ClearStream Announces Fourth Quarter and 2021 Annual Financial Results
Secures $236 million of new project awards and contract renewals in fourth quarter
Calgary, Alberta (March 8, 2022) – ClearStream Energy Services Inc. (“ClearStream” or the "Company") (TSX:
CSM) today announced its results for the three and twelve months ended December 31, 2021. All amounts are in
Canadian dollars and expressed in thousands of dollars unless otherwise noted.
“EBITDAS” and “Adjusted EBITDAS” are not standard measures under IFRS. Please refer to the Advisory
regarding Non-Standard Measures at the end of this press release for a description of these items and limitations
of their use.
“As expected, activity levels in the fourth quarter moderated slightly from the third quarter, as our customers in the
energy industry continued to be disciplined with their capital allocation decisions by prioritizing debt repayment
and returns to shareholders. With the continued rise in global energy demand and commodity prices providing
strong fundamentals, we are seeing customers increase their spending on both maintenance and capital projects,
as evidenced by $236 million of new project and contract awards secured in the fourth quarter of 2021,” said
Barry Card, Interim Chief Executive Officer.
“We are proud to be a trusted provider of asset integrity services and appreciate the confidence that our
customers have demonstrated with these awards, which reflect their willingness to secure capacity for the next
few years with reliable service providers. I would like to thank our dedicated employees who have managed the
health and safety challenges presented by the pandemic while delivering high quality services to our customers,”
added Mr. Card.
HIGHLIGHTS
•
Revenues for the year ended December 31, 2021 were $389.4 million, representing a decrease of
$3.7 million or 0.9% from 2020.
• Gross profit for the year ended December 31, 2021 was $40.3 million, representing an increase of $6.6
million or 19.7% from 2020.
• Gross profit margin for the year ended December 31, 2021 was 10.4%, as compared to 8.6% in 2020.
•
•
•
•
•
Adjusted EBITDAS for the year ended December 31, 2021 was $17.1 million, representing an increase of
$6.6 million or 62.6% from 2020.
Adjusted EBITDAS margin for the year ended December 31, 2021 was 4.4%, as compared to 2.7% in
2020.
Selling, general and administrative expenses for the year ended December 31, 2021 were $26.3 million,
representing an increase of $2.3 million or 9.6% from 2020. The increase is largely due to investments
being made in 2021 to support our enterprise systems and digital strategy to drive longer-term efficiencies
and increase our cost competitiveness.
Liquidity remained strong with total cash and available credit facilities of $33.7 million at December 31,
2021.
New project awards and contract renewals were $236 million for the three months ended December 31,
2021 and $65 million for the first two months of 2022. Approximately 52% of that work is expected to be
completed in 2022.
Page 1
Maintenance and Construction Services
Revenues for the year ended December 31, 2021 were $354.7 million, representing a decrease of 2.0% or
$7.1 million. Quarterly revenues for the last three quarters of 2021 increased relative to the corresponding
periods in 2020 indicating that our customers are beginning to increase their spending on both maintenance and
capital projects. As evidenced by the level of new project awards and contract renewals, we expect activity levels
to continue to recover in 2022, with several turnaround projects already scheduled.
In order to better serve our customers that have operations on the west coast, we have opened an office in
Burnaby, British Columbia.
We continue to focus on consolidating various scopes of work with existing or new customers by adding additional
services in order to enable more efficient execution and lower costs for our customers on each work site.
Wear Technology Overlay Services
Revenues for the year ended December 31, 2021 were $37.8 million, representing an increase of 13.2% or
$4.4 million. Quarterly revenues for the last three quarters of 2021 increased relative to the corresponding
periods in 2020. With the continued rise in global energy demand and commodity prices, we are seeing
customers in the oil sands operating at full production levels, which has increased the demand for wear
technology overlay services.
In January, we launched our suite of asset protection products and expertise under the brand name Asset
ArmorTM. The Asset ArmorTM product line includes chromium carbide overlay, chrome white iron, corrosion
resistant alloys, asset integrity monitoring, tungsten carbide overlay and specialized field repair. These products
are designed for various asset arrangements and sizes, with the ability to service a wide variety of markets and
specifications across the globe.
Environmental Services
We have been actively growing our capabilities by adding staff and a new location in Swift Current, Saskatchewan
to better serve our customers in this area. In addition to the funding provided by existing government programs,
we are seeing our customers increase expenditures for the closure, reclamation and remediation of oil and gas
wells, pipelines and facilities in Western Canada. We expect this trend to continue following the expiry of the
government programs at the end of 2022 given the increased focus on ESG (environmental, social and
governance) matters.
Page 2
FOURTH QUARTER AND ANNUAL 2021 FINANCIAL RESULTS
($ millions, except per share amounts)
Revenue
Maintenance and Construction Services
Wear Technology Overlay Services
Total
Gross Profit
Maintenance and Construction Services
Wear Technology Overlay Services
Total
% of revenue
Selling, general and administrative
expenses
% of revenue
Adjusted EBITDAS
Maintenance and Construction Services
Wear Technology Overlay Services
Corporate
Total
% of revenue
(Loss) income from continuing operations
Net (loss) income per share (dollars) from
continuing operations (basic and diluted)
Three months ended
December 31,
Twelve months ended
December 31,
2021
2020 % Change
2021
2020 % Change
94.0
9.0
102.0
7.9
1.8
9.7
9.5 %
6.4
6.3 %
7.9
1.7
(5.1)
4.5
4.4 %
0.0
77.6
7.6
84.5
7.1
1.3
8.4
9.9 %
7.9
9.4 %
7.0
1.2
(7.7)
0.5
0.6 %
1.8
21.1 %
19.5 %
20.6 %
354.7
37.8
389.4
30.6
11.8 %
9.8
40.4 %
16.2 %
40.3
(0.4) % 10.4 %
(18.7) %
(3.1) %
26.3
6.8 %
12.6 %
50.0 %
(33.0) %
835.4 %
3.8 %
(99.7) %
30.6
9.5
(23.0)
17.1
4.4 %
(9.3)
361.8
33.4
393.1
28.0
5.6
33.7
8.6 %
24.0
6.1 %
27.8
5.5
(22.7)
10.5
2.7 %
3.5
(2.0) %
13.2 %
0.9 %
9.1 %
72.8 %
19.7 %
1.8 %
9.6 %
0.7 %
10.3 %
72.5 %
1.1 %
62.6 %
1.7 %
(367.9) %
0.00
0.02
(99.7) %
(0.08)
0.03
(368.0) %
Note: (1) “Adjusted EBITDAS” is not a standard measure under IFRS. Please refer to the Advisory regarding Non-
Standard Measures at the end of this press release for a description of this measure and limitations of its use.
Page 3
2021 SUMMARY RESULTS COMMENTARY
Revenue for the year ended December 31, 2021 was $389,402 compared to $393,121 for the year ended
December 31, 2020, representing a decrease of 0.9%. The decrease in revenue for the year ended December 31,
2021, in comparison to the same period in 2020, was driven by a strong first quarter in 2020, which was largely
unaffected by the COVID-19 pandemic, partially offset by improvements in the remainder of 2021. The
stabilization of the business that started in Q2 2021 continued in Q3 and Q4 2021 with revenue increasing in Q4
2021 by 20.6% from Q4 2020.
Gross profit for the year ended December 31, 2021 was $40,337 compared to $33,686 for the year ended
December 31, 2020, representing an increase of 19.7%. Gross profit margin for the year ended December 31,
2021 was 10.4% compared to 8.6% for the year ended December 31, 2020. The increase in gross profit was
driven primarily by a change in the overall volume mix across the business, including the Wear Technology
Overlay Services business which benefited from higher revenues and a reduction in its cost structure. As it
became clear that the COVID-19 pandemic and other market conditions were going to have longer term impacts
on our activity levels and margins across the whole business, we took immediate steps to adjust our cost
structures. These mitigation measures have improved operational flexibility and reduced the fixed costs
associated with ClearStream's operations as shown by the increase in gross profit margins. With more
stabilization in the marketplace overall, margins are more comparative to pre-COVID-19 pandemic levels.
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2021 were $26,298, in
comparison to $23,986 for 2020, representing an increase of 9.6%. As a percentage of revenue, SG&A expenses
for the year ended December 31, 2021 were 6.8% compared to 6.1% for 2020. The increase in SG&A expenses
relative to 2020 is largely due to investments being made in 2021 to support our enterprise systems and digital
strategy. These investments, which will extend into 2022, will drive longer-term efficiencies and increase our cost
competitiveness. Also, SG&A expenses were driven down in 2020 due to the cost reduction initiatives that were
adopted in response to reduced operational volumes and macro-economic uncertainty created by the COVID-19
pandemic. As our business has recovered and stabilized in 2021, certain elements of these cost reductions have
been reversed in order to support the increased volume of work in 2021 and to prepare for 2022.
For the year ended December 31, 2021, Adjusted EBITDAS was $17,115 compared to $10,524 for the year
ended December 31, 2020. As a percentage of revenue, Adjusted EBITDAS was 4.4% for the year ended
December 31, 2021 compared to 2.7% for 2020. Adjusted EBITDAS as a percentage of revenue increased for the
year ended December 31, 2021 due to gross profit margin increases being realized in both the Maintenance and
Construction Services segment and the Wear Technology Overlay Services segment.
Income from government subsidies includes the Canada Emergency Wage Subsidy ("CEWS") and the Canada
Emergency Rent Subsidy ("CERS") received from the Government of Canada to assist with the payment of
employee wages and rent as a result of the impact of the COVID-19 pandemic. During the year ended December
31, 2021, the Company qualified for both CEWS and CERS and recorded total subsidies of $16,133 compared to
$33,521 in 2020.
Loss from continuing operations for the year ended December 31, 2021 was $9,295 compared to income of
$3,469 for the year ended December 31, 2020. The income variance was driven by lower government subsidies
received in 2021 compared to 2020 and the recovery of the share-based compensation and other long-term
incentive plans in 2020, offset by the impairment of right-of-use assets in 2021 and goodwill in 2020.
LIQUIDITY AND CAPITAL RESOURCES
ClearStream has an asset-based lending facility (the “ABL Facility”) comprised of (i) a revolving credit facility
providing for maximum borrowings up to $15.0 million (the “Revolving Facility”) and (ii) a term loan facility
providing for maximum borrowings of up to $40.5 million (the “Term Loan Facility”). The Revolving Facility matures
on March 31, 2022 and the Term Loan Facility matures 180 days thereafter. As at December 31, 2021, the
Page 4
Company had $12.0 million of available capacity under the Revolving Facility, $40.5 million drawn on the Term
Loan Facility and $21.7 million of cash on hand.
On February 25, 2022, ClearStream received confirmation from a Canadian chartered bank that it had agreed to
provide a $25.0 million asset-based revolving credit facility with a three-year term (the “New ABL Facility"), subject
to the completion of a new credit agreement and other legal documentation. The New ABL Facility is expected to
be finalized prior to the maturity of the Revolving Facility on March 31, 2022. The terms of the New ABL Facility
are expected to be substantially similar to the Revolving Facility, other than the increase in the size of the facility
and the longer term. The existing credit agreement, which governs both the Revolving Facility and the Term Loan
Facility, will be amended to govern only the Term Loan Facility, the terms of which are expected to remain
substantially the same.
The Company anticipates that its liquidity (cash on hand and available credit facilities) and cash flow from
operations will be sufficient to meet its short-term contractual obligations, maintain compliance with its financial
covenants, and maintain a positive cash position through December 31, 2022.
On December 10, 2021, Canso Investment Counsel Ltd., in its capacity as portfolio manager for and on behalf of
certain accounts that it manages and sole holder of the Senior Secured Debentures, agreed to accept the
issuance of an additional 4,278 Senior Secured Debentures on December 31, 2021, 4,449 Senior Secured
Debentures on June 30, 2022 and 4,627 Senior Secured Debentures on December 31, 2022 at a principal
amount of $1,000 per Senior Secured Debenture in order to satisfy the interest that would otherwise become due
and payable on such dates (the “Payment in Kind Transactions”).
The Payment in Kind Transactions will save ClearStream approximately $13.4 million in cash, preserve this
capital for its ongoing operations and improve its financial situation. In addition, the Payment in Kind Transactions
will assist ClearStream to maintain compliance with the covenants under the ABL Facility. Following the Payment
in Kind Transactions, the principal amount of Senior Secured Debentures outstanding is $111.2 million at
December 31, 2021 and will be approximately $115.7 million at June 30, 2022 and $120.3 million at
December 31, 2022.
As at December 31, 2021 and December 31, 2020, issued and outstanding share capital included 109,992,668
common shares, 127,735 Series 1 preferred shares and 40,111 Series 2 preferred shares.
The Series 1 preferred shares (having an aggregate value of $127.735 million) are convertible at the option of the
holder into common shares at a price of $0.35/share and the Series 2 preferred shares (having an aggregate
value of $40.111 million) are convertible into common shares at a price of $0.10/share.
The Series 1 and Series 2 preferred shares have a 10% fixed cumulative preferential cash dividend payable when
the Company has sufficient monies to be able to do so, including under the provisions of applicable law and
contracts affecting the Company. The board of directors of the Company does not intend to declare or pay any
cash dividends until such times as the Company's balance sheet and liquidity position supports the payment. As
at December 31, 2021, the accrued and unpaid dividends on the Series 1 and Series 2 shares totaled
$59.8 million. Any accrued and unpaid dividends are convertible in certain circumstances at the option of the
holder into additional Series 1 and Series 2 preferred shares.
OUTLOOK
For our customers in the energy industry, the continued rise in global energy demand and commodity prices is
providing strong fundamentals. While these customers are prioritizing debt repayment and returns to shareholders
in the short-term, we are seeing them increase their spending on both maintenance projects (to enhance
operational reliability) and capital projects (to maintain/expand productive capacity).
The growth in our served markets is creating some near-term challenges, including inflationary pressure on both
labour and materials as well as supply chain disruptions. Over the past two years, we have taken steps to
strengthen the Company. We have invested in our enterprise systems and digital strategy to drive longer-term
Page 5
efficiencies and increase our cost competitiveness. We are also enhancing our programs to attract, retain and
develop our employees.
With energy transition and environmental considerations becoming increasingly important for all stakeholders in
the energy sector, we expect that our customers will continue to focus on improving their operational processes
for greater efficiencies and reliability, which aligns well with our service offerings.
To better support our customers, ClearStream has continued to add new service offerings that encompass the full
asset lifecycle and is now offering a suite of more than 40 services. Through the extensive regional coverage
provided by our 19 operating facilities, we believe that ClearStream is well-positioned to further consolidate
services required at various operating sites while generating efficiencies and cost reductions for its customers. In
2021, we added four new operating facilities: Fox Creek, Alberta; Drayton Valley, Alberta; Swift Current,
Saskatchewan; and Burnaby, British Columbia.
ClearStream's business model continues to prove its resilience as we are working closely with our customers
everyday in helping them to effectively manage their operations.
Additional Information
Our audited consolidated financial statements for the year ended December 31, 2021 and the related
Management's Discussion and Analysis of the operating and financial results can be accessed on our website at
www.clearstreamenergy.ca and will be available shortly through SEDAR at www.sedar.com.
About ClearStream Energy Services Inc.
With a legacy of excellence and experience stretching back more than 50 years, ClearStream provides solutions
for the Energy and Industrial markets including: Oil & Gas, Petrochemical, Mining, Power, Agriculture, Forestry,
Infrastructure and Water Treatment. With offices strategically located across Canada and a dedicated workforce,
we provide maintenance, construction, wear technology and environmental services that keep our clients moving
forward. For more information about ClearStream, please visit www.clearstreamenergy.ca or contact:
Randy Watt
Chief Financial Officer
ClearStream Energy Services Inc.
(587) 318-0997
rwatt@clearstreamenergy.ca
Advisory regarding Forward-Looking Information
Barry Card
Interim Chief Executive Officer
ClearStream Energy Services Inc.
(587) 318-0997
bcard@clearstreamenergy.ca
Certain information included in this Press Release may constitute “forward-looking information” within the meaning of Canadian securities laws. In some cases,
forward-looking information can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”,
“continue” or the negative of these terms or other similar expressions concerning matters that are not historical facts. This press release contains forward-looking
information relating to: our business plans, strategies and objectives; that our customers who are involved in the energy industry will increase their spending on
both maintenance and capital projects; contract renewals and project awards, including the estimated value thereof and the timing of completing the associated
work; that activity levels for maintenance and construction services will continue to recover in 2022; that the demand for wear technology overlay services will
increase as customers increase production levels; that customers will increase expenditures for the closure, reclamation and remediation of oil and gas wells,
pipelines and faciilties in Western Canada; that the COVID-19 pandemic and other market conditions will have longer term impacts on our activity levels and
margins; that the adjustments to our cost structures have improved operational flexibility and reduced the fixed costs associated with our operations; that the
investments being made to support our enterprise systems and digital strategy will drive longer-term efficiencies and increase our cost competitiveness; that the
New ABL Facility will be finalized prior to March 31, 2022 and that its terms will be substantially similar to the Revolving Facility; that the terms of the Term Loan
Facility will be substantially the same; the sufficiency of our liquidity and cash flow from operations to meet our short-term contractual obligations, maintain
compliance with our financial covenants and maintain a positive cash position through December 31, 2022; that our customers will focus on improving their
operational processes; and that we are well-positioned to consolidate further multiple services while generating efficiencies and cost reductions for our customers.
Page 6
Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual events or results to differ materially from the events
and results discussed in the forward-looking information including, but not limited to, the success of our response to the COVID-19 global pandemic, compliance
with debt covenants; access to credit facilities and other sources of capital for working capital requirements and capital expenditure needs, availability of labour,
dependence on key personnel, economic conditions, commodity prices, interest rates, regulatory change, weather and risks related to the integration of acquired
businesses. These factors should not be considered exhaustive. Risks and uncertainties about ClearStream’s business are more fully discussed in ClearStream’s
disclosure materials, including its annual information form and management’s discussion and analysis of the operating and financial results, filed with the securities
regulatory authorities in Canada and available at www.sedar.com. In formulating the forward-looking information, management has assumed that business and
economic conditions affecting ClearStream will continue substantially in the ordinary course, including, without limitation, with respect to general levels of economic
activity, regulations, taxes and interest rates. Although the forward-looking information is based on what management of ClearStream consider to be reasonable
assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with this forward-looking
information, and management’s assumptions may prove to be incorrect.
