UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to       
Commission File Number: 1-10945

OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
oii-20220331_g1.jpg
Delaware95-2628227
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
11911 FM 529
Houston,Texas77041
(Address of principal executive offices)(Zip Code)
(713) 329-4500
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed from last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.25 per shareOIINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes   ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  þ  Yes   ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated filer¨
Non-accelerated filer
¨(Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company
¨


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨☐Yesþ No
Number of shares of Common Stock outstanding as of October 27, 2017: 98,279,062April 22, 2022: 100,253,589 



Oceaneering International, Inc.
Form 10-Q
Table of Contents
 
Part I
Part IItem 1.
Item 1.
Consolidated Balance Sheets
Item 2.
Item 3.
Item 4.
Part II
Item 1.
Item 6.



1
Table of Contents
PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements.

Item 1.Financial Statements

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
Mar 31, 2022Dec 31, 2021
(in thousands, except share data)
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents$438,019 $538,114 
Accounts receivable, net303,436 262,960 
Contract assets, net171,951 164,847 
Inventory, net162,261 153,682 
Other current assets67,054 68,400 
Total Current Assets1,142,721 1,188,003 
Property and equipment, at cost2,476,639 2,452,421 
Less accumulated depreciation1,996,380 1,962,825 
Net property and equipment480,259 489,596 
Other Assets:
Goodwill34,940 34,908 
Other noncurrent assets101,986 104,255 
Right-of-use operating lease assets142,091 146,097 
Total other assets279,017 285,260 
Total Assets$1,901,997 $1,962,859 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable$108,015 $122,327 
Accrued liabilities272,651 290,659 
Contract liabilities84,769 88,175 
Total current liabilities465,435 501,161 
Long-term debt701,808 702,067 
Long-term operating lease liabilities153,113 158,503 
Other long-term liabilities79,586 90,104 
Commitments and contingencies00
Equity:
Common stock, par value $0.25 per share; 360,000,000 shares authorized; 110,834,088 shares issued27,709 27,709 
Additional paid-in capital148,060 173,608 
Treasury stock; 10,580,499 and 11,033,098 shares, at cost(605,893)(631,811)
Retained earnings1,282,703 1,301,913 
Accumulated other comprehensive loss(356,587)(366,458)
Oceaneering shareholders' equity495,992 504,961 
       Noncontrolling interest6,063 6,063 
               Total equity502,055 511,024 
Total Liabilities and Equity$1,901,997 $1,962,859 
  Sep 30, 2017 Dec 31, 2016
(in thousands, except share data)  
  (unaudited)  
ASSETS    
Current Assets:    
Cash and cash equivalents $472,381
 $450,193
Accounts receivable, net of allowances for doubtful accounts of $6,151 and $8,288 464,547
 489,749
Inventory, net 245,783
 280,130
Other current assets 50,064
 42,523
Total Current Assets 1,232,775
 1,262,595
Property and Equipment, at cost 2,790,056
 2,728,125
Less accumulated depreciation 1,706,703
 1,574,867
Net Property and Equipment 1,083,353
 1,153,258
Other Assets:    
Goodwill 464,772
 443,551
Other non-current assets 363,783
 270,911
Total Other Assets 828,555
 714,462
Total Assets $3,144,683
 $3,130,315
LIABILITIES AND EQUITY    
Current Liabilities:    
Accounts payable $89,438
 $77,593
Accrued liabilities 372,018
 430,771
Total Current Liabilities 461,456
 508,364
Long-term Debt 795,805
 793,058
Other Long-term Liabilities 387,464
 312,250
Commitments and Contingencies 

 

Equity:    
Common Stock, par value $0.25 per share; 360,000,000 shares authorized; 110,834,088 shares issued 27,709
 27,709
Additional paid-in capital 224,542
 227,566
Treasury stock; 12,557,317 and 12,768,726 shares, at cost (719,096) (731,202)
Retained earnings 2,243,844
 2,295,234
Accumulated other comprehensive loss (282,395) (302,664)
Oceaneering Shareholders' Equity 1,494,604
 1,516,643
       Noncontrolling interest 5,354
 —
               Total Equity 1,499,958
 1,516,643
Total Liabilities and Equity $3,144,683
��$3,130,315

The accompanying Notes are an integral part of these Consolidated Financial Statements.

2

Table of Contents
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Three Months Ended March 31,
(in thousands