company's Credit ~~Facility by $111 million.~~Facility.

During the three and six months ended ~~March 31,~~June 30, 2021, we repurchased ~~4,781~~29,082 and 33,863 of our common shares for an aggregate purchase price of ~~$0.2 million.~~$0.9 million and $1.0 million, respectively.

~~During the three months ended March 31, 2021, we used $0.4 million to pay dividends, as compared to the $11.1 million paid for the same period in 2020.~~

We utilize the non-GAAP financial measure of free cash flow to evaluate our cash flows and results of operations. Free cash flow is defined as net cash provided by operating activities (which is the most directly comparable GAAP measure) less cash paid for capital expenditures. Management believes that free cash flow provides useful information to investors regarding the cash available in the period that was in excess of our needs to fund our capital expenditures and operating activities. Free cash flow is not a measure of operating performance under GAAP and should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Free cash flow does not represent residual cash available for distribution because we may have other non-discretionary expenditures that are not deducted from the measure. Moreover, since free cash flow is not a measure determined in accordance with GAAP and thus is susceptible to varying interpretations and calculations, free cash flow as presented, may not be comparable to similarly titled measures presented by other companies. The following table reconciles this non-GAAP financial measure to the most directly comparable measure calculated and presented in accordance with GAAP (in thousands):


	Six Months Ended June 30,						2021/2020
	2021			2020			% Change
Free cash flow calculation:
Net cash provided by operating activities	$	17,473		$	49,021		(64)%
Less: cash paid for capital expenditures		(5,657	)		(6,406	)	(12)%
Free cash flow	$	11,816		$	42,615		(72)%

Return to Index

Three Months Ended March 31,

2021/2020

2021

2020

% Change

Free cash flow calculation:

Net cash provided by operating activities

$
7,987

$
22,025

(64)%

Less: cash paid for capital expenditures

(2,772
)

(3,340
)

(17)%

Free cash flow

$
5,215

$
18,685

(72)%

~~Revenue and earnings~~Activity levels have ~~decreased~~changed significantly in the six months ended June 30, 2021 as compared to ~~2020, when excluding~~ the ~~significant non-cash charges recorded~~same period in 2020. As noted above the ~~quarter ending March 31, 2020. The quarter~~six months ended ~~March 31,~~June 30, 2020 included non-cash charges of $122 million for impairments of goodwill and intangible assets as well as $6.1 million of additional non-cash stock compensation expense, and when excluding these non-cash expenses, operating profits and net income were approximately $12 million higher in 2020. Additionally, cash from operating activities in 2020 benefited approximately $2.5$12.0 million from a reduction in working capital as operating activity levels declined during the global pandemic while working capital required an investment of ~~$1.3~~$19.0 million for the same period in ~~2021.~~2021 as operating activity levels increased. Free cash flow has decreased for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020 in line with the decrease in cash from operations asoffset with slightly lower capital expenditures ~~were comparable, although slightly lower~~ in 2021.

Senior Notes, Credit ~~Facilities~~Facility and Available Future Liquidity

We have four series of senior notes outstanding with an aggregate principal amount of $210 million that were issued through private placement transactions.

Two series of the senior notes were issued in 2011 ("2011 Senior Notes"). Series A consists of $75 million in aggregate principal amount of notes that bear interest at a fixed rate of 4.01% and are due in full on September 30, 2021. Series B consists of $75 million in aggregate principal amount of notes that bear interest at a fixed rate of 4.11% and are due in full on September 30, 2023. Interest on each series of the 2011 Senior Notes is payable semi-annually on March 30 and September 30.

On October 16, 2020, we, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. as issuer, entered into two new series of senior notes with aggregate principal amount of $60 million in a private placement transaction (“2021 Senior Notes” and together with the 2011 Senior Notes, the “Senior Notes”). The 2021 Senior Notes were issued and funded on January 12, 2021. Series A of the ~~2020~~2021 Senior Notes consists of $45 million in aggregate principal amount that bear interest at a fixed rate of 4.09% and are due in full on January 12, 2026. Series B of the 2021 Senior Notes consists of $15 million in aggregate principal amount that bear interest at a fixed rate of 4.38% and are due in full on January 12, 2028. Interest on each series of the 2021 Senior Notes is payable semi-annually on June 30 and December 30, commencing on June 30, 2021.