This forward-looking information is made as of the date of this press release, and ClearStream does not assume any obligation to update or revise it to reflect new
events or circumstances except as required by law. Undue reliance should not be placed on forward-looking information. Forward-looking information is provided
for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information
may not be appropriate for other purposes.
Advisory regarding Non-Standard Measures
The terms ‘‘EBITDAS’’ and “Adjusted EBITDAS” (collectively, the ‘‘Non-standard measures’’) are financial measures used in this press release that are not
standard measures under IFRS. ClearStream’s method of calculating the Non-Standard Measures may differ from the methods used by other issuers. Therefore,
ClearStream’s Non-Standard Measures, as presented may not be comparable to similar measures presented by other issuers.
EBITDAS refers to net earnings determined in accordance with IFRS, before depreciation and amortization, interest expense, income tax expense (recovery),
share-based compensation, and other long-term incentive plans. EBITDAS is used by management and the directors of ClearStream as well as many investors to
determine the ability of an issuer to generate cash from operations. Management also uses EBITDAS to monitor the performance of ClearStream’s reportable
segments and believes that in addition to net income or loss and cash provided by operating activities, EBITDAS is a useful supplemental measure from which to
determine ClearStream’s ability to generate cash available for debt service, working capital, capital expenditures and income taxes. ClearStream has provided a
reconciliation of income (loss) from continuing operations to EBITDAS in its management's discussion and analysis of the operating and financial results for the
year ended December 31, 2021.
Adjusted EBITDAS refers to EBITDAS excluding the gain on sale of assets held for sale, impairment of goodwill and intangible assets, restructuring expense, gain
on sale of property, plant and equipment, recovery of contingent consideration liability, one time incurred expenses, impairment of right-of-use assets, and
government subsidies. ClearStream has used Adjusted EBITDAS as the basis for the analysis of its past operating financial performance. Adjusted EBITDAS is a
measure that management believes (i) is a useful supplemental measure from which to determine ClearStream’s ability to generate cash available for debt service,
working capital, capital expenditures, and income taxes, and (ii) facilitates the comparability of the results of historical periods and the analysis of its operating
financial performance which may be useful to investors. ClearStream has provided a reconciliation of income (loss) from continuing operations to Adjusted
EBITDAS in its management's discussion and analysis of the operating and financial results for the year ended December 31, 2021.
Investors are cautioned that the Non-Standard Measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator
of performance or cash flows, a measure of liquidity or as a measure of actual return on the shares. These Non-Standard Measures should only be used with
reference to ClearStream’s consolidated interim and annual financial statements available on SEDAR at www.sedar.com or on ClearStream’s website at
www.clearstreamenergy.ca.
Page 7
Management’s Discussion and Analysis
March 8, 2022
The following is management’s discussion and analysis (“MD&A”) of the consolidated results of operations,
balance sheets and cash flows of ClearStream Energy Services Inc. ("ClearStream" or the "Company") for the
years ended December 31, 2021 and 2020. This MD&A should be read in conjunction with ClearStream’s audited
consolidated financial statements and the notes thereto for the years ended December 31, 2021 and 2020.
All amounts in this MD&A are in Canadian dollars and expressed in thousands of dollars unless otherwise noted.
The accompanying audited consolidated financial statements of ClearStream have been prepared by and are the
responsibility of management. The contents of this MD&A have been approved by the Board of Directors of
ClearStream on the recommendation of its Audit Committee. This MD&A is dated March 8, 2022 and is current to
that date unless otherwise indicated.
The audited consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
This MD&A makes reference to certain measures that are not defined in IFRS and contains forward-looking
information. These measures do not have any standard meaning prescribed by IFRS and are therefore unlikely to
be comparable to similar measures presented by other issuers. See "Advisory regarding Forward-Looking
Information" and "Advisory regarding Non-Standard Measures".
References to “we”, “us”, “our” or similar terms, refer to ClearStream, unless the context otherwise requires.
P A G E 7
Reportable Segments
The three segments listed below represent the reportable segments that the chief operating decision maker
considers when reviewing the performance of ClearStream and deciding where to allocate resources.
ClearStream’s operations, assets and employees are mainly located in Canada with some activity in the United
States through its Universal Weld Overlays division. ClearStream utilizes EBITDAS and Adjusted EBITDAS as
performance measures for its segmented results. These measures are considered to be non-standard measures
under IFRS.
Segment
Business Description
Maintenance and
Construction Services
Operational, maintenance,
the
conventional oil and gas, oilsands, and other industries as well as abandonment,
decommissioning, and reclamation services.
turnaround and construction services
to
Wear Technology Overlay
Services
Custom fabrication services supporting pipeline and infrastructure projects,
patented wear technology overlay services specializing in overlay pipe spools,
pipe bends and plate.
Corporate
Provision of typical head office functions, including strategic planning, corporate
communications,
finance, human resources and
information technology.
legal, marketing,
taxes,
P A G E 8
Advisory regarding Forward-Looking Information
Certain information included in this MD&A may constitute “forward-looking information” within the meaning of Canadian securities laws. In some cases, forward-
looking information can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”,
“continue” or the negative of these terms or other similar expressions concerning matters that are not historical facts. Specifically, this MD&A contains forward-
looking information relating to: our business plans, strategies and objectives; that the COVID-19 pandemic and other market conditions will have longer term
impacts on our activity levels and margins; that the adjustments to our cost structures have improved operational flexibility and reduced the fixed costs associated
with our operations; that the investments being made to support our enterprise systems and digital strategy will drive longer-term efficiencies and increase our cost
competitiveness; that the New ABL Facility will be finalized prior to March 31, 2022 and that its terms will be substantially similar to the Revolving Facility; that the
terms of the Term Loan Facility will be substantially the same; the sufficiency of our liquidity and cash flow from operations to meet our short-term contractual
obligations, maintain compliance with our financial covenants and maintain a positive cash position through December 31, 2022; that the Payment in Kind
Transactions will preserve capital for ongoing operations and improve our financial situation; the principal amount of Senior Secured Debentures outstanding
following the Payment in Kind Transactions; the effect of known claims and litigation on our financial position and results of operations; that our customers who are
involved in the energy industry will increase their spending on both maintenance and capital projects; that our customers will focus on improving their operational
processes; and that we are well-positioned to consolidate further multiple services while generating efficiencies and cost reductions for our customers.
Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual events or results to differ materially from the events
and results discussed in the forward-looking information including, but not limited to, the success of our response to the COVID-19 global pandemic, compliance
with debt covenants; access to credit facilities and other sources of capital for working capital requirements and capital expenditure needs, availability of labour,
dependence on key personnel, economic conditions, commodity prices, interest rates, regulatory change, weather and risks related to the integration of acquired
businesses. These factors should not be considered exhaustive. Risks and uncertainties about ClearStream’s business are more fully discussed in ClearStream’s
disclosure materials, including its annual information form and management’s discussion and analysis of the operating and financial results, filed with the securities
regulatory authorities in Canada and available at www.sedar.com. In formulating the forward-looking information, management has assumed that business and
economic conditions affecting ClearStream will continue substantially in the ordinary course, including, without limitation, with respect to general levels of economic
activity, regulations, taxes and interest rates. Although the forward-looking information is based on what management of ClearStream consider to be reasonable
assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with this forward-looking
information, and management’s assumptions may prove to be incorrect.
This forward-looking information is made as of the date of this MD&A, and ClearStream does not assume any obligation to update or revise it to reflect new events
or circumstances except as required by law. Undue reliance should not be placed on forward-looking information. Forward-looking information is provided for the
purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not
be appropriate for other purposes.
Advisory regarding Non-Standard Measures
The terms ‘‘EBITDAS’’ and “Adjusted EBITDAS” (collectively, the ‘‘Non-Standard Measures’’) are financial measures used in this MD&A that are not standard
measures under IFRS. ClearStream’s method of calculating the Non-Standard Measures may differ from the methods used by other issuers. Therefore,
ClearStream’s Non-Standard Measures, as presented may not be comparable to similar measures presented by other issuers.
EBITDAS refers to net earnings determined in accordance with IFRS, before depreciation and amortization, interest expense, income tax expense (recovery),
share-based compensation, and other long-term incentive plans. EBITDAS is used by management and the directors of ClearStream as well as many investors to
determine the ability of an issuer to generate cash from operations. Management also uses EBITDAS to monitor the performance of ClearStream’s reportable
segments and believes that in addition to net income or loss and cash provided by operating activities, EBITDAS is a useful supplemental measure from which to
determine ClearStream’s ability to generate cash available for debt service, working capital, capital expenditures and income taxes. ClearStream has provided a
reconciliation of income (loss) from continuing operations to EBITDAS in this MD&A.
Adjusted EBITDAS refers to EBITDAS excluding the gain on sale of assets held for sale, impairment of goodwill and intangible assets, restructuring expense, gain
on sale of property, plant and equipment, recovery of contingent consideration liability, one time incurred expenses, impairment of right-of-use assets, and
government subsidies. ClearStream has used Adjusted EBITDAS as the basis for the analysis of its past operating financial performance. Adjusted EBITDAS is a
measure that management believes (i) is a useful supplemental measure from which to determine ClearStream’s ability to generate cash available for debt service,
working capital, capital expenditures, and income taxes, and (ii) facilitates the comparability of the results of historical periods and the analysis of its operating
financial performance which may be useful to investors. ClearStream has provided a reconciliation of income (loss) from continuing operations to Adjusted
EBITDAS in this MD&A.
Investors are cautioned that the Non-Standard Measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator
of performance or cash flows, a measure of liquidity or as a measure of actual return on the shares. These Non-Standard Measures should only be used with
reference to ClearStream’s consolidated interim and annual financial statements available on SEDAR at www.sedar.com or on ClearStream’s website at
www.clearstreamenergy.ca.
P A G E 9
2021 SUMMARY OF RESULTS – CONTINUING OPERATIONS ($000's)
For the year ended December 31,
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Long-term incentive plans (expense) recovery
Amortization of intangible assets
Depreciation expense
Income from equity investment
Interest expense
Restructuring expenses
Impairment of intangible assets and goodwill
Impairment of right-of-use assets
Recovery of contingent consideration liability
Gain on sale of property, plant and equipment
Income tax recovery - current
Income tax recovery - deferred
Income from government subsidies
(Loss) income from continuing operations
Add:
Amortization of intangible assets
Depreciation expense
Long-term incentive plans expense (recovery)
Interest expense
Income tax recovery - current
Income tax recovery - deferred
EBITDAS (1)
Add:
Gain on sale of property, plant and equipment
Impairment of intangible assets and goodwill
Restructuring expense
Income from government subsidies
One-time incurred expenses
Impairment of right-of-use assets
Recovery of contingent consideration liability
Adjusted EBITDAS (1)
(1) EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
(149)
17,115 $
$
2021
2020
$
389,402 $
393,121
(349,065)
(359,435)
40,337
33,686
(26,298)
(23,986)
(2,239)
(669)
1,127
(1,824)
(12,224)
(14,937)
534
1
(15,934)
(19,028)
(1,052)
—
(8,270)
149
238
—
—
16,133
(9,295)
669
12,224
2,239
15,934
—
—
21,771
(238)
—
1,052
(2,641)
(5,000)
—
1,121
154
65
1,210
33,521
3,469
1,824
14,937
(1,127)
19,028
(65)
(1,210)
36,856
(154)
5,000
2,641
(16,133)
(33,521)
2,542
8,270
823
—
(1,121)
10,524
P A G E 10
Net (loss) income per share (dollars)
For the year ended December 31,
Basic & Diluted:
Continuing operations
Net (loss) income
Selected Balance Sheet Accounts
As at December 31,
Total assets
ABL facility
Senior secured debentures
Other secured borrowings
Shareholders' deficit
2021 RESULTS
$
$
$
2021
2020
(0.08) $
(0.08) $
0.03
0.03
2021
2020
205,454 $
40,436
109,744
15,571
29,250
215,607
40,626
105,173
17,703
19,942
Revenue for the year ended December 31, 2021 was $389,402 compared to $393,121 for the year ended
December 31, 2020, representing a decrease of 0.9%. The decrease in revenue for the year ended December 31,
2021, in comparison to the same period in 2020, was driven by a strong first quarter in 2020, which was largely
unaffected by the COVID-19 pandemic, partially offset by improvements in the remainder of 2021. The
stabilization of the business that started in Q2 2021 continued in Q3 and Q4 2021 with revenue increasing in Q4
2021 by 20.6% from Q4 2020.
Gross profit for the year ended December 31, 2021 was $40,337 compared to $33,686 for the year ended
December 31, 2020, representing an increase of 19.7%. Gross profit margin for the year ended December 31,
2021 was 10.4% compared to 8.6% for the year ended December 31, 2020. The increase in gross profit was
driven primarily by a change in the overall volume mix across the business, including the Wear Technology
Overlay Services business which benefited from higher revenues and a reduction in its cost structure. As it
became clear that the COVID-19 pandemic and other market conditions were going to have longer term impacts
on our activity levels and margins across the whole business, we took immediate steps to adjust our cost
structures. These mitigation measures have improved operational flexibility and reduced the fixed costs
associated with ClearStream's operations as shown by the increase in gross profit margins. With more
stabilization in the marketplace overall, margins are more comparative to pre-COVID-19 pandemic levels.
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2021 were $26,298, in
comparison to $23,986 for 2020, representing an increase of 9.6%. As a percentage of revenue, SG&A expenses
for the year ended December 31, 2021 were 6.8% compared to 6.1% for 2020. The increase in SG&A expenses
relative to 2020 is largely due to investments being made in 2021 to support our enterprise systems and digital
strategy. These investments, which will extend into 2022, will drive longer-term efficiencies and increase our cost
competitiveness. Also, SG&A expenses were driven down in 2020 due to the cost reduction initiatives that were
adopted in response to reduced operational volumes and macro-economic uncertainty created by the COVID-19
pandemic. As our business has recovered and stabilized in 2021, certain elements of these cost reductions have
been reversed in order to support the increased volume of work in 2021 and to prepare for 2022.
Non-cash items that impacted the 2021 results were depreciation, amortization, and an impairment of right-of-use
assets. For the year ended December 31, 2021, depreciation and amortization expenses was $12,893 compared
to $16,761 for the year ended December 31, 2020. The decrease in depreciation and amortization expenses was
due to the passage of time and regular reduction of asset values. The Company recognized an impairment of
right-of-use assets in the year ended December 31, 2021 of $8,270 of which the primary purpose was to earn
sub-lease income. The term of the existing sub-lease agreement ended in early 2021 and with current market
P A G E 11
conditions the potential for these assets to generate sub-lease income in the future is uncertain. The right-of-use
land and building impaired are included in the Corporate segment.
For the year ended December 31, 2021, interest expenses were $15,934 compared to $19,028 for the year ended
December 31, 2020, representing a decrease of 16.3%. The decrease in 2021 was due to no amounts being
drawn on the revolving portion of the asset-based lending facility and reduced utilization and fees in comparison
to 2020.
Restructuring expenses of $1,052 were recorded during the year ended December 31, 2021 compared to $2,641
for the year ended December 31, 2020. The non-recurring restructuring expenses in 2021 and 2020 were
primarily related to cost reduction initiatives in response to changing market conditions.
Impairment of goodwill of $5,000 in the Universal Weld Overlays cash-generating unit was recorded in 2020 due
to the forecasted impact of the COVID-19 pandemic, which had decreased global demand for oil and gas and
resulted in a reduction in the long-term outlook for commodity prices.
Income from government subsidies includes the Canada Emergency Wage Subsidy ("CEWS") and the Canada
Emergency Rent Subsidy ("CERS") received from the Government of Canada to assist with the payment of
employee wages and rent as a result of the impact of the COVID-19 pandemic. During the year ended December
31, 2021, the Company qualified for both CEWS and CERS and recorded total subsidies of $16,133 compared to
$33,521 in 2020.
Loss from continuing operations for the year ended December 31, 2021 was $9,295 compared to income of
$3,469 for the year ended December 31, 2020. The income variance was driven by lower government subsidies
received in 2021 compared to 2020 and the recovery of the share-based compensation and other long-term
incentive plans in 2020, offset by the impairment of right-of-use assets in 2021 and goodwill in 2020.
For the year ended December 31, 2021, Adjusted EBITDAS was $17,115 compared to $10,524 for the year
ended December 31, 2020. As a percentage of revenue, Adjusted EBITDAS was 4.4% for the year ended
December 31, 2021 compared to 2.7% for 2020. Adjusted EBITDAS as a percentage of revenue increased for the
year ended December 31, 2021 due to gross profit margin increases being realized in both the Maintenance and
Construction Services segment and the Wear Technology Overlay Services segment.
P A G E 12
SEGMENT OPERATING RESULTS
MAINTENANCE AND CONSTRUCTION SERVICES
For the year ended December 31,
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Depreciation expense
Income from equity investments
Interest expense
Restructuring expenses
Gain on sale of property, plant and equipment
Income from government subsidies
Income from continuing operations
Add:
Amortization of intangible assets
Depreciation expense
Interest expense
EBITDAS (1)
Gain on sale of property, plant and equipment
Restructuring expense
Income from government subsidies
2021
2020
$
354,652 $
361,816
(324,070)
(333,776)
30,582
28,040
(488)
(209)
(671)
(261)
(7,785)
(8,888)
534
(799)
(2)
238
13,756
35,827
209
7,785
799
1
(1,273)
(501)
615
29,078
46,140
261
8,888
1,273
44,620
56,562
(238)
2
(615)
501
(13,756)
(29,078)
One-time incurred expenses
Adjusted EBITDAS (1)
(1) EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
30,628 $
—
$
386
27,756
Revenues
Revenues for the Maintenance and Construction Services segment were $354,652 for the year ended December
31, 2021 compared to $361,816 for the year ended December 31, 2020, representing a decrease of 2.0%. The
decrease was due to reduced customer spending and the ongoing lower industry volume of certain scheduled
maintenance activities starting in April 2020 and extending through Q1 2021. This was a result of volatility in crude
oil prices due to macro-economic uncertainty and the economic impact of the COVID-19 pandemic. However, we
have started to see a stabilization of our business as evidenced by the increase in revenues in the second, third
and fourth quarters of 2021 compared to the same periods in 2020.
Gross Profit
Gross profit was $30,582 for the year ended December 31, 2021 compared to $28,040 for the year ended
December 31, 2020, representing an increase of 9.1%. Gross profit margin was 8.6% for the year ended
December 31, 2021 compared to 7.7% for the year ended December 31, 2020. The increase in gross profit
margin for the year ended December 31, 2021 was due to an increase in the number of higher margin projects
completed compared to 2020.
P A G E 13
WEAR TECHNOLOGY OVERLAY SERVICES
For the year ended December 31,
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Depreciation expense
Interest expense
Restructuring expenses
Impairment of goodwill and intangible assets
Loss on sale of property, plant and equipment
Income from government subsidies
Income (loss) from continuing operations
Add:
Amortization of intangible assets
Depreciation expense
Interest expense
EBITDAS (1)
Loss on sale of property, plant and equipment
Impairment of goodwill and intangible assets
Restructuring expense
Income from government subsidies
2021
2020
$
37,826 $
33,406
(28,071)
(27,760)
9,755
5,646
(300)
(460)
(2,763)
(328)
(282)
—
—
1,211
6,833
460
2,763
328
10,384
—
—
282
(544)
(1,563)
(3,410)
(374)
(41)
(5,000)
(359)
2,484
(3,161)
1,563
3,410
374
2,186
359
5,000
41
(1,211)
(2,484)
One time incurred expenses
Adjusted EBITDAS (1)
(1) EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
9,455 $
—
$
379
5,481
Revenues
Revenues for this segment for the year ended December 31, 2021 were $37,826, compared to $33,406 for the
year ended December 31, 2020, representing an increase of 13.2%. The increase was due to activity levels for
wear technology overlay services continuing to see market recovery as customers are steadily bringing back their
production output and spending on consumables. This recovery is evidenced by an increase in revenues in the
second, third and fourth quarters of 2021 compared to the same periods in 2020.
Gross Profit
Gross profit was $9,755 for the year ended December 31, 2021, compared to $5,646 for the year ended
December 31, 2020, representing an increase of 72.8%. Gross profit margin was 25.8% for the year ended
December 31, 2021 compared to 16.9% for the year ended December 31, 2020. As it became clear that the
COVID-19 pandemic and other market conditions were going to have longer term impacts on our activity levels
and margins, we took immediate steps to adjust our cost structures and optimize our overlay manufacturing
footprint by consolidating all operations into our facility in Sherwood Park resulting in the closure of the facilities in
Edmonton and Nisku during the third quarter of 2020. The increase in gross profit margin for the year ended
December 31, 2021 compared to 2020 was due to cost efficiencies as well as an increase in the number of higher
margin projects.
P A G E 14
CORPORATE
ClearStream’s head office functions are located in Calgary, Alberta. The Corporate segment provides typical head
office functions, including strategic planning, corporate communications, taxes, legal, marketing, finance, human
resources and information technology, for the entire organization. The tables below reflect the costs of
ClearStream’s corporate function, as well as other corporate overhead expenses.
For the year ended December 31,
Selling, general and administrative expenses
Long-term incentive plans (expense) recovery
Depreciation expense
Interest expense
Restructuring expenses
Impairment of right-of-use assets
Recovery of contingent consideration liability
Loss on sale of property, plant and equipment
Income tax recovery - current
Income tax recovery - deferred
Income from government subsidies
Loss from continuing operations
Add:
Depreciation expense
Long-term incentive plans expense (recovery)
Interest expense
Income tax recovery - current
Income tax recovery - deferred
EBITDAS (1)
Loss on sale of property, plant and equipment
2021
2020
$
(25,510) $
(2,239)
(1,676)
(14,807)
(768)
(8,270)
149
—
—
—
1,166
(51,955)
1,676
2,239
14,807
—
—
(33,233)
—
(22,771)
1,127
(2,639)
(17,381)
(2,099)
—
1,121
(102)
65
1,210
1,959
(39,510)
2,639
(1,127)
17,381
(65)
(1,210)
(21,892)
102
2,099
(1,959)
58
—
(1,121)
(22,713)
Restructuring expenses
Income from government subsidies
One-time incurred expenses
Impairment of right-of-use assets
Recovery of contingent consideration liability
Adjusted EBITDAS (1)
(1) EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
768
(1,166)
2,542
8,270
(149)
(22,968) $
$
Selling, General and Administrative Expenses
SG&A expenses were $25,510 for the year ended December 31, 2021 compared to $22,771 for the year ended
December 31, 2020. SG&A expenses as a percentage of revenue were 6.6% for the year ended December 31,
2021 compared to 5.8% for the year ended December 31, 2020. The increase in SG&A expenses relative to 2020
is largely due to investments being made in 2021 to support our enterprise systems and digital strategy. These
investments, which will extend into 2022, will drive longer-term efficiencies and increase our cost competitiveness.
Also, SG&A expenses were driven down in 2020 due to the cost reduction initiatives that were adopted in
response to reduced operational volumes and macro-economic uncertainty created by the COVID-19 pandemic.
As our business has recovered and stabilized in 2021, certain elements of these cost reductions have been
reversed in order to support the increased volume of work in 2021 and to prepare for 2022.
P A G E 15
FOURTH QUARTER 2021 RESULTS
For three months ended December 31,
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Long-term incentive plans (expense) recovery
Amortization of intangible assets
Depreciation expense
Income from equity investment
Interest expense
Restructuring expenses
Recovery of contingent consideration liability
Gain on sale of property, plant and equipment
Income tax recovery - deferred
Income from government subsidies
Income from continuing operations
Add:
Amortization of intangible assets
Depreciation expense
Long-term incentive plans expense (recovery)
Interest expense
Income tax recovery - deferred
EBITDAS (1)
Add:
Gain on sale of property, plant and equipment
Restructuring expense
Income from government subsidies
One-time incurred expenses
2021
2020
$
101,955 $
84,530
(92,227)
(76,158)
9,728
8,372
(6,443)
(1,239)
(167)
(2,884)
70
(3,914)
(168)
149
53
—
4,820
5
167
2,884
1,239
3,914
—
(7,923)
18
(495)
(3,791)
(127)
(5,630)
(1,153)
1,121
112
1,210
10,040
1,754
495
3,791
(18)
5,630
(1,210)
8,209
10,442
(53)
168
(112)
1,153
(4,820)
(10,040)
1,107
155
(1,121)
477
Recovery of contingent consideration liability
Adjusted EBITDAS (1)
(1) EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
4,462 $
(149)
$
FOURTH QUARTER 2021 RESULTS COMMENTARY
Revenues for the three months ended December 31, 2021 were $101,955 compared to $84,530 for the same
period in 2020 an increase of 20.6% on a quarter-over-quarter basis. This increase for the three months ended
December 31, 2021 in comparison to the same period in 2020 was driven by the increase in turnaround activity
that was deferred to Q4 2021, in addition to the overall stabilization of the business in 2021. In 2020, the
Company experienced reduced customer spending as a result of the volatility in crude oil prices due to macro-
economic uncertainty and the economic impact of the COVID-19 pandemic.
P A G E 16
Gross profit for the three months ended December 31, 2021 was $9,728 compared to $8,372 for the same period
in 2020. Gross margins were 9.5% for the three months ended December 31, 2021 compared to 9.9% in the
same period in 2020. The decrease in gross margin in Q4 2021 was primarily in the Maintenance and
Construction Services segment where lower margins were realized on a couple of major projects.
SG&A expenses for the three months ended December 31, 2021 were $6,443 compared to $7,923 for the same
period in 2020. As a percentage of revenue, SG&A expenses for the three months ended December 31, 2021 was
6.3% compared to 9.4% for the same period in 2020 due to the timing of some significant year end accruals in
Q4 2020.
Income from continuing operations for the three months ended December 31, 2021 was $5 compared to $1,754
for the same period in 2020. The decrease in income from continuing operations was driven by lower government
subsidies received in 2021 compared to 2020, partially offset by a decrease in depreciation and amortization
expenses due to the passage of time and regular reduction of asset values.
For the three months ended December 31, 2021, Adjusted EBITDAS was $4,462 compared to $477 for the same
period in 2020. As a percentage of revenue, Adjusted EBITDAS was 4.4% for the three months ended December
31, 2021 compared to 0.6% for the same period in 2020. Adjusted EBITDAS as a percentage of revenue
increased for the three months ended December 31, 2021 due to gross profit margin increase being realized in
the Wear Technology Overlay Services segment and decrease in SG&A expenses for the period.
ADJUSTED EBITDAS
Three months ended
December 31,
Years ended
December 31,
2021
2020
2021
2020
Maintenance and Construction Services
$
Wear Technology Overlay Services
7,876 $
1,725
6,992 $
30,628 $
27,756
1,150
9,455
Corporate
Adjusted EBITDAS (1)
$
(1) T EBITDAS and Adjusted EBITDAS are not a standard measure under IFRS and they are defined in the section "Advisory regarding Non-Standard Measures".
17,115 $
(22,968)
4,462 $
(7,665)
(5,139)
477 $
5,481
(22,713)
10,524
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31,
Cash flow provided by operating activities
Cash flow used in investing activities
Cash flow used in financing activities
Consolidated cash, end of period
2021
2020
2,217 $
(1,224)
(9,790)
21,680 $
60,025
(948)
(35,709)
30,477
$
$
The Company anticipates that its liquidity (cash on hand and available credit facilities) and cash flow from
operations will be sufficient to meet its short-term contractual obligations, maintain compliance with its financial
covenants, and maintain a positive cash position through December 31, 2022.
Investing Activities
Cash flow used in investing activities during the year ended December 31, 2021 consisted of the purchase of
assets and the acquisition of all of the outstanding shares of Sharp Instruments Ltd., an electrical and
instrumentation company located in Fort St. John, BC, that was acquired on August 16, 2021, offset by proceeds
from the disposal of certain assets and dividends from equity investments.
P A G E 17
Financing Activities
a. ABL Facility
ClearStream has an asset-based lending facility (the “ABL Facility”) comprised of (i) a revolving credit facility
providing for maximum borrowings up to $15,000 (the “Revolving Facility”) with a Canadian chartered bank (the
"Lender") and (ii) a term loan facility providing for maximum borrowings of up to $40,500 (the “Term Loan Facility”)
with Canso Investment Counsel Ltd., in its capacity as portfolio manager for and on behalf of certain accounts that
it manages (“Canso”). The Revolving Facility matures on March 31, 2022 and the Term Loan Facility matures
180 days thereafter.
The amount available under the Revolving Facility will vary from time to time based on the borrowing base
determined with reference to the accounts receivable of the Company. The Revolving Facility borrowing base as
at December 31, 2021 was $15,000 (December 31, 2020 - $49,054). The obligations under the ABL Facility are
secured by, among other things, a first ranking lien on all of the existing and after acquired accounts receivable
and inventories of the Company and the other guarantors, being certain of the Company's direct and indirect
subsidiaries. The interest rate on the Revolving Facility is prime plus 2.5%, increasing to prime plus 4.0% if the
Revolving Facility is more than 50% drawn.
As at December 31, 2021, nil (December 31, 2020 - nil) was drawn on the Revolving Facility, and there were
$2,450 (December 31, 2020 - $3,125) of letters of credit reducing the amount available to be drawn. As at
December 31, 2021, the net unamortized amount of deferred financing costs was $64 (December 31, 2020 -
$113).
As at December 31, 2021, $40,500 (December 31, 2020 - $40,500) was outstanding under the Term Loan Facility.
The Term Loan Facility is required to be used for specific purposes and cannot be redrawn once repaid. The
interest rate on the Term Loan Facility is equal to the interest rate on the Revolving Facility plus 2.0%.
The financial covenants applicable under the ABL Facility are as follows:
•
•
The Company must maintain a fixed charge coverage ratio equal to or greater than 1.00:1.00 for each
twelve month period calculated and tested as of the last day of each fiscal quarter (commencing
March 31, 2021); and
The Company must not expend or become obligated for any capital expenditures in an aggregate amount
exceeding $6,600 during the period commencing January 1, 2021 and ending December 31, 2021, and
any fiscal year thereafter.
As at December 31, 2021, ClearStream was in compliance with all financial covenants under the ABL Facility.
On February 25, 2022, ClearStream received confirmation from a Canadian chartered bank that it had agreed to
provide a $25,000 asset-based revolving credit facility with a three-year term (the “New ABL Facility"), subject to
the completion of a new credit agreement and other legal documentation. The New ABL Facility is expected to be
finalized prior to the maturity of the Revolving Facility on March 31, 2022. The terms of the New ABL Facility are
expected to be substantially similar to the Revolving Facility, other than the increase in the size of the facility and
the longer term. The existing credit agreement, which governs both the Revolving Facility and the Term Loan
Facility, will be amended to govern only the Term Loan Facility, the terms of which are expected to remain
substantially the same.
b. Other Secured Borrowings
On June 26, 2019, the Company received $19,000 from two secured loans with the Business Development Bank
of Canada (“BDC”) as a partial source of funds for the acquisition of certain assets of the production services
division of AECOM Production Services Ltd. (the "AECOM PSD Business").
P A G E 18
The $13,500 loan is repayable over 300 monthly payments of $45, with the final payment to occur on October 2,
2045. The interest rate on the loan is the BDC Floating Base Rate less 1.0%. Interest accrues and is payable
monthly. The Company allocated $195 in deferred financing costs to this loan that will be amortized over the life of
the loan.
The $5,500 loan is repayable over 72 monthly payments of $75, with the final payment to occur on March 28,
2025. The interest rate on the loan is the BDC Floating Base Rate less 0.5%. Interest accrues and is payable
monthly. The Company allocated $85 in deferred financing costs to this loan that will be amortized over the life of
the loan.
The loans are secured by a first security interest on the real property and equipment acquired through the
acquisition of the AECOM PSD Business and a security interest in all other present and future property, subject to
the priorities granted to existing lenders under the ABL Facility, senior secured debentures and other existing
commitments.
The loan agreements with BDC require the Company to maintain a fixed charge coverage ratio equal to or greater
than 1.10:1.00 on annual basis.
As at December 31, 2021, ClearStream was in compliance with all financial covenants under the loan agreements
with BDC.
c. Senior Secured Debentures
On March 23, 2016, the Company issued 8% senior secured debentures due March 23, 2026 (the "Senior
Secured Debentures") pursuant to a trust indenture between ClearStream, as issuer, and BNY Trust Company of
Canada, as debenture trustee, as amended and supplemented (the "Senior Secured Indenture"), on a private
placement basis to Canso. On June 2, 2020, the debenture trustee was changed to Computershare Trust
Company of Canada.
The Senior Secured Debentures bear interest at an annual rate of 8.00% payable in arrears on June 30 and
December 31 of each year. The maturity date of the Senior Secured Debentures is March 23, 2026. The Senior
Secured Debentures are redeemable at the option of the Company and, in certain circumstances, are mandatorily
redeemable. The Senior Secured Debentures are secured by first‑ranking liens over all of the property of the
Company and its guarantor subsidiaries, other than certain limited classes of collateral over which the Company
has granted a prior‑ranking lien in favour of the ABL Facility and the BDC secured loans. The Senior Secured
Debentures provide for certain events of default and covenants of the Company, including financial and reporting
covenants and restrictive covenants limiting the ability of the Company and its subsidiaries to make certain
distributions and dispositions, incur indebtedness, grant liens and limitations with respect to acquisitions, mergers,
investments, non‑arm’s length transactions, reorganizations and hedging arrangements (subject to certain
exceptions).
On December 10, 2021, Canso, in its capacity as portfolio manager for and on behalf of certain accounts that it
manages and sole holder of the Senior Secured Debentures, agreed to accept the issuance of an additional
4,278 Senior Secured Debentures on December 31, 2021, 4,449 Senior Secured Debentures on June 30, 2022
and 4,627 Senior Secured Debentures on December 31, 2022 at a principal amount of $1,000 per Senior Secured
Debenture in order to satisfy the interest that would otherwise become due and payable on such dates (the
“Payment in Kind Transactions”).
The Payment in Kind Transactions will save ClearStream approximately $13.4 million in cash, preserve this
capital for its ongoing operations and improve its financial situation. In addition, the Payment in Kind Transactions
will assist ClearStream to maintain compliance with the covenants under the ABL Facility. Following the Payment
in Kind Transactions, the principal amount of Senior Secured Debentures outstanding is $111.2 million at
December 31, 2021 and will be approximately $115.7 million at June 30, 2022 and $120.3 million at
December 31, 2022.
P A G E 19
CONTRACTUAL OBLIGATIONS
The table below summarizes the Company’s contractual obligations at December 31, 2021, on an undiscounted
basis:
Total
Less than
One Year
One to Five
Years
After Five
Years
Accounts payable and accrued liabilities
$
34,869 $
34,869 $
Deferred consideration
Earn-out contingent liability (2)
ABL facility (1)
Lease liabilities (2)
Other secured borrowings (1)
Senior secured debentures (1)
Total
(1) Carrying value is presented gross of debt issuance costs.
(2) Carrying value is presented as undiscounted cash flows.