On June 22, 2020, we entered into the Amendment to the Seventh Amended and Restated Credit Agreement, dated June 19, 2018. The Amendment increases 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 as follows:


Quarter ending	Maximum leverage ratio permitted
June 30, 2020 up to and including June 30, 2021		3.00
September 30, 2021		2.75
December 31, 2021 and thereafter		2.50

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 0.500%. The Amendment, also reduced the aggregate borrowing ~~capacity~~commitment under the Credit Facility to $225 million and the amount by which we may elect to increase the facility size, known as the “accordion” feature, to $50 million, subject to the satisfaction of certain conditions. Any outstanding balance under the Credit Facility is due on maturity on June 19, 2023. Our available capacity at any point in time is reduced by outstanding borrowings and outstanding letters of credit which totaled ~~$11.1~~$10.6 million at ~~March 31,~~June 30, 2021, resulting in an available borrowing capacity under the Credit Facility of ~~$213.9~~$214.4 million. In addition to indebtedness under the Credit Facility, we had ~~$6.0~~$6.3 million of outstanding letters of credit and performance guarantees and bonds from other sources as ~~at March 31, 2020.~~

~~Return to Index~~of June 30, 2021.

The Credit Facility isremains unsecured, and contains customary representations, warranties, terms and conditions for similar types of facilities.

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)

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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 agreement. The Credit Facility has more restrictive covenants with a minimum interest coverage ratio of 3.0 to 1.0 and ~~permit~~permits a maximum leverage ratio as described above. 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 ~~2.33,~~2.18, and our interest coverage ratio is ~~5.58,~~7.04, each for the period ended ~~March 31,~~June 30, 2021.

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.

We entered into two interest rate swap agreements for a total notional amount of $50 million, including one of which was entered during 2020. These two interest rate swap agreements were terminated and settled during the three-month period ending March 31, 2021. We ~~entered into two forward interest rate swap agreements for~~currently have a ~~total notional amount of $35 million during 2020. These two forward interest rate swap agreements were terminated and settled during the three months ended March 31, 2021.~~ ~~During the three months ended March 31, 2021, we entered into a new~~ forward interest rate swap agreement for a notional amount of $60 ~~million.~~million for the purpose to fix the underlying risk-free rate, that would be associated with any anticipated issuance of new long-term debt by the Company in future periods under the Credit Facility. See Note 16, Derivative Instruments and Hedging Activities for additional information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our 2020 Annual Report.

Item 4. Controls and Procedures

A complete discussion of our controls and procedures is included in our 2020 Annual Report.

Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2021 at the reasonable assurance level.

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. Further, the design of disclosure controls and internal control over financial reporting must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

~~Return to Index~~

Changes in Internal Control Over Financial Reporting

There have been no changes in our system of internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended ~~March 31,~~June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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CORE LABORATORIES N.V.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Note 8, 9, Commitments and Contingencies to our Interim Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors

Our business faces many risks. Any of the risks discussed in this Quarterly Report or our other SEC filings could have a material impact on our business, financial position or results of operations.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. For a detailed discussion of the risk factors that should be understood by any investor contemplating investment in our securities, please refer to "Item 1A - Risk Factors" in our 2020 Annual Report.

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

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Maximum Number of Shares That May Yet be Purchased Under the Program (2)(3)
April 1 - 30, 2021 (1)		21,327	$	30.10		—		4,331,557
May 1 - 31, 2021 (1)		7,755	$	28.18		—		4,350,891
June 1 - 30, 2021		—	$	—		—		4,350,891
Total		29,082	$	29.59		—

Period

Total Number
of Shares
Purchased

Average Price
Paid Per
Share

Total Number of Shares
Purchased as Part of a
Publicly Announced
Program

Maximum Number of
Shares That May Yet be
Purchased Under the
Program ⁽²⁾⁽³⁾

January 1 - 31, 2021 ⁽¹⁾

—

$
-

—

4,256,174

February 1 - 28, 2021 ⁽¹⁾

549

$
31.44

—

4,256,995

March 1 - 31, 2021

4,232

$
36.39

—

4,265,842

Total

4,781

$
35.82

—

(1)

During the three months ended June 30, 2021 29,082 shares were surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award.