433
70
40,500
37,550
15,747
111,236
433
70
40,500
9,425
1,439
—
— $
—
—
—
23,686
4,183
111,236
—
—
—
—
4,439
10,125
—
14,564
$
240,404 $
86,736 $
139,105 $
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
ClearStream prepares its consolidated financial statements in accordance with IFRS. The preparation of the
consolidated financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and
liabilities, and the reported amounts of revenues and expenses for the period of the consolidated financial
statements. Based on the current environment, significant market uncertainty exists that could impact the
estimates and assumptions made by ClearStream. Significant accounting policies and methods used in the
preparation of the consolidated financial statements, including use of estimates and judgments, are described in
note 1 of the audited consolidated financial statements.
CONTINGENCIES
Contingencies are provided for when they are likely to occur and can be reasonably estimated. ClearStream is
subject to claims and litigation proceedings arising in the normal course of operations. The known claims and
litigation proceedings are not expected to materially affect the Company's financial position or reported results of
operations.
P A G E 20
SUMMARY OF QUARTERLY RESULTS
($000s except unit amounts)
2021
Q4
2021
Q3
2021
Q2
2021
Q1
2020
Q4
2020
Q3
2020
Q2
2020
Q1
Revenue
$101,955 $108,647 $96,596 $82,204 $84,530 $100,755 $81,037 $126,799
Gross Profit Margin
$9,728
$12,124 $10,440
$8,045
$8,372
$9,965
$6,030
$9,319
Gross Profit Margin %
Net income (loss) from
continuing operations
Net income (loss)
Net income (loss) per share
from continuing operations
Net income (loss) per share
9.5 % 11.2 % 10.8 %
9.8 %
9.9 %
9.9 %
7.4 %
7.3 %
$5
$4
$(2,227)
$(2,228)
$494
$487
$(7,569)
$1,754
$9,684
$1,303
$(9,272)
$(7,572)
$1,722
$9,832
$1,299
$(9,357)
$0.00
$0.00
$(0.02)
$(0.02)
$0.00
$0.00
$(0.07)
$(0.07)
$0.02
$0.02
$0.09
$0.09
$0.01
$0.01
$(0.08)
$(0.09)
ClearStream’s revenues are somewhat seasonal, in particular for the Maintenance and Construction Services
segment. Typically, there are scheduled shutdown turnaround projects in the spring and fall which increase
revenues over and above the standard maintenance and operational support services. In 2020 and 2021, this
trend was disrupted due to the COVID-19 pandemic causing the postponement of scheduled spring shutdown
turnaround projects to the third quarter as shown by the increased revenue in the third quarter in comparison to
the second quarter.
TRANSACTIONS WITH RELATED PARTIES
As at December 31, 2021, directors, officers and key employees beneficially held an aggregate of
7,732,907 common shares, representing approximately 7% of the issued and outstanding common shares.
SHARE CAPITAL
The authorized share capital of the Company consists of: (i) an unlimited number of common shares, and
(ii) preferred shares issuable in series to be limited in number to an amount equal to not more than one half of the
issued and outstanding common shares at the time of issuance of such preferred shares.
As at December 31, 2021 and 2020, issued and outstanding share capital included 109,992,668 common shares,
127,735 Series 1 preferred shares and 40,111 Series 2 preferred shares.
The Series 1 and Series 2 Preferred Shares have a 10% fixed cumulative preferential cash dividend payable
when the Company shall have sufficient monies to be able to do so, including under the provisions of applicable
law and contracts affecting the Company. The Board of Directors of the Company does not intend to declare or
pay any cash dividends until such time as the Company’s balance sheet and liquidity position supports the
payment. Any accrued and unpaid dividends are convertible in certain circumstances at the option of the holder
into additional Series 1 and Series 2 Preferred Shares.
As at December 31, 2021, the accrued and unpaid dividends on the Series 1 and Series 2 preferred shares
totaled $59,886 (2020 - $43,102). Assuming that the holders of the preferred shares exercise the right to convert
such accrued and unpaid dividends into additional preferred shares and then convert such preferred shares into
common shares, approximately 242,857,143 (2020 - 166,463,401) common shares would be issued, which
represents approximately 221% (2020 - 151%) of the common shares outstanding as at December 31, 2021.
In addition, holders of the Series 1 and Series 2 Preferred Shares have the right, at their option, to convert their
Preferred Shares into Common Shares at a price of $0.35 and $0.10 per Common Share, respectively, subject to
adjustment in certain circumstances. The Series 1 and Series 2 Preferred Shares are redeemable by the
P A G E 21
Company for cash at 110% of the purchase price for such shares, plus accrued but unpaid dividends, once all of
the outstanding Senior Secured Debentures have been repaid and are subject to repayment in the event of
certain change of control transactions.
Based upon the conversion rights of the Series 1 and Series 2 Preferred Shares there could be significant dilution
to the current holders of Common Shares. Up to approximately 766,067,000 (December 31, 2020 - 766,067,000)
additional Common Shares would be issuable upon conversion of the face amount of the Preferred Shares into
Common Shares, representing approximately 697% (December 31, 2020 - 697%) of the Common Shares
outstanding as at December 31, 2021.
OUTLOOK
For our customers in the energy industry, the continued rise in global energy demand and commodity prices is
providing strong fundamentals. While these customers are prioritizing debt repayment and returns to shareholders
in the short-term, we are seeing them increase their spending on both maintenance projects (to enhance
operational reliability) and capital projects (to maintain/expand productive capacity).
The growth in our served markets is creating some near-term challenges, including inflationary pressure on both
labour and materials as well as supply chain disruptions. Over the past two years, we have taken steps to
strengthen the Company. We have invested in our enterprise systems and digital strategy to drive longer-term
efficiencies and increase our cost competitiveness. We are also enhancing our programs to attract, retain and
develop our employees.
With energy transition and environmental considerations becoming increasingly important for all stakeholders in
the energy sector, we expect that our customers will continue to focus on improving their operational processes
for greater efficiencies and reliability, which aligns well with our service offerings.
To better support our customers, ClearStream has continued to add new service offerings that encompass the full
asset lifecycle and is now offering a suite of more than 40 services. Through the extensive regional coverage
provided by our 19 operating facilities, we believe that ClearStream is well-positioned to further consolidate
services required at various operating sites while generating efficiencies and cost reductions for its customers. In
2021, we added four new operating facilities: Fox Creek, Alberta; Drayton Valley, Alberta; Swift Current,
Saskatchewan; and Burnaby, British Columbia.
ClearStream's business model continues to prove its resilience as we are working closely with our customers
everyday in helping them to effectively manage their operations.
RISK FACTORS
An investment in the common shares of ClearStream involves a number of risks. In addition to the other
information contained in this MD&A and ClearStream’s other publicly-filed disclosure documents, investors should
give careful consideration to the following factors, which are qualified in their entirety by reference to, and must be
read in conjunction with, the detailed information appearing elsewhere in this MD&A. Any of the matters
highlighted in these risk factors could have a material adverse effect on ClearStream’s results of operations,
business prospects or financial condition. The risks described below and referenced elsewhere in this MD&A are
not exhaustive. The Company operates in a very competitive and ever-changing environment. New risk factors
emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess
the impact of all such risk factors on the Company’s business.
•
The outbreak of the COVID-19 pandemic and its impact on the global economy (including a material
reduction in the demand for petroleum products) has impacted the Company’s plans and activities by
reducing the demand for its services and its gross profit margins. There can be no assurance that the
Company will not continue to be impacted by adverse consequences that may be brought about by the
COVID-19 pandemic. See "COVID-19 Pandemic" below.
P A G E 22
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Failure to comply with the covenants in the agreements governing the Company’s debt could adversely
affect the Company’s financial condition.
The Company’s credit facilities may not provide sufficient liquidity and a failure to renew the credit
facilities could adversely affect the Company’s financial condition.
The Company’s access to capital or borrowing to maintain operations and/or finance future development
and acquisitions may become restricted.
The Company’s growth potential is restricted by the use of the majority of its cash flow to service debt.
Common Shares issuable on conversion of Series 1 or Series 2 preferred shares, substantially all of
which are held by Canso Investment Counsel Ltd., in its capacity as portfolio manager for and on behalf
of certain accounts that it manages, could result in the holders of the Common Shares being substantially
diluted and Canso being in a position to unilaterally elect the directors of the Company should it so
choose.
The Company’s business depends on the oil and natural gas industry and particularly on the level of
exploration, development and production for North American oil and natural gas, which is volatile.
The Company relies on certain key personnel whose absence or loss could disrupt its operations and
have a material adverse effect on its business.
The Company’s financial performance depends on its performance under agreements with its customers
and its ability to renew customer contracts and attract new business.
The Company is subject to risk of default by counterparties to its contracts, and its counterparties may
deem the Company to be a default risk.
Failure to maintain the Company’s safety standards and record could lead to a decline in the demand for
its services.
Difficulty in retaining, replacing or adding personnel could adversely affect the Company’s business. A
portion of the Company’s employees are unionized, and accordingly the Company is subject to the
detrimental effects of a strike or other labour action, in addition to competitive cost factors.
The Company is subject to a number of federal, provincial and regional health, safety and environmental
laws and regulations that may require it to make substantial expenditures or cause it to incur substantial
liabilities. Changes in legislation and regulations that affect the Company’s customers, or failure of
customers to comply with such regulations, could adversely affect demand for the Company’s services
and the Company’s financial performance.
The Company’s industry is intensely competitive. The Company’s reputation relative to its competition
significantly affects the Company’s long-term success and financial performance.
The Company has direct and indirect exposure to credit market volatility resulting from negative investor
sentiment about the development and regulation of energy production.
The Company is directly and indirectly subject to the influence of public perception on the regulatory
regime governing resource development.
The Company is susceptible to seasonal volatility in its operating and financial results due to adverse
weather conditions.
The Company’s reliance on equipment and parts suppliers exposes it to risks, including timing of delivery
and quality of parts and equipment.
P A G E 23
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The Company is subject to a number of additional business risks, which could adversely affect its ability
to complete projects and service contracts on time and on budget.
The direct and indirect restrictions and costs of various environmental laws and regulations, existing and
proposed, may adversely affect the Company’s business, operations and financial results.
The Company may participate in large contracts with a small number of customers, thus increasing the
risk of economic dependence and concentration of credit. The Company’s customer base is concentrated
and loss of a significant customer could cause the Company’s revenue to decline substantially.
The Company’s performance is sensitive to impacts of localized factors and trends that are specific to
Alberta and British Columbia because a large percentage of the Company’s revenues originate in those
provinces.
Since a significant portion of the Company’s work is in the oil sands sector, the Company’s performance is
sensitive to factors affecting the oil sands sector, including temporary or permanent shutdown of projects
due to downturns in oil and gas prices, natural disasters, mechanical breakdowns, technology failures or
pressure from environmental activism.
ClearStream may not be able to convert its backlog into revenue and cannot guarantee that the revenues
projected in its backlog will be realized or, if realized, will result in profits.
The Company’s current technology may become obsolete or experience a decrease in demand. To the
extent that ClearStream does not keep up with changes in technology, demand for its services may be
hindered.
The Company’s operations are subject to hazards inherent in the oilfield services industry, which risks
may not be covered to the full extent by the Company’s insurance policies.
The Company is and may become subject to legal proceedings, which could have a material adverse
effect on its business, financial condition and results of operations.
Conservation measures and technological advances could reduce demand for oil and natural gas,
resulting in reduced demand for the Company’s services.
Business acquisitions involve numerous risks and the failure to realize anticipated benefits of acquisitions
and dispositions could negatively affect the Company’s results of operations.
Public announcement of strategic transactions could be delayed.
Improper access to confidential information could adversely affect the Company’s business.
Cyber attacks and loss of the Company’s information and computer systems could adversely affect the
Company’s business.
Income tax laws, regulations or administrative practices relating to the Company and its shareholders
may in the future be changed or interpreted in a manner that adversely affects the Company or its
shareholders.
The Company's business is subject to changes in general economic conditions over which ClearStream
has little or no control.
The trading activity and price of the Common Shares could be unpredictable and volatile.
The Company may issue additional Common Shares or securities exchangeable for or convertible into
Common Shares in the future, which could result in the dilution of the interests of the holders of Common
Shares.
P A G E 24
For additional information regarding the risks that the Company is exposed to, see the disclosure provided under
the heading “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2021,
which is available on the SEDAR website at www.sedar.com.
COVID-19 Pandemic
The outbreak of the COVID-19 pandemic and its impact on the global economy (including a material reduction in
the demand for petroleum products) has impacted the Company’s plans and activities by reducing the demand for
its services and its gross profit margins. The Company may face disruption to operations, supply chain delays,
travel and trade restrictions and the impact on economic activity can be difficult to quantify. Such pandemics or
diseases represent a serious threat to maintaining a skilled workforce and could be a major healthcare challenge
for the Company. There can be no assurance that the Company’s personnel will not be impacted by COVID-19
and ultimately that the Company would see its workforce productivity reduced. In addition, the COVID-19
pandemic has created a dramatic slowdown in both the global and local economy. The duration of the COVID-19
pandemic and the resulting travel restrictions, social distancing, Government response actions, business closures
and business disruptions, can all have an impact on the Company’s operations and access to capital.
There can be no assurance that the Company will not continue to be impacted by adverse consequences that
may be brought about by the COVID-19 pandemic, including an extended period of low commodity prices further
reducing the demand for its services and its gross profit margins which in turn will put pressure on its financial
liquidity.
The full extent of the risks surrounding the severity and timing of the COVID-19 pandemic are continually evolving
and are not fully known at this time; therefore, there is significant risk and uncertainty which may have a material
and adverse effect on our operations. The following risks disclosed in our Annual Information Form for the year
ended December 31, 2021 may be exacerbated as a result of the COVID-19 pandemic:
•
•
•
•
•
•
•
•
The Company’s credit facilities may not provide sufficient liquidity;
Failure to comply with the covenants in the agreements governing the Company’s debt could adversely
affect the Company’s financial condition;
The Company’s business depends on the oil and natural gas industry and particularly on the level of
exploration, development and production for North American oil and natural gas, which is volatile;
The Company relies on certain key personnel whose absence or loss could disrupt its operations and
have a material adverse effect on its business;
Since a significant portion of the Company’s work is in the oil sands sector, the Company’s performance is
sensitive to factors affecting the oil sands sector, including temporary or permanent shutdown of projects
due to downturns in oil and gas prices, natural disasters, mechanical breakdowns, technology failures or
pressure from environmental activism;
The Company may not be able to convert its backlog into revenue and cannot guarantee that the
revenues projected in its backlog will be realized or, if realized, will result in profits;
Cyber attacks and loss of the Company’s information and computer systems as its workforce moves to
remote connections could adversely affect the Company’s business; and
The Company's business is subject to changes in general economic conditions over which it has little or
no control.
P A G E 25
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
Disclosure Controls and Procedures
National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” (“NI 52-109”),
issued by the Canadian Securities Administrators requires CEOs and CFOs to certify that they are responsible for
establishing and maintaining the disclosure controls and procedures for the issuer, that disclosure controls and
procedures have been designed to provide reasonable assurance that material information relating to the issuer is
made known to them, that they have evaluated the effectiveness of the issuer’s disclosure controls and
procedures, and that their conclusions about effectiveness of those disclosure controls and procedures at the end
of the period covered by the relevant annual filings have been disclosed by the issuer.
The Company's management, including its CEO and CFO, have evaluated the effectiveness of the Company’s
disclosure controls and procedures as at December 31, 2021 and have concluded that those disclosure controls
and procedures were effective to ensure that information required to be disclosed by the Company in its corporate
filings is recorded, processed, summarized and reported within the required time period for the year then ended.
The CEO and CFO have certified the appropriateness of the financial disclosures in the Company’s filings for the
year ended December 31, 2021 with securities regulators, including this MD&A and the accompanying audited
consolidated financial statements, and that they are responsible for the design of the disclosure controls and
procedures.
Internal Controls over Financial Reporting
NI 52-109 also requires CEOs and CFOs to certify that they are responsible for establishing and maintaining
internal controls over financial reporting for the issuer, that those internal controls have been designed and are
effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with IFRS, and that the issuer has disclosed any changes in its internal
controls during its most recent year end that has materially affected, or is reasonably likely to materially affect, its
internal control over financial reporting.
There have been no changes in internal controls over financial reporting during the year ended December 31,
2021 that have materially affected or are reasonably likely to materially affect internal controls over financial
reporting. Furthermore, the Company’s management, including its CEO and CFO, have evaluated the
effectiveness of the Company’s internal control over financial reporting as at December 31, 2021 and have
concluded that those controls were effective. Due to the inherent limitations common to all control systems,
management acknowledges that disclosure controls and procedures and internal control over financial reporting
may not prevent or detect all misstatements. Accordingly, management’s evaluation of our disclosure controls and
procedures and internal control over financial reporting provide reasonable, not absolute, assurance that
misstatements resulting from fraud or error will be detected.
ADDITIONAL INFORMATION
Additional information relating to the Company is available in our Annual Information Form for the year ended
December 31, 2021.
P A G E 26
CONSOLIDATED FINANCIAL STATEMENTS OF
CLEARSTREAM ENERGY SERVICES INC.
YEARS ENDED DECEMBER 31, 2021 AND 2020
P A G E 1
Calgary, Canada
March 8, 2022
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements of ClearStream Energy Services Inc. (“ClearStream”) and all of the
information in the annual report are the responsibility of management, including responsibility for establishing and
maintaining disclosure controls and procedures and internal control over financial reporting to provide reasonable
assurance that the information used internally by management and disclosed externally is complete and reliable in
all material respects. Management has evaluated the effectiveness of the disclosure controls and procedures and
internal controls over financial reporting and has concluded that they are effective.
The consolidated financial statements have been prepared by management in accordance with International
Financial Reporting Standards and include certain estimates that are based on management’s best judgments.
Actual results may differ from these estimates and judgments. Management has ensured that the consolidated
financial statements are presented fairly in all material respects.
Management has developed and maintains a system of internal control to provide reasonable assurance that
ClearStream’s assets are safeguarded, transactions are accurately recorded, and the consolidated financial
statements report ClearStream’s operating and financial results in a timely manner. Financial information
presented elsewhere in the annual report has been prepared on a consistent basis with that in the consolidated
financial statements.
The Board of Directors of ClearStream annually appoints an Audit Committee (the “Committee”) comprised of
Independent Directors. This Committee meets regularly with management and the auditors to review significant
accounting, reporting and internal control matters. The auditors have unrestricted access to the Committee. The
Committee reviews the consolidated financial statements, Management’s Discussion & Analysis, and the external
auditor's report. The Committee reports its findings to the Board of Directors for their consideration in approving
the consolidated financial statements for issuance to the shareholders. The Committee also considers, for review
by the Board of Directors and approval by the shareholders, the engagement or re-appointment of the external
auditors.
Ernst & Young LLP, an independent firm of Chartered Professional Accountants, was appointed by the
shareholders to audit the consolidated financial statements in accordance with Canadian generally accepted
auditing standards. Ernst & Young LLP has provided an independent auditor's report.
Barry Card
Interim Chief Executive Officer
Calgary, Canada
March 8, 2022
Randy Watt
Chief Financial Officer
P A G E 2
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of ClearStream Energy Services Inc.
Opinion
We have audited the consolidated financial statements of ClearStream Energy Services Inc. and its subsidiaries
(collectively, the “Company”), which comprise the consolidated balance sheets as at December 31, 2021 and
2020 and the consolidated statements of (loss) income and comprehensive (loss) income, consolidated
statements of shareholders’ deficit and consolidated statements of cash flows for the years then ended, and notes
to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at December 31, 2021 and 2020, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (“IFRS”).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor's responsibilities for the audit of the consolidated
financial statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of
the consolidated financial statements of the current period. These matters were addressed in the context of the
audit of the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do
not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed
the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report, including in relation to these matters. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the risks of material misstatement of
the consolidated financial statements. The results of our audit procedures, including the procedures performed to
address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial
statements.
P A G E 3
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and indefinite life intangible assets
indefinite
As at December 31, 2021, the carrying amounts of
goodwill and indefinite life intangible assets were $7,949
and $1,574, respectively. For the year ended December
31, 2021, no impairment loss was recorded with respect
to goodwill or indefinite life intangible assets. Refer to
Note 1 Significant accounting policies of
the
consolidated financial statements for a description of the
Company’s accounting policy for impairment of long-
lived assets,
intangible assets and
life
goodwill. Refer to Note 4 Goodwill and intangible assets
of
the
financial statements
impairment disclosures. Goodwill and
Company’s
indefinite life intangible assets are tested at least
annually for impairment. If the carrying amount of a cash
generating unit (“CGU”) or group of CGUs exceeds its
recoverable amount, an
is
recognized for the difference. The recoverable amounts
of the Company’s CGUs were determined based on
their fair value less costs of disposal (“FVLCD”), which
was estimated using a discounted cash flow approach.
impairment charge
the consolidated
for
Auditing the Company’s estimated recoverable amounts
for the Wear and UWO CGUs was complex due to the
subjective nature of the various management inputs and
assumptions. Significant assumptions included earnings
interest, depreciation and
before
amortization (“EBITDA”), capital expenditures, growth
rates, working capital, discount rates, and costs of
disposal, which are affected by expectations about
future market and economic conditions.
income
taxes,
To test the estimated recoverable amounts of the CGUs,
our audit procedures included, among others, assessing
the significant assumptions discussed above and the
underlying data used by the Company in its analysis:
• We involved our valuation specialists to assess the
methodology applied and the various inputs utilized in
determining the discount rate by referencing current
industry, economic, and comparable company
information, and company and cash-flow specific risk
premiums;
the
• We
historical
of
assessed
including
management’s cash
EBITDA, capital expenditures, and working capital by
comparing them to actual historical performance;
• We compared the growth rates to current industry,
flow projections,
accuracy
market and economic trends;
• We performed sensitivity analysis on significant
assumptions
the
recoverable amounts of the CGUs that would arise
from changes in those assumptions; and
the changes
to evaluate
in
• We assessed
the Company’s
the adequacy of
disclosures included in the notes to the consolidated
financial statements in relation to this matter.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
We obtained Management’s Discussion & Analysis and the Annual Report prior to the date of this auditor’s report.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
P A G E 4
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control.
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause the Company to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the consolidated financial statements. We are
P A G E 5
responsible for the direction, supervision and performance of the Company audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Kim Wiggins.
Calgary, Canada
March 8, 2022
P A G E 6
Consolidated Balance Sheets
(In thousands of Canadian dollars)
As at December 31,
Assets
Cash
Accounts receivable
Inventories
Prepaid expenses
Total current assets
Property, plant and equipment
Goodwill and intangible assets
Long-term investments
Total assets
Liabilities and shareholders' deficit
Accounts payable and accrued liabilities
Deferred consideration
Earn-out contingent liability
ABL facility
Current portion of lease liabilities
Current portion of other secured borrowings
Total current liabilities
Long-term incentive plans liability
Lease liabilities
Other secured borrowings
Senior secured debentures
Total liabilities
Common shares
Preferred shares
Contributed surplus
Deficit
Total shareholders' deficit
Total liabilities and shareholders' deficit
The accompanying notes are an integral part of these consolidated financial statements.
Signed on behalf of the Board of Directors,
Fraser Clarke, Director
Sean McMaster, Director
Notes
2021
2020
$
21,680 $
19
2
3
4
5
6
7
8
7
14
8
7
7
16
16
$
$
$
107,178
5,532
2,061
136,451
54,965
13,360
678
205,454 $
34,869 $
416
63
40,436
7,514
1,437
84,735
2,239
23,852
14,134
109,744
234,704
462,054
141,933
20,679
(653,916)
(29,250)
205,454 $
30,477
89,508
6,885
1,813
128,683
72,688
13,842
394
215,607
34,614
802
170
40,626
7,604
1,679
85,495
—
28,858
16,023
105,173
235,549
462,054
141,933
20,679
(644,608)
(19,942)
215,607
P A G E 7
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(In thousands of Canadian dollars)
For the year ended December 31,
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Long-term incentive plans (expense) recovery
Amortization of intangible assets
Depreciation expense
Income from equity investment
Interest expense
Restructuring expenses
Impairment of goodwill and intangible assets
Impairment of right-of-use assets
Recovery of contingent consideration liability
Gain on sale of property, plant and equipment
Income from government subsidies
(Loss) income from continuing operations before taxes
Income tax recovery - current
Income tax recovery - deferred
(Loss) income from continuing operations
(Loss) gain from discontinued operations (net of income taxes)
Notes
10
$
2021
2020
389,402 $
(349,066)
40,336
393,121
(359,435)
33,686
(26,298)
(23,986)
11
14
4
3
12
17
4
3
3
15
13
13
(2,239)
(669)
(12,224)
534
(15,934)
(1,052)
—
(8,270)
149
238
16,133
(9,296)
—
—
(9,296)
(12)
1,127
(1,824)
(14,937)
1
(19,028)
(2,641)
(5,000)
—
1,121
154
33,521
2,194
65
1,210
3,469
27
3,496
Net (loss) income and comprehensive (loss) income
$
(9,308) $
Net (loss) income per share (dollars)
Basic & diluted:
Continuing operations
Discontinued operations
Net (loss) income
The accompanying notes are an integral part of these consolidated financial statements.
$
$
$
(0.08) $
(0.00) $
(0.08) $
0.03
0.00
0.03
P A G E 8
Consolidated Statements of Shareholders’ Deficit
(In thousands of Canadian dollars, except number of shares)
January 1, 2021
Net loss
Number of
Common
Shares
Common
Shares
Preferred
Shares
Contributed
Surplus
Deficit
Total
Shareholders'
Deficit
109,992,668 $ 462,054 $ 141,933 $
20,679 $ (644,608) $
(19,942)
—
—
—
—
(9,308)
(9,308)
At December 31, 2021
109,992,668 $ 462,054 $ 141,933 $
20,679 $ (653,916) $
(29,250)
January 1, 2020
Net income
Number of
Common
Shares
Common
Shares
Preferred
Shares
Contributed
Surplus
Deficit
Total
Shareholders'
Deficit
109,992,668 $ 462,054 $ 141,933 $
20,679 $ (648,104) $
(23,438)
—
—
—
—
3,496
3,496
At December 31, 2020
109,992,668 $ 462,054 $ 141,933 $
20,679 $ (644,608) $
(19,942)
The accompanying notes are an integral part of these consolidated financial statements.
P A G E 9
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
For the year ended December 31,
Operating activities:
Net (loss) income
Adjustments for:
Long-term incentive plans expense (recovery)
Amortization of intangible assets
Depreciation expense
Income from equity investments
Non-cash interest expense
Impairment of goodwill and intangible assets
Impairment of right-of-use assets
Recovery of contingent consideration liability
Gain on sale of property, plant and equipment
Deferred income tax recovery
Changes in non-cash working capital
Cash flow provided by operating activities
Investing activities:
Acquisitions, net of cash acquired
Purchase of property, plant and equipment
Net proceeds on disposal of property, plant and equipment
Purchase of intangible assets
Proceeds from equity investment
Payment of deferred consideration
Cash flow used in investing activities
Financing activities:
Decrease in restricted cash
Repayment of other secured borrowings
Refinancing fees
Repayment of ABL facility
Repayment of lease liabilities
Cash flow used in financing activities
(Decrease) increase in cash
Cash, beginning of year
Cash, end of year
The accompanying notes are an integral part of these consolidated financial statements.
Notes
2021
2020
$
(9,308) $
3,496
14
4
3
7
4
3
3
20
9
3
4
5
20
20
20
2,239
669
12,224
(534)
4,667
—
8,270
(149)
(238)
—
(15,623)
$
2,217 $
(1,197)
(1,500)
1,678
(22)
250
(433)
(1,224) $
—
(1,935)
(132)
(126)
(7,597)
(9,790) $
(8,797)
30,477
21,680 $
$
$
$
(1,127)
1,824
14,937
(1)
10,065
5,000
—
(1,121)
(154)
(1,210)
28,316
60,025
—
(1,918)
1,312
(335)
426
(433)
(948)
805
(827)
(654)
(26,942)
(8,091)
(35,709)
23,368
7,109
30,477
P A G E 10
Notes to Consolidated Financial Statements
(In thousands of Canadian dollars)
For the years ended December 31, 2021 and 2020
Reporting Entity
ClearStream Energy Services Inc. (“ClearStream” or the “Company”) is a corporation formed pursuant to the
Business Corporations Act (Alberta). The head office is located at Bow Valley Square 2, Suite 3500, 205 - 5th
Avenue S.W., Calgary, Alberta T2P 2V7. ClearStream is a fully-integrated provider of upstream, midstream, and
downstream production services, which includes maintenance and turnarounds, wear technologies, facilities
construction, welding and fabrication, and environmental services with locations across Western Canada.
These audited consolidated financial statements were authorized for issuance in accordance with a resolution of
the Board of Directors of ClearStream on March 8, 2022.
1.
Significant accounting policies
a. Basis of presentation
These consolidated financial statements are prepared on a historical cost basis in accordance with
International Financial Reporting Standards (“IFRS”). The accounting policies that follow have been
consistently applied to all years presented.
b. Principles of consolidation
These consolidated financial statements comprise the financial statements of the Company and its
subsidiaries as at December 31, 2021. The Company conducts business through numerous subsidiaries,
all of which are wholly-owned and therefore controlled, by the Company. The financial results of
subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. All inter-company balances and transactions have been eliminated on
consolidation.
c.
Joint ventures
A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
d. Financial instruments
(i) Financial assets
When financial assets are recognized initially, they are measured at fair value, plus, in the case of
investments not at fair value through profit or loss, directly attributable transaction costs. The
Company considers whether a contract contains an embedded derivative when the entity first
becomes a party to it. Embedded derivatives are separated from the host contract which is not
measured at fair value through profit or loss when the analysis shows that the economic
characteristics and risks of embedded derivatives are not closely related to those of the host contract.
The Company determines the classification of its financial assets at initial recognition and, where
allowed and appropriate, re-evaluates this designation at each financial year end. Financial assets
and financial liabilities are recognized on the Company’s consolidated balance sheet when the
Company becomes party to the contractual provisions of the instrument. Financial assets are
P A G E 11
derecognized when the contractual rights to the cash flows from the financial asset expire or when the
contractual rights to those assets are transferred. Financial liabilities are derecognized when the
obligation specified in the contract is discharged, cancelled or expired.
Cash
Cash is comprised of cash on deposit with financial institutions. These are measured at amortized
cost.
Accounts receivable
Accounts receivable, which are non-derivative financial assets that have fixed or determinable
payments that are not quoted in an active market, are classified as amortized cost and subsequently
measured using the effective interest rate method, net of any impairment.
Impairment provisions for trade receivables are recognized based on lifetime expected credit losses.
During this process the probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the accounts receivable. For accounts receivable, which are reported
net, such provisions are recorded in a separate provision account with the loss being recognized in
the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income. On confirmation
that the trade receivable will not be collectable, the gross carrying value of the asset is written off
against the associated provision.
(ii) Financial liabilities
Financial liabilities include accounts payable and accrued liabilities, the asset-based lending facility,
senior secured debentures, other secured borrowings, deferred consideration and earn-out
contingent liability. Accounts payable are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Other liabilities are classified as current
liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Other liabilities are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest rate method.
(iii) Fair value hierarchy
The Company uses a three level hierarchy to categorize the significance of the inputs used in
measuring the fair value of financial instruments. The three levels of the fair value hierarchy are:
Level 1 – Where financial instruments are traded in active financial markets, fair value is determined
by reference to the appropriate quoted unadjusted market price at the reporting date. Active markets
are those in which transactions occur in significant frequency and volume to provide pricing
information on an ongoing basis.
Level 2 – If there is no active market, fair value is established using inputs other than quoted prices
that are observable for the asset or liability either directly or indirectly, including quoted forward prices,
time value, volatility factors and broker quotations.
Level 3 – Valuations in this level are those with inputs that are not based on observable market data
and which are less observable, unavailable or where the observable data does not support the
majority of the instrument’s fair value. Level 3 instruments may include items based on pricing
services or broker quotes where the Company is unable to verify the observability of inputs into their
prices. Level 3 instruments include longer-term transactions, transactions in less active markets or
transactions at locations for which pricing information is not available. In these instances, internally
developed methodologies are used to determine fair value which primarily includes extrapolation of
observable future prices to similar location, similar instruments or later time periods.
P A G E 12
If different levels of inputs are used to measure a financial instrument’s fair value, the classification
within the hierarchy is based on the lowest level input that is significant to the fair value measurement.
e.
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes
the costs to purchase and other costs incurred in bringing the inventories to their present location. Costs
such as storage costs and administrative overheads that do not directly contribute to bringing the
inventories to their present location and condition are specifically excluded from the cost of inventories
and are expensed in the period incurred. The cost of inventories of items that are not ordinarily
interchangeable and goods or services produced and segregated for specific projects are assigned by
using specific identification of their individual costs. The weighted average cost formula is used for
inventories other than those dealt with by the specific identification of cost formula.
f. Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, costs directly attributable to bringing
the asset to a working condition for its intended use, and the costs of dismantling and removing the items
and restoring the site on which they are located. Purchased software that is integral to the functionality of
the related equipment is capitalized as part of that equipment. Borrowing costs related to the acquisition
or construction of qualifying assets are capitalized.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for
as separate items (major components) of property, plant and equipment.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year
and adjusted prospectively, if appropriate.
Depreciation is calculated following the method that best reflects usage and annual rates based on the
estimated useful lives of the assets as follows:
Asset class
Furniture, tools & equipment
Computer hardware
Automotive & heavy equipment
Buildings
Basis
Declining balance
Declining balance
Declining balance
Declining balance
Leasehold improvements
Straight-line
Rate
10% - 50%
20% - 50%
10% - 30%
5% - 10%
The shorter of expected useful life
or term of lease
g.
Intangible assets
Intangible assets acquired individually or as part of a group of other assets are recognized and measured
at cost. Intangible assets acquired in a transaction, including those acquired in business combinations,
are initially recorded at their fair value. Intangible assets with determinable useful lives, such as customer
relationships, management contracts, computer software and sales orders, are amortized over their
useful lives. Intangible assets having an indefinite life, such as brands, are not amortized but are subject
to an annual impairment test (refer to Note 1(h)). The Company expects to renew the registration of the
brand names indefinitely, and expects these assets to generate economic benefit in perpetuity. As such,
the Company assessed brand name intangible assets as having indefinite useful lives with an exception
P A G E 13
of the Universal Weld Overlays ("UWO") brand name. UWO brand name was assessed as having definite
useful live and is being amortized according to the method and rate provided in the table below.
Some intangible assets are contained in a physical form, such as a compact disc in the case of computer
software. When the software is not an integral part of the related hardware, computer software is treated
as an intangible asset.
Intangible assets with determinable lives are amortized using the following methods and rates based on
the estimated useful life of the asset as follows:
Asset class
Customer relationships
Computer software
UWO brand name
Basis
Straight line
Declining balance
Straight line
Rate / Term
10 years
50% - 100%
10 years
h.
Impairment of long-lived assets, indefinite life intangible assets and goodwill
Assets with definite useful lives, including property, plant and equipment and intangible assets, are
amortized over their estimated useful lives. Long-lived assets are assessed for impairment at each
balance sheet date, or whenever events or changes in circumstances occur, to assess whether there is
an indication that such assets may not be recoverable.
If indicators of impairment exist, an estimate of the recoverable amount is made. If the carrying amount of
an asset or cash generating unit (“CGU”) exceeds its recoverable amount, an impairment charge is
recognized for the amount by which the carrying amount exceeds the recoverable amount.