(2)

In connection with our initial public offering in September 1995, our shareholders authorized our Management Board to repurchase up to 10% of our issued share capital for a period of 18 months. This authorization was renewed at subsequent annual or special shareholder meetings. The repurchase of shares in the open market is at the discretion of management pursuant to this shareholder authorization.

(3)

We distributed 114,131 treasury shares upon vesting of stock-based awards during the three months ended June 30, 2021.

~~(1)~~36

During the three months ended March 31, 2021 4,781 shares were surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award.

~~(2)~~

~~(3)~~

~~We distributed 14,449 treasury shares upon vesting of stock-based awards during the three months ended March 31, 2021.~~

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Item 6. Exhibits


Exhibit No.		Exhibit Title	Incorporated by reference from the following documents
31.1	-	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	-	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	-	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	-	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	-	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed herewith
101.SCH	-	Inline XBRL Schema Document	Filed herewith
101.CAL	-	Inline XBRL Calculation Linkbase Document	Filed herewith
101.LAB	-	Inline XBRL Label Linkbase Document	Filed herewith
101.PRE	-	Inline XBRL Presentation Linkbase Document	Filed herewith
101.DEF	-	Inline XBRL Definition Linkbase Document	Filed herewith
104	-	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith

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SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Core Laboratories N.V., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CORE LABORATORIES N.V.
		~~CORE LABORATORIES N.V.~~
Date:	July 29, 2021
~~Date:~~By:	~~April 22, 2021~~	~~By:~~	/s/ Christopher S. Hill
			Christopher S. Hill
			Chief Financial Officer
			(Duly Authorized Officer and
			Principal Financial Officer)

3638

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	March 31, 2021
Remainder of 2021	$	11,309
2022		13,537
2023		11,413
2024		9,151
2025		8,071
Thereafter		33,196
Total undiscounted lease payments		86,677
Less: Imputed interest		(15,685	)
Total operating lease liabilities	$	70,992

			Fair Value Measurement at
			December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies ⁽¹⁾	$	30,985	$	—	$	30,985	$	—
	$	30,985	$	—	$	30,985	$	—
Liabilities:
Deferred compensation liabilities	$	22,559	$	—	$	22,559	$	—
5 year interest rate swap		368		—		368		—
10 year interest rate swap		2,123		—		2,123		—
	$	25,050	$	—	$	25,050	$	—

	Reservoir Description		Production Enhancement			Corporate & Other ¹			Consolidated
Three months ended March 31, 2021
Revenue from unaffiliated clients	$	76,486	$	31,897		$	—		$	108,383
Inter-segment revenue		57		36			(93	)		—
Segment operating income (loss)		10,051		1,560			11			11,622
Total assets (at end of period)		332,429		131,096			120,921			584,446
Capital expenditures		2,400		304			68			2,772
Depreciation and amortization		3,126		1,447			298			4,871
Three months ended March 31, 2020
Revenue from unaffiliated clients	$	102,702	$	49,698		$	—		$	152,400
Inter-segment revenue		100		316			(416	)		—
Segment operating income (loss)		11,062		(121,299	)		1,264			(108,973	)
Total assets (at end of period)		337,406		159,608			149,595			646,609
Capital expenditures		1,412		1,914			14			3,340
Depreciation and amortization		3,521		1,642			278			5,441
(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations.

	Three Months Ended March 31,					2021/2020				Three Months Ended December 31,			Q1 / Q4
	2021		2020			$ Change			% Change	2020			$ Change			% Change
Revenue:
Reservoir Description	$	76,486	$	102,702		$	(26,216	)	(26)%	$	83,838		$	(7,352	)	(9)%
Production Enhancement		31,897		49,698			(17,801	)	(36)%		29,911			1,986		7%
Consolidated	$	108,383	$	152,400		$	(44,017	)	(29)%	$	113,749		$	(5,366	)	(5)%
Operating income (loss):
Reservoir Description	$	10,051	$	11,062		$	(1,011	)	(9)%	$	19,426		$	(9,375	)	(48)%
Production Enhancement		1,560		(121,299	)		122,859		NM		4,495			(2,935	)	(65)%
Corporate and Other¹		11		1,264			(1,253	)	NM		(517	)		528		NM
Consolidated	$	11,622	$	(108,973	)	$	120,595		NM	$	23,404		$	(11,782	)	NM
(1) "Corporate and Other" represents those items that are not directly related to a particular segment. "NM" means not meaningful