Goodwill and indefinite life intangible assets are not amortized and are tested for impairment annually, or
more frequently, if events or changes in circumstances indicate that the asset might be impaired. For the
purposes of impairment testing, goodwill is allocated to the CGU or group of CGUs whose acquisition
gave rise to the goodwill. Assessment of goodwill impairment is performed at the level at which goodwill is
monitored for internal management purposes, which is the CGU level. Goodwill impairment is determined
by assessing whether the carrying amount of the CGU or relevant group of CGUs exceeds the
recoverable amount. Indefinite life intangible impairment is determined by assessing whether the carrying
amount of the CGU to which those indefinite life intangible assets relate exceeds the recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs of disposal (“FVLCD”) and its
value in use (“VIU”). If it is not possible to estimate the recoverable amount of an individual asset, the
CGU to which the asset belongs is tested for impairment. The FVLCD excludes any costs with respect to
restructuring, employee severance and termination benefits. The VIU is determined using the estimated
future cash flows generated from use and eventual disposition of an asset or CGU discounted to their
present value using a post-tax discount rate and excludes any costs with respect to restructuring,
employee severance and termination benefits.
Assets to be disposed of are presented separately in the Consolidated Balance Sheets and reported at
the lower of the carrying amount or FVLCD.
An assessment is made at each reporting date as to whether there is any indication that previously
recognized impairment losses may no longer exist or may have decreased. If such indication exists,
ClearStream estimates the assets' or CGUs' recoverable amount. A previously recognized impairment
loss is reversed only if there has been a change in the assumption used to determine the asset’s
recoverable amount since the last impairment loss was recognized. The reversal is limited such that the
carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined net of depreciation had the impairment loss not been recognized for the
P A G E 14
asset in prior years. Such reversal is recognized in the Consolidated Statements of (Loss) Income and
Comprehensive (Loss) Income.
i. Revenue recognition
Maintenance and Construction services revenue includes revenue from contracts entered into to provide
maintenance and construction services to various industries, including energy, mining, agriculture, pulp,
paper and petrochemical, and regulatory and environmental advisory services. The majority of the
revenue within the Maintenance and Construction segment relates to contracts with customers to perform
services based on cost plus an agreed-upon margin.
Wear Technology Overlay services revenue includes the sale of goods with respect to custom fabrication
services supporting pipeline and infrastructure projects and patented wear technology overlay services
specializing in pipe spools, pipe bends and plate. The majority of revenue within the Wear Technology
Overlay services segment relates to contracts with customers to construct goods to client specifications
for an agreed-upon price.
i.
Revenue from the sale of services
Performance obligations arising from contracts with customers require ClearStream to provide labour
hours and rental of equipment as requested. Each individual contract may contain multiple performance
obligations and at contract inception, consideration is variable as the total number of hours required is not
fixed. However, under the terms of its contracts with customers, ClearStream has the right to
consideration in an amount that corresponds directly with the value to its customers of performance
completed to date, and therefore recognizes revenue over time based on the amount ClearStream has
the right to invoice.
ii.
Revenue from the sale of goods
At the inception of each contract with a customer, ClearStream identifies the distinct performance
obligations based on promises to transfer distinct goods to the customer. A contract’s transaction price is
allocated to each distinct performance obligation and recognized as revenue when, or as, the
performance obligation is satisfied. ClearStream’s performance obligations are generally satisfied over
time as work progresses because of continuous transfer of control to the customer. For contracts with
multiple performance obligations, the contract’s transaction price is allocated to each performance
obligation using the Company’s best estimate of the standalone selling price of each distinct good in the
contract.
Transfer of control is measured utilizing an input method to measure progress for contracts based on an
analysis of costs incurred to date compared to total estimated costs. These costs, once incurred, are
considered a measure of progress and are expensed in the period in which they are incurred. Total
estimated project costs and resulting contract income are affected by changes in the expected cost of
materials and labor, productivity, scheduling and other factors. Additionally, external factors such as
customer requirements and other factors outside of ClearStream’s control may affect the progress and
estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income
recognition. Changes in total estimated contract cost and losses, if any, are recognized in the period they
are determined.
j.
Income taxes
Income tax expense or recovery comprises current and deferred taxes. Current tax is the expected tax
payable or recoverable on the taxable income for the year and is recognized in the period to which it
relates. Amounts included in current tax reflect the income tax expense or recovery relating to the
taxable income of ClearStream and its subsidiaries.
P A G E 15
Deferred tax is recognized using the balance sheet method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial
recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In
addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition
of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary
differences when they reverse based on the tax laws that have been enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are offset if ClearStream has a legally enforceable
right to offset current tax assets/liabilities and if the corresponding deferred tax assets and liabilities relate
to the income taxes raised by the same taxation authority on either the same taxable entity or different
taxable entities that intend to settle their current tax assets and liabilities either on a net basis or
simultaneously.
A deferred tax asset is recognized to the extent it is probable that future taxable profits will be available
against which the temporary difference can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent it is no longer probable that the related tax benefit will be
realized.
k. Leases
i.
Leases as a Lessee
The Company assesses whether a contract is or contains a lease at inception. The Company recognizes
a right-of-use asset and corresponding lease liability with respect to all lease contracts in which it is a
lessee, except for leases with a term of twelve months or less or leases of low value assets.
A right-of-use asset and lease liability is recognized on the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made on or before the commencement date, less any lease incentives received. Right-of-
use assets are subsequently depreciated using the straight line method from the commencement date to
the end of the lease term, including periods covered by an option to extend the lease if the Company is
reasonably certain to exercise that option.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the
lease commencement date. The associated lease payments are discounted using the rate implicit in the
lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. Lease
liabilities are subsequently measured at amortized cost using the effective interest rate method. The lease
liability is re-measured when there is a change in future lease payments arising from a change in an index
or rate, if there is change in the Company’s estimate of the amount expected to be payable under a
residual value guarantee, or if the Company changes its assessment of whether it will exercise a
purchase, extension or termination option.
ii. Leases as a Lessor
The Company enters into sub-lease agreements as a lessor with respect to some of its leased properties.
When the Company is an intermediate lessor, it accounts for the head lease and the sublease as two
separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-
use asset arising from the head lease. Whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are
classified as operating leases. Rental income from operating leases is recognized on a straight line basis
over the term of the lease.
P A G E 16
l. Share-based compensation and performance incentive plan
Employees, directors and consultants of the Company may receive remuneration in the form of share-
based payment transactions and performance incentive plan ("PIP") awards for services rendered.
Equity-settled awards are recorded in the consolidated statement of loss for awards granted, with a
corresponding amount reflected in contributed surplus. The fair value of equity-settled awards is
estimated, at the date of grant, using the Black-Scholes pricing model, and amortized over the expected
vesting period using the graded vesting method. Market vesting conditions are factored into the fair value
of share-based payments on the date of grant and no subsequent adjustments are made to reflect the
occurrence or non-occurrence of those conditions. Performance vesting conditions are adjusted at each
reporting date to reflect the actual number of awards expected to vest.
Share-based awards that can be settled in either cash or equity at the sole discretion of ClearStream are
classified as equity-settled if management and the Board of Directors do not intend to settle the awards in
cash (and there is no history of settling those awards in cash).
m.
Income (loss) per share
The income (loss) per share of ClearStream is computed by dividing ClearStream’s income (loss) by the
weighted average number of common shares outstanding during the reporting period. Diluted income
(loss) per share is determined by adjusting the weighted average number of common shares outstanding
for the effects of all potentially dilutive common shares, using the treasury stock method.
n. Provisions
A provision is recognized if, as a result of a past event, ClearStream has a present legal or constructive
obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognized as interest expense.
o. Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate fair values of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange for control of the acquiree. Transaction costs directly
attributable to the acquisition are expensed. Identifiable assets acquired, liabilities and contingent
liabilities assumed in a business combination are measured initially at fair values at the date of
acquisition, irrespective of the extent of any non-controlling interest.
Goodwill is initially measured as the excess of the fair value of consideration paid over the fair value of
the net identifiable tangible and intangible assets acquired. If the fair value of consideration paid is less
than the fair value of the net identifiable tangible and intangible assets acquired, the difference is
recognized directly in net income as a bargain purchase gain.
p. Government assistance
The Company recognizes government subsidies on an accrual basis when there is a reasonable
assurance that it will comply with the conditions required to qualify for the subsidy and that the collection
of the subsidy is also reasonably assured. Government subsidies are recognized on the Consolidated
Balance Sheet under accounts receivable and are recognized on the Consolidated Statements of (Loss)
Income and Comprehensive (Loss) Income over the periods in which the expense that the subsidy is
intended to offset are recognized.
q. Use of estimates and judgements
P A G E 17
In March 2020, the World Health Organization declared a global pandemic related to the novel
coronavirus known as COVID-19, which resulted in a series of public health and emergency measures
being put in place to combat the spread of the virus. There continues to be uncertainty surrounding the
pandemic, particularly the resurgences of variants of the virus and the efficacy and distribution of
COVID-19 vaccines. The extent of the COVID-19 pandemic continues to inform the Company's
assessment of the financial impacts on its operations, financial condition, and liquidity. There is
uncertainty around both the duration and the extent of the virus’ impact and therefore it is unclear as to
whether the COVID-19 pandemic will have a material adverse effect on the Company. This may increase
the complexity of estimates and assumptions used to prepare the consolidated financial statements, and
changes to these assumptions could result in a material adjustment to the carrying amount of assets and
liabilities within the next financial year. Examples of significant estimates and judgments made by
management in the preparation of these consolidated financial statements are outlined below.
i.
Depreciation and amortization
Measurement of the net book value of property, plant and equipment and intangible assets
requires the Company to make estimates of the expected useful lives of the assets, method of
depreciation and amortization and whether impairment in value has occurred. Residual values of
the assets, estimates useful lives and depreciation and amortization methodology are reviewed
annually with prospective application of any changes, if deemed appropriate. Changes to
estimates and specifically those related to automotive and heavy equipment, which could be
significant, could be caused by a variety of factors, including changes to the physical life of the
assets or changes in the nature of the utilization of the assets. A change in any of the estimates
would result in a change in the amount of depreciation or amortization and, as a result, a charge
to net income recorded in the period in which the change occurs.
ii. Revenue recognition – percentage of completion
The nature of certain of the Company’s contracts with customers is such that revenue is earned
over time as the related good is produced. In these instances, revenue is recognized as work is
completed and this requires management to make a number of estimates and assumptions
surrounding the expected profitability of the contract, the estimated degree of completion based
on hours and costs incurred and other detailed factors. Although these factors are routinely
reviewed as part of the project management process, changes in these estimates or assumptions
could lead to changes in revenues recognized in a given period.
iii. Determination of cash generating units
Assets are grouped into CGUs that have been identified as being the smallest identifiable group
of assets that generate cash inflows that are independent of cash flows of other assets or groups
of assets. The allocation of assets into CGUs requires significant judgment and interpretations.
Factors considered in the classification include the integration between assets, the ability of
management to allocate finite resources to complete future projects or contracts, and the way in
which management monitors the operations. The recoverability of the Company’s assets is
assessed at the CGU level and therefore the determination of a CGU could have a significant
effect on impairment losses or reversals.
iv.
Income taxes
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and carried forward tax losses can
be utilized. Assessing the recoverability of deferred taxes requires management to make
significant estimates related to expectations of future taxable income and the application of
existing tax laws. The carrying amount of deferred tax assets is reviewed each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
P A G E 18
allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are
reassessed at each reporting date and are recognized to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
Deferred income taxes contain uncertainties because of the assumptions made about when
deferred tax assets are likely to reverse, and a judgment as to whether or not there will be
sufficient taxable profits available to offset the tax assets when they do reverse. This requires
assumptions regarding future profitability and is therefore inherently uncertain.
v. Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail
to occur. The assessment of contingencies inherently involves the exercise of significant
judgment and estimates of the outcome of future events. Judgment and estimates are necessary
to determine the likelihood that a pending litigation or other claim will succeed or a liability will
arise and to quantify the possible range of the final settlement.
ClearStream is subject to claims and litigation proceedings arising in the normal course of
operations. The known claims and litigation proceedings are not expected to materially affect the
Company's financial position or reported results of operations.
vi.
Impairment of non-financial assets
With respect to property, plant and equipment and definite life intangible assets, judgment is
applied by management in assessing whether there are any indicators of impairment at each
reporting date that would require a full impairment test to be performed. Impairment indicators
include, but are not limited to, a significant decline in an asset’s market value, significant adverse
changes in the technological, market, economic or legal environment in which the assets are
operated, evidence of obsolescence or physical damage of an asset, significant changes in the
planned use of an asset, or ongoing under-performance of an asset. Application of these factors
to the facts and circumstances of a particular asset requires a significant amount of judgment.
Should an impairment test be required, the determination of the magnitude of impairment involves
the use of estimates, assumptions and judgments on highly uncertain matters particularly with
respect to estimating the recoverable amount of a CGU or a group of CGUs. Such estimates,
assumptions and judgments include, but are not limited to: the choice of discount rates that reflect
appropriate asset-specific risks, timing of revenue and customer turnover, inflation factors for
projected costs and the level of capital expenditures required in future periods to maintain
operations.
vii. Carrying amount of accounts receivable
Impairment provisions for trade receivables are recognized based on the simplified approach
using the lifetime expected credit losses, which is estimated taking into account historic collection
patterns and experiences with customers.
viii. Going concern
These financial statements have been prepared on a going concern basis, which assumes the
realization of assets and discharge of liabilities and commitments in the normal course of
business within the foreseeable future. Management uses judgment to assess the Company’s
ability to continue as a going concern and the conditions that cast doubt upon the use of the
going concern assumption.
P A G E 19
ix. Discount rate for the measurement of lease liabilities
Lease liability is measured at the present value of the lease payments that are not paid at the
commencement date. The lease payments are discounted using the implicit interest rate in the
lease. If the rate cannot be readily determined, the lessee’s incremental borrowing rate is used.
The Company estimates the incremental borrowing rate based on the economic environment, the
nature and quality of the asset, the Company’s credit rating and other factors.
x. Performance Incentive Plan
The PIP provides eligible participants with a cash settlement that varies depending on certain
criteria, including EBITDA-based performance conditions and other Company-based key
performance indicators, and is therefore subject to estimation uncertainty. Eligibility is based on
service conditions ending two and three years after the start of the performance period.
2.
Inventories
Inventories comprise the following:
As at December 31,
Raw materials
Work-in-progress
Finished goods
Parts and supplies
Total
2021
2020
2,784 $
50
2,260
438
5,532 $
4,451
50
2,352
32
6,885
$
$
Included in cost of revenues for the year ended December 31, 2021 is the cost of inventories of
$9,432 (2020 - $13,174).
P A G E 20
3.
Property, plant and equipment
Land
and
buildings
Computer
hardware
Furniture,
tools and
equipment
Leasehold
improvem
ents
Right-of-
use
assets
Automotive
and heavy
equipment
Total
Cost
Balance as at January 1, 2020
$ 18,491 $ 1,906 $ 12,819 $
2,531 $ 49,538 $ 41,141 $ 126,426
Additions
Remeasurement
Disposals
Asset class transfer
—
—
—
—
278
—
—
—
824
—
(675)
(403)
608
6,203
208
8,121
—
—
2,418
—
2,418
(697)
(1,928)
(3,300)
403
(7,037)
7,037
—
Balance as at December 31, 2020
$ 18,491 $ 2,184 $ 12,565 $
3,542 $ 50,425 $ 46,458 $ 133,665
Additions
Acquisitions (note 9)
Impairment
Remeasurement
Disposals
Asset class transfer
—
—
—
—
—
—
200
1,050
—
—
—
24
—
—
15
—
2,223
235
3,723
—
211
235
—
(8,270)
—
(8,270)
—
253
—
253
(581)
(291)
(2,808)
(2,036)
(4,281)
(9,997)
—
574
—
(645)
71
—
Balance as at December 31, 2021
$ 18,491 $ 1,803 $ 13,922 $
749 $ 41,950 $ 42,694 $ 119,609
Accumulated Depreciation
Balance as at January 1, 2020
$
450 $
953 $
7,215 $
2,296 $ 18,038 $ 19,230 $ 48,182
Depreciation
Disposals
Asset class transfer
703
394
2,010
206
8,074
3,550 14,937
—
—
—
—
(313)
(62)
—
(470)
(1,359)
(2,142)
—
(5,871)
5,933
—
Balance as at December 31, 2020
$ 1,153 $ 1,347 $
8,850 $
2,502 $ 19,771 $ 27,354 $ 60,977
Depreciation
Disposals
Asset class transfer
661
296
1,273
567
6,139
3,288 12,224
—
—
(580)
(291)
(2,808)
(2,036)
(2,842)
(8,557)
—
545
—
(597)
52
—
Balance as at December 31, 2021
$ 1,814 $ 1,063 $ 10,377 $
261 $ 23,277 $ 27,852 $ 64,644
Net book value
As at December 31, 2020
$ 17,338 $
837 $
3,715 $
1,040 $ 30,654 $ 19,104 $ 72,688
As at December 31, 2021
$ 16,677 $
740 $
3,545 $
488 $ 18,673 $ 14,842 $ 54,965
a. Collateral:
As at December 31, 2021, property, plant and equipment included $13,083 subject to a general security
agreement under the Senior Secured Debentures (2020 - $15,249) and $23,211 subject to a general
security agreement under the other secured borrowings (2020 - $26,785).
b. Disposals:
During the year ended December 31, 2021, the Company disposed of assets with a cost of $9,997 (2020
- $3,300) and accumulated depreciation of $8,557 (2020 - $2,142), for cash proceeds of $1,678 (2020 -
$1,312), and recognized a net gain on sale of $238 (2020 - $154).
P A G E 21
49,538
2,418
(7,037)
6,203
(697)
50,425
(8,270)
253
(645)
2,223
(2,036)
41,950
18,038
(470)
8,074
(5,871)
19,771
(2,036)
6,139
(597)
23,277
—
—
(645)
1,222
—
7,696 $
4,815 $
(398)
2,456
(5,871)
1,002 $
—
1,984
(597)
2,389 $
c. Right-of-use assets consist of the following:
Land and
buildings
Furniture, tools
and equipment
Automotive and
heavy equipment
Total
Cost
Balance as at January 1, 2020
$
37,427 $
69 $
12,042 $
Remeasurement
Asset class transfer
Additions
Disposals
Balance as at December 31, 2020 $
Impairment
Remeasurement
Asset class transfer
Additions
Disposals
2,418
—
3,506
(114)
43,237 $
(8,270)
253
—
1,001
(2,036)
—
—
—
—
—
(7,037)
2,697
(583)
69 $
7,119 $
—
—
—
—
—
Balance as at December 31, 2021 $
34,185 $
69 $
Accumulated Depreciation
Balance as at January 1, 2020
$
13,192 $
Disposals
Depreciation
Asset class transfer
(72)
5,594
—
Balance as at December 31, 2020 $
18,714 $
Disposals
Depreciation
Asset class transfer
(2,036)
4,145
—
Balance as at December 31, 2021 $
20,823 $
Net book value
As at December 31, 2020
As at December 31, 2021
$
$
24,523 $
13,362 $
31 $
—
24
—
55 $
—
10
—
65 $
14 $
4 $
6,117 $
5,307 $
30,654
18,673
The Company recognized an impairment charge of $8,270 during the year ended December 31, 2021
representing right-of-use assets with the primary purpose of earning sub-lease income where the sub-
lease came to term without the tenant exercising extension options. In the short-term, sub-lease income is
no longer expected to be earned by the right-of-use assets. The recoverable amount was determined to
be nil based on the estimated value-in-use at the termination dates. The right-of-use land and building
impaired are included in the Corporate segment.
During the years ended December 31, 2021 and 2020, the Company exercised options to extend the
terms of certain building lease agreements representing lease modifications in accordance with IFRS 16,
and therefore the lease liability and right-of-use assets were remeasured.
Information regarding lease liabilities can be found in Note 8.
P A G E 22
4.
Goodwill and intangible assets
Goodwill
Customer
relationships
Computer
software
Brands
Intangible
Total
Cost
Balance as at January 1, 2020
$
100,681 $
87,852 $
3,021 $
16,487 $
107,360
Additions
—
—
335
—
335
Balance as at December 31, 2020
$
100,681 $
87,852 $
3,356 $
16,487 $
107,695
Additions
Acquisitions (note 9)
Disposals
—
—
—
—
165
(54,772)
21
—
—
—
—
—
21
165
(54,772)
Balance as at December 31, 2021
$
100,681 $
33,245 $
3,377 $
16,487 $
53,109
Amortization and impairments
Balance as at January 1, 2020
$
(87,732) $
(82,691) $
(2,703) $
(14,583) $
(99,977)
Amortization
Impairment
—
(1,530)
(5,000)
—
(264)
—
(30)
—
(1,824)
—
Balance as at December 31, 2020
$
(92,732) $
(84,221) $
(2,967) $
(14,613) $
(101,801)
Amortization
Disposals
—
—
(446)
54,772
(193)
—
(30)
—
(669)
54,772
Balance as at December 31, 2021
$
(92,732) $
(29,895) $
(3,160) $
(14,643) $
(47,698)
Net book value
As at December 31, 2020
As at December 31, 2021
$
$
7,949 $
7,949 $
3,631 $
3,350 $
389 $
217 $
1,874 $
1,844 $
5,894
5,411
ClearStream has five CGUs, one of which has intangible assets with an indefinite life. Goodwill is
monitored by management at the CGU level. As at December 31, 2021, the ClearStream Wear
Technologies LP ("Wear") CGU had indefinite life intangible assets of $1,574 (2020 - $1,574) and goodwill
of $4,297 (2020 - $4,297) and the UWO CGU had goodwill of $3,652 (2020 - $3,652).
On December 31, 2021 and 2020, ClearStream performed its annual impairment tests on indefinite life
intangible assets and goodwill for both the Wear and UWO CGUs. Based on the results of these tests, the
Company concluded that the recoverable amount of each CGU approximated or exceeded its carrying
amount, and therefore there was no impairment.
ClearStream previously identified indicators of impairment at March 31, 2020 for the Wear and UWO
CGUs as a result of the forecasted impact of the COVID-19 pandemic, which decreased global demand
for oil and gas, resulting in a reduction in long-term commodity price outlooks. ClearStream’s customers’
capital spending budgets were reduced and there was significant uncertainty as to the scale and duration
of these developments.
Management therefore performed impairment tests as at March 31, 2020 for the Wear and UWO CGUs,
both of which are within the Wear Technology Overlay Services segment. This testing resulted in the
carrying amount of the UWO CGU exceeding its recoverable amount by $5,000 and therefore the
goodwill within that CGU was impaired by $5,000 in the year ended December 31, 2020.
Based on the results of the impairment test for the Wear CGU, the recoverable amount exceeded its
carrying amount and no impairment was required to be recorded.
P A G E 23
Valuation technique
The recoverable amounts of ClearStream’s CGUs were calculated based on fair value less costs of
disposal, which is considered to be a level 3 fair value measurement. The fair value less costs of disposal
determined through a discounted cash flow (“DCF”) approach for all CGUs. The DCF method involves
projecting cash flows and converting them into a present value equivalent through discounting. The
discounting process uses a rate of return that is commensurate with the risk associated with the business
or asset and the time value of money. This approach requires assumptions about earnings before interest,
taxes, depreciation and amortization (“EBITDA”), capital expenditures, growth rates, working capital and
discount rates.
Projected EBITDA and Capital Expenditures
Projected EBITDA and capital expenditures are based on ClearStream’s internal budget for the following
year and take into consideration past experience, economic trends and market/industry trends at the time
the budget is developed. The annual budget is developed during the fourth quarter of the previous year
and is updated quarterly by senior management based on actual results. Anticipated future cash flows are
updated to reflect any subsequent changes in expected demand for products and services.
Growth rate and terminal value
ClearStream used projected EBITDA and capital expenditures for the following year and applied a
perpetual long-term growth rate of 3-4% thereafter for the Wear and UWO CGUs. The perpetual growth
rates are management's estimate of long-term inflation and productivity growth in the industry and
geographic locations in which it operates.
Leaving all other variables constant, a 5% decrease to the perpetual long-term growth rate would result in
the recoverable amount being equal to the carrying amount for the UWO CGU. Management does not
believe that a reasonably possible change in the perpetual long-term growth rate for the Wear CGU would
result in the recoverable amount being less than the carrying amount.
Discount rate
ClearStream assumed post-tax discount rates of 17.75-26.00% in order to calculate the present value of
projected future cash flows. The discount rates represent a weighted average cost of capital (“WACC”) for
comparable companies operating in similar industries based on publicly available information for each
CGU. The WACC is an estimate of the overall required rate of return on an investment for both debt and
equity owners and serves as the basis for developing an appropriate discount rate, adjusted for risks
specific to each CGU.
Leaving all other variables constant, a 4.8% increase to the post-tax discount rate would result in the
recoverable amount being equal to the carrying amount for the UWO CGU. Management does not believe
that a reasonably possible change in the post-tax discount rate for the Wear CGU would result in the
recoverable amount being less than the carrying amount.
5.
Deferred consideration
On June 28, 2019, the Company acquired 100% of the issued and outstanding shares of UWO. The total
purchase price of $16,024 included deferred consideration of $1,114 (undiscounted - $1,300), which
represents the fair value of three equal installments of $433 due on June 28, 2020, 2021 and 2022. The
deferred consideration as at December 31, 2021 of $416 reflects the increase from acquisition date as a
result of the passage of time less the installment payments in 2020 and 2021 totaling $866.
P A G E 24
6.
Earn-out contingent liability
On June 28, 2019, the Company acquired 100% of the issued and outstanding shares of UWO. The total
purchase price of $16,024 included an earn-out contingent liability of $861 (undiscounted - $1,612), which
represented the fair value of the expected amount estimated by management at the acquisition date to be
paid to the sellers on June 28, 2022. The maximum undiscounted earn-out is $2,000. The earn-out
contingent liability has decreased from $170 (undiscounted - $250) at December 31, 2020 to $63
(undiscounted - $70) at December 31, 2021. The earn-out contingent liability will fluctuate depending on
the EBITDA-based performance condition over the specified period and is therefore subject to estimation
uncertainty.
7.
ABL Facility and Other Borrowings
a. ABL Facility
ClearStream has an asset-based lending facility (the “ABL Facility”) comprised of (i) a revolving credit
facility providing for maximum borrowings up to $15,000 (the “Revolving Facility”) with a Canadian
chartered bank (the "Lender") and (ii) a term loan facility providing for maximum borrowings of up to
$40,500 (the “Term Loan Facility”) with Canso Investment Counsel Ltd., in its capacity as portfolio
manager for and on behalf of certain accounts that it manages (“Canso”). The Revolving Facility matures
on March 31, 2022 and the Term Loan Facility matures 180 days thereafter.
The amount available under the Revolving Facility will vary from time to time based on the borrowing
base determined with reference to the accounts receivable of the Company. The Revolving Facility
borrowing base as at December 31, 2021 was $15,000 (December 31, 2020 - $49,054). The obligations
under the ABL Facility are secured by, among other things, a first ranking lien on all of the existing and
after acquired accounts receivable and inventories of the Company and the other guarantors, being
certain of the Company's direct and indirect subsidiaries. The interest rate on the Revolving Facility is
prime plus 2.5%, increasing to prime plus 4.0% if the Revolving Facility is more than 50% drawn.
As at December 31, 2021, nil (December 31, 2020 - nil) was drawn on the Revolving Facility, and there
were $2,450 (December 31, 2020 - $3,125) of letters of credit reducing the amount available to be drawn.
As at December 31, 2021, the net unamortized amount of deferred financing costs was $64
(December 31, 2020 - $113).
As at December 31, 2021, $40,500 (December 31, 2020 - $40,500) was outstanding under the Term Loan
Facility. The Term Loan Facility is required to be used for specific purposes and cannot be redrawn once
repaid. The interest rate on the Term Loan Facility is equal to the interest rate on the Revolving Facility
plus 2.0%.
The financial covenants applicable under the ABL Facility are as follows:
•
•
The Company must maintain a fixed charge coverage ratio equal to or greater than 1.00:1.00 for
each twelve month period calculated and tested as of the last day of each fiscal quarter
(commencing March 31, 2021); and
The Company must not expend or become obligated for any capital expenditures in an aggregate
amount exceeding $6,600 during the period commencing January 1, 2021 and ending
December 31, 2021, and any fiscal year thereafter.
As at December 31, 2021, ClearStream was in compliance with all financial covenants under the ABL
Facility.
P A G E 25
b. Other Secured Borrowings
On June 26, 2019, the Company received $19,000 from two secured loans with the Business
Development Bank of Canada (“BDC”) as a partial source of funds for the acquisition of certain assets of
the production services division of AECOM Production Services Ltd. (the "AECOM PSD Business").
The $13,500 loan is repayable over 300 monthly payments of $45, with the final payment to occur on
October 2, 2045. The interest rate on the loan is the BDC Floating Base Rate less 1.0%. Interest accrues
and is payable monthly. The Company allocated $195 in deferred financing costs to this loan that will be
amortized over the life of the loan.
The $5,500 loan is repayable over 72 monthly payments of $75, with the final payment to occur on
March 28, 2025. The interest rate on the loan is the BDC Floating Base Rate less 0.5%. Interest accrues
and is payable monthly. The Company allocated $85 in deferred financing costs to this loan that will be
amortized over the life of the loan.
The loans are secured by a first security interest on the real property and equipment acquired through the
acquisition of the AECOM PSD Business and a security interest in all other present and future property,
subject to the priorities granted to existing lenders under the ABL Facility, senior secured debentures and
other existing commitments.
The loan agreements with BDC require the Company to maintain a fixed charge coverage ratio equal to
or greater than 1.10:1.00 on annual basis.
As at December 31, 2021, ClearStream was in compliance with all financial covenants under the loan
agreements with BDC.
c. Senior Secured Debentures
Balance as at January 1, 2020
Accretion
Debentures issued to settle interest
Balance as at December 31, 2020
Accretion
Debentures issued to settle interest
Balance as at December 31, 2021
$
96,955
149
8,069
$
105,173
293
4,278
$
109,744
On March 23, 2016, the Company issued 8% senior secured debentures due March 23, 2026 (the "Senior
Secured Debentures") pursuant to a trust indenture between ClearStream, as issuer, and BNY Trust
Company of Canada, as debenture trustee, as amended and supplemented (the "Senior Secured
Indenture"), on a private placement basis to Canso. On June 2, 2020, the debenture trustee was changed
to Computershare Trust Company of Canada.
The Senior Secured Debentures bear interest at an annual rate of 8.00% payable in arrears on June 30
and December 31 of each year. The maturity date of the Senior Secured Debentures is March 23, 2026.
The Senior Secured Debentures are redeemable at the option of the Company and, in certain
circumstances, are mandatorily redeemable. The Senior Secured Debentures are secured by first‑ranking
liens over all of the property of the Company and its guarantor subsidiaries, other than certain limited
classes of collateral over which the Company has granted a prior‑ranking lien in favour of the ABL Facility
and the BDC secured loans. The Senior Secured Debentures provide for certain events of default and
covenants of the Company, including financial and reporting covenants and restrictive covenants limiting
the ability of the Company and its subsidiaries to make certain distributions and dispositions, incur
indebtedness, grant liens and limitations with respect to acquisitions, mergers, investments, non‑arm’s
length transactions, reorganizations and hedging arrangements (subject to certain exceptions).
P A G E 26
On December 10, 2021, Canso, in its capacity as portfolio manager for and on behalf of certain accounts
that it manages and sole holder of the Senior Secured Debentures, agreed to accept the issuance of an
additional 4,278 Senior Secured Debentures on December 31, 2021, 4,449 Senior Secured Debentures
on June 30, 2022 and 4,627 Senior Secured Debentures on December 31, 2022 at a principal amount of
$1,000 per Senior Secured Debenture in order to satisfy the interest that would otherwise become due
and payable on such dates (the"Payment in Kind Transaction"). The terms of the new Senior Secured
Debentures issued pursuant to the Payment in Kind Transaction were the same as the existing Senior
Secured Debentures in all material respects. In connection with the Payment in Kind Transaction, the
Company entered into the Seventh Supplemental Senior Secured Indenture effective as of December 15,
2021.
8.
Leases
As a lessee
The Company recognized the following amounts related to lease liabilities in the Consolidated
Statements of (Loss) Income and Comprehensive (Loss) Income.
For the year ended December 31,
Depreciation of right-of-use assets
Interest expense on lease liabilities
Expense relating to leases of low value assets
Expense relating to variable lease payments not included in the
measurement of the lease liability
2021
2020
$
6,139 $
2,616
2
8,074
2,868
7
369
204
Overall the variable payments constitute up to 7.4% (2020 - 3.8%) of the Company's entire lease
payments. Variable payments are primarily based on management fees related to the use of the rented
property.
The total cash outflow for leases for the year ended December 31, 2021 was $9,775 (December 31, 2020
- $10,529).
Maturity analysis - contractual undiscounted cash flows
As at December 31,
2022
2023
2024
2025
2026
After 2027
Total
Less: effects of discounting
Total discounted lease liabilities
Analyzed as:
Current
Non-current
$
$
$
$
$
9,425
8,067
6,770
5,043
3,807
4,439
37,551
(6,185)
31,366
7,514
23,852
P A G E 27
9.
Business combination
On August 16, 2021, ClearStream completed the acquisition of all of the outstanding shares of Sharp
Instruments Ltd. in exchange for cash consideration of $1,197. Of the assets acquired and liabilities
assumed, $797 related to working capital (including inventories) and $400 related to property, plant
and equipment and intangible assets (customer relationships). This business is included in the
Maintenance and Construction Services segment.
10.
Revenue
The following are amounts for each significant category of revenue recognized during the years ended
December 31, 2021 and 2020:
For the year ended December 31,
Rendering of services
Sales of goods
Total
11.
Selling, general and administrative expenses
For the year ended December 31,
Salaries and benefits
Occupancy and office costs
Professional fees
Travel and advertising
Insurance
Total
12.
Interest expense
2021
2020
$
$
340,606 $
345,154
48,796
47,967
389,402 $
393,121
2021
2020
$
17,461 $
16,962
2,590
3,519
1,137
1,591
2,092
2,364
876
1,692
$
26,298 $
23,986
For the year ended December 31,
2021
2020
Interest expense on senior secured debentures
$
8,557 $
Interest expense on ABL facility
Interest expense on lease liabilities
Deferred financing costs amortized
Interest expense - other
Interest expense on other secured borrowings
Accretion expense
Total
3,448
2,616
181
88
612
432
8,069
5,812
2,868
1,356
150
744
29
$
15,934 $
19,028
P A G E 28
13.
Income taxes
The reconciliation of statutory income tax rates to ClearStream’s effective tax rate is as follows:
For the year ended December 31,
Loss from continuing operations before tax
Tax rate
Income tax (recovery) expense at statutory rates
Permanent differences
Change in rates on temporary differences
Deferred tax asset not recognized
Income tax (recovery) expense
2021
2020
(9,296) $
2,194
23.77 %
24.50 %
(2,210) $
537
$
$
(22)
(187)
2,419
$
—
$
619
381
(2,812)
(1,275)
The statutory rate declined from 24.50% to 23.77% due to the reduction of the Alberta income tax rates
from 10% to 8% starting on July 1, 2020.
Deferred income taxes have been recognized at December 31, 2021 and 2020 in respect of the following
temporary differences:
As at December 31,
Property, plant and equipment
Non-capital losses
Deferred tax liability
2021
2020
(20,677) $
(34,105)
20,677
34,105
— $
—
$
$
A deferred tax asset has not been recognized in respect of the following deductible temporary differences:
As at December 31,
Intangible Assets
Senior secured debentures
Non-capital loss carryforward
Net capital loss carryforward
Lease liabilities
Other
2021
$
9,201 $
4,779
68,049
80,606
31,366
5,008
2020
10,263
4,487
48,618
80,606
36,462
4,662
Unrecognized deductible temporary differences
$
199,009 $
185,098
A deferred tax asset has been recognized in respect of $20,677 of non-capital losses and a deferred tax
asset has not been recognized in respect of $68,049 of non-capital losses. The total of $88,726 non-
capital losses begin to expire in 2035.
ClearStream has approximately $80,606 of net capital losses that have not been recognized in the
consolidated financial statements as at December 31, 2021 (2020 - $80,606). There is no expiry of capital
losses.
P A G E 29
14.
Performance Incentive Plan
The Board of Directors approved the PIP on March 4, 2021. It provides participants with a cash
settlement based on achieving certain performance criteria and is earned based on service requirements
between two and three years. PIP awards are payable within one month following approval of the
Company’s annual financial statements for those years.
As at December 31, 2021, the carrying amount of $2,239 (December 31, 2020 - nil) represents the net
present value of estimated future cash payments expected to be earned under the program based on
management’s best estimate of the performance criteria over the performance periods ending December
31, 2022 and 2023, adjusted for the portion of the performance period that has been completed.
For the year ended December 31, 2020, a recovery of $1,127 was recorded for previous long-term
incentive plans whereby outstanding units were forfeited or did not vest. The PIP replaced all previous
long-term incentive plans.
15.
Income from government subsidies
Income from government subsidies includes the Canada Emergency Wage Subsidy ("CEWS") and the
Canada Emergency Rent Subsidy ("CERS") received from the Government of Canada to assist with the
payment of employee wages and rent as a result of the impact of the COVID-19 pandemic. During the
year ended December 31, 2021, the Company qualified for both CEWS and CERS and recorded total
subsidies of $16,133 (December 31, 2020 - $33,521) in the Consolidated Statements of (Loss) Income
and Comprehensive (Loss) Income.
At December 31, 2021, $464 (December 31, 2020 - $663) of government subsidies were accrued and
included in accounts receivable.
16.
Share capital and loss per share
The authorized share capital of the Company consists of: (i) an unlimited number of common shares, and
(ii) preferred shares issuable in series to be limited in number to an amount equal to not more than one
half of the issued and outstanding common shares at the time of issuance of such preferred shares.
As at December 31, 2021 and 2020, issued and outstanding share capital included 109,992,668 common
shares, 127,735 Series 1 preferred shares and 40,111 Series 2 preferred shares.
The Series 1 and Series 2 Preferred Shares have a 10% fixed cumulative preferential cash dividend
payable when the Company shall have sufficient monies to be able to do so, including under the
provisions of applicable law and contracts affecting the Company. The Board of Directors of the Company
does not intend to declare or pay any cash dividends until such time as the Company’s balance sheet and
liquidity position supports the payment. Any accrued and unpaid dividends are convertible in certain
circumstances at the option of the holder into additional Series 1 and Series 2 Preferred Shares.
As at December 31, 2021, the accrued and unpaid dividends on the Series 1 and Series 2 preferred
shares totaled $59,886 (2020 - $43,102). Assuming that the holders of the preferred shares exercise the
right to convert such accrued and unpaid dividends into additional preferred shares and then convert such
preferred shares into common shares, approximately 242,857,143 (2020 - 166,463,401) common shares
would be issued, which represents approximately 221% (2020 - 151%) of the common shares
outstanding as at December 31, 2021.
In addition, holders of the Series 1 and Series 2 Preferred Shares have the right, at their option, to
convert their Preferred Shares into Common Shares at a price of $0.35 and $0.10 per Common Share,
respectively, subject to adjustment in certain circumstances. The Series 1 and Series 2 Preferred Shares
are redeemable by the Company for cash at 110% of the purchase price for such shares, plus accrued
P A G E 30
but unpaid dividends, once all of the outstanding Senior Secured Debentures have been repaid and are
subject to repayment in the event of certain change of control transactions.
Based upon the conversion rights of the Series 1 and Series 2 Preferred Shares there could be significant
dilution to the current holders of Common Shares. Up to approximately 766,067,000 (2020 - 766,067,000)
additional Common Shares would be issuable upon conversion of the face amount of the Preferred
Shares into Common Shares, representing approximately 697% (2020 - 697%) of the Common Shares
outstanding as at December 31, 2021.
As the terms of the preferred shares do not create an unavoidable obligation to pay cash, the preferred
shares are accounted for within shareholders' deficit, net of transaction costs.
(in thousands, except number of shares and per share amounts)
2021
2020
Net income (loss) - basic and diluted
Weighted average shares outstanding - basic and diluted
Net income (loss) per common shares - basic and diluted
$
$
(9,308) $
3,496
109,992,668
109,992,668
(0.08) $
0.03
The only potentially dilutive securities as at December 31, 2021 were the preferred shares. All potentially
dilutive securities were anti-dilutive for the year ended December 31, 2021.
17.
Restructuring expenses
Restructuring expenses of $1,052 were recorded during the year ended December 31, 2021 (2020 -
$2,641). The 2021 and 2020 non-recurring restructuring expenses are primarily related to the right sizing
of our selling, general and administrative expenses to mitigate the COVID-19 pandemic impacts, including
severance, office, and corporate legal structure consolidation costs.
18.
Related party disclosures
Compensation for key management personnel
ClearStream’s key management personnel are comprised of officers and directors. The remuneration for
these key management personnel during the years ended December 31, 2021 and 2020 are as follows:
For the year ended December 31,
Short-term employment benefits
Total compensation
2021
2020
$
$
6,510 $
6,510 $
5,511
5,511
19.
Financial instruments and risk management
Financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities, ABL
Facility, senior secured debentures, other secured borrowings, deferred consideration and earn-out
contingent liability.
a. Risk management
ClearStream’s Board of Directors has overall responsibility for the establishment and oversight of
ClearStream’s risk management framework. ClearStream has exposure to credit risk, customer
concentration risk, and liquidity risk.
i. Credit risk
The Company has exposure to credit risk, which is the risk of financial loss to ClearStream if a customer
or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from
P A G E 31
ClearStream’s accounts receivable. The following table outlines ClearStream’s maximum exposure to
credit risk:
As at December 31,
Cash
Accounts receivable
Total
2021
2020
$
$
21,680 $
107,178
128,858 $
30,477
89,508
119,985
Cash is held at Canadian Schedule A Banks and is therefore considered low credit risk.
ClearStream has a credit policy under which each new customer is analyzed individually for
creditworthiness before standard payment terms and conditions are offered. ClearStream’s exposure to
credit risk with its customers is influenced mainly by the individual characteristics of each customer.
When available, ClearStream reviews credit bureau ratings, bank accounts and financial information for
each new customer. ClearStream’s customers are primarily Canadian energy companies engaged in
upstream, midstream and downstream activities, all of which have strong creditworthiness.
Of the total balance of accounts receivable at December 31, 2021, $72,205 (December 31, 2020 -
$73,704) related to trade receivables and $34,973 (December 31, 2020 - $15,804) related to accrued
revenue (i.e., for work performed but not yet invoiced).
Trade receivables are non-interest bearing and generally due on 30-90 day terms. As at December 31,
2021, approximately $4,846 of ClearStream’s trade receivables had been outstanding longer than 90
days (December 31, 2020 - $5,884). Subsequent to December 31, 2021, $3,997 of the $4,846 over 90
days was collected. Management has fully evaluated the outstanding receivables as at December 31,
2021 and has determined that the lifetime expected credit losses of the trade receivables was immaterial
at this time.
ii.
Interest rate risk
Interest rate risk arises from the possibility of the future cash flows of a financial instrument fluctuating as
a result of changes in the market rates of interest. ClearStream is subject to interest rate risk on its ABL
facility and other secured borrowings. The required cash flow to service certain credit facilities will
fluctuate as a result of changes in market rates.
A 1% increase in interest rates in the year, assuming debt patterns are consistent with those that actually
occurred in 2021, when annualized, would have resulted in a 2021 net income sensitivity of approximately
$563 (2020 - $582).
iii. Customer concentration risk
Revenues of ClearStream are concentrated, with its top three customers representing 28.6% of
consolidated revenue (2020 - 24.9%) and 22.5% of consolidated accounts receivable (2020 - 26.3%).
More specifically, ClearStream's largest customer accounted for 11.1% or $43,227 of ClearStream's
consolidated revenue for the year ended December 31, 2021 (2020 - 10.3% or $40,309).
iv. Liquidity risk
Liquidity risk is the risk that ClearStream will not be able to meet its financial obligations as they come
due. ClearStream’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to its reputation.
P A G E 32
Accounts payable and accrued liabilities $
34,869 $
34,869 $
Total
Less than
One Year
One to Five
Years
After Five
Years
433
70
40,500
37,550
15,747
111,236
433
70
40,500
9,425
1,439
— $
—
—
—
23,686
4,183
—
—
—
—
4,439
10,125
—
$
240,404 $
86,736 $
139,105 $
14,564
—
111,236
Deferred consideration
Earn-out contingent liability (2)
ABL facility (1)
Lease liabilities (2)
Other secured borrowings (1)
Senior secured debentures (1)
Total
(1) Carrying value is presented gross of debt issuance costs.
(2) Carrying value is presented as undiscounted cash flows.
ClearStream’s strategy is that long-term debt should always form part of its capital structure, assuming an
appropriate cost. As existing debt approaches maturity, ClearStream will replace it with new debt, convert
it into equity or refinance or restructure, depending on the state of the capital markets at the time.
On February 25, 2022, the Company received confirmation of approval from a Canadian chartered bank
that it had agreed to provide a $25.0 million asset-based revolving facility with a three-year term (the
"New ABL Facility"), subject to the completion of a new credit agreement and other legal document. The
New ABL Facility is expected to be substantially similar to the Revolving Facility, other than the increase
in size of the facility and the longer term. The existing credit agreement, which governs bother the
Revolving Facility and the Term Loan Facility, will be amended to govern only the Term Loan Facility, the
terms of which are expected to remain substantially the same.
ClearStream manages its liquidity risk by continuously monitoring forecast and actual gross profit and
cash flows from operations.
The Company anticipates that its liquidity (cash on hand and available credit facilities) and cash flows
from operations will be sufficient to meet its short-term contractual obligations and to maintain compliance
with its financial covenants through December 31, 2022.
P A G E 33
20.
Supplemental cash flow information
a. Changes in non-cash working capital
As at December 31,
Accounts receivables
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Provision
2021
2020
$
(17,393) $
49,130
1,812
(171)
129
—
2,854
75
(22,858)
(885)
Total changes in non-cash working capital
$
(15,623) $
28,316
b. Changes in liabilities arising from financing activities
ABL facility
Lease
liabilities
Senior
secured
debentures
Other
secured
borrowings
Total liabilities
from financing
activities
Balance as at January 1, 2020
$
67,442 $
36,034 $
96,955 $
18,621 $
219,052
Borrowings
Repayment
Interest settled for additional
senior secured debentures
Non-cash changes
Balance as at December 31,
2020
Borrowings
Repayments
Interest settled for additional
senior secured debentures
Non-cash changes
Balance as at December 31,
2021
—
(26,942)
—
126
8,752
(8,091)
—
(233)
—
—
8,752
(827)
(35,860)
8,069
149
—
(91)
8,069
(49)
$
40,626 $
36,462 $
105,173 $
17,703 $
199,964
—
(126)
—
(64)
2,223
(7,597)
—
278
—
—
—
(1,935)
4,278
293
—
(197)
2,223
(9,658)
4,278
310
$
40,436 $
31,366 $
109,744 $
15,571 $
197,117
21.
Capital management
ClearStream's capital structure is comprised of shareholders' equity and short and long-term debt.
ClearStream's objectives when managing capital are to support its ability to continue as a going concern
in order to provide optimal returns for shareholders. Maintaining liquidity, managing financial risk and
optimizing the cost of capital are key factors that set the framework for ClearStream capital management
strategy.
ClearStream is not subject to any externally imposed capital requirements other than standard and
restrictive financial covenants on its ABL facility, other borrowings and senior secured debentures.
P A G E 34
22.
Segment information
The Company has organized the business around differences in products and services provided to
customers. All or substantially all of ClearStream’s operations, assets and employees are located in
Canada.
ClearStream has five operating segments, which are aggregated into two reportable segments, as
follows:
•
•
The Maintenance and Construction Services segment is a fully integrated provider of
maintenance and construction services to the energy and industrial markets. This segment
turnaround
provides maintenance services, welding,
services, heavy equipment operators and a resource/labour supply. The Maintenance and
Construction reportable segment consists of the Union and Non-union operating segments as
well as the Environmental operating segment on the basis of the similarities in their service
offerings, customers and business environment.
fabrication, machining, construction,
The Wear Technology Overlay Services segment specializes in the supply and fabrication of
overlay pipe spools, pipe bends, wear plates and vessels for corrosion and abrasion resistant
applications across various end markets. This reportable segment consists of the Wear and UWO
CGUs on the basis of similarities in their service offerings, customers and technologies.
In addition to the reportable operating segments, the Corporate division is a standard head office function,
which deals with strategic planning, corporate communications, taxes, legal, marketing, finance, financing
(including interest expense), human resources and information technology for the entire organization.
The Eliminations column includes adjustments required to account for joint ventures as equity
investments, and eliminations of inter-divisional transactions. ClearStream accounts for inter-segment
sales based on transaction price.
P A G E 35
For the year ended December 31, 2021
Revenue
Cost of revenue
Gross profit
Selling, general and administrative
expenses
Other long-term incentive plans expense
Amortization of intangible assets
Depreciation expense
Income from equity investment
Interest expense
Restructuring expenses
Impairment of right-of-use assets
Recovery of contingent consideration
liability
Gain on sale of property, plant and
equipment
Income from government subsidies
Income (loss) before taxes
Income tax recovery - current
Income tax recovery - deferred
Maintenance
and
Construction
Services
Wear
Technology
Overlay
services
Corporate
Eliminations
Total
$
354,652 $
37,826 $
— $
(3,076) $
389,402
(324,071)
(28,071)
30,581
9,755
—
—
3,076
(349,066)
—
40,336
(488)
—
(209)
(300)
(25,510)
—
(2,239)
(460)
—
(7,785)
(2,763)
(1,676)
534
(799)
(2)
—
—
238
13,756
35,826
—
—
—
(328)
(282)
—
(14,807)
(768)
—
(8,270)
—
—
149
—
1,211
6,833
1,166
(51,955)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(26,298)
(2,239)
(669)
(12,224)
534
(15,934)
(1,052)
(8,270)
149
238
16,133
(9,296)
—
—
Income (loss) from continuing operations
$
35,826 $
6,833 $
(51,955) $
— $
(9,296)
P A G E 36
For the year ended December 31, 2020
Revenue
Cost of revenue
Gross profit
Selling, general and administrative
expenses
Other long-term incentive plans recovery
Amortization of intangible assets
Depreciation expense
Income from equity investment
Interest expense
Restructuring expenses
Impairment of goodwill and intangible
assets
Recovery of contingent consideration
liability
Gain (loss) on sale property, plant and
equipment
Income from government subsidies
Income (loss) income before taxes
Income tax recovery - current
Income tax recovery - deferred
Maintenance
and
Construction
Services
Wear
Technology
Overlay
services
Corporate
Eliminations
Total
$
361,816 $
33,406 $
— $
(2,101) $
393,121
(333,776)
(27,760)
28,040
5,646
—
—
2,101
(359,435)
—
33,686
(671)
—
(261)
(8,888)
1
(1,273)
(501)
(544)
(22,771)
—
1,127
(1,563)
(3,410)
—
—
(2,639)
—
(374)
(17,381)
(41)
(2,099)
—
—
—
—
—
—
—
(23,986)
1,127
(1,824)
(14,937)
1
(19,028)
(2,641)
—
(5,000)
—
—
(5,000)
—
—
1,121
615
(359)
(102)
29,078
46,140
2,484
1,959
(3,161)
(40,785)
—
—
—
—
65
1,210
—
—
—
—
—
—
1,121
154
33,521
2,194
65
1,210
Income (loss) from continuing operations
$
46,140 $
(3,161) $
(39,510) $
— $
3,469
P A G E 37
CORPORATE INFORMATION
BOARD OF DIRECTORS
Sean McMaster (1) (2)
Chair of the Board
Jordan Bitove (2) (3)
Director
H. Fraser Clarke (1) (2)
Director
Karl Johannson (1) (2) (3)
Director
Dean MacDonald (3)
Director
OFFICERS
Barry Card
Interim Chief Executive Officer
Randy Watt
Chief Financial Officer
Neil Wotton
Chief Operating Officer
Murray Desrosiers
Senior Vice President and General Counsel
Deloris Hetherington
Vice President, Human Resources
Notes:
(1) Member of the Audit Committee
(2) Member of the Corporate Governance and Compensation Committee
(3) Member of the Health, Safety and Environment Committee
Brad Naeth
Vice President, Wear Technology Overlay
HEAD OFFICE
ClearStream Energy Services Inc.
Bow Valley Square 2
3500, 205 – 5th Avenue S.W.
Calgary, Alberta T2P 2V7
T: 587-318-0997
F: 587-475-2181
www.clearstreamenergy.ca
BANKER
Bank of Montreal
AUDITORS
Ernst & Young LLP
Herb Thomas
Vice President, Operations (Flint)
Angela Thompson
Vice President, Environmental and Project
Services
Clint Tisnic
Vice President, Operational Finance
Kelly Siemens
Vice President, Finance and Corporate
Controlling
LEGAL COUNSEL
Blake, Cassels & Graydon LLP
McCarthy Tetrault LLP
TRANSFER AGENT
Computershare Investor Services Inc.
EXCHANGE LISTING
Toronto Stock Exchange
Symbol: CSM
P A G E 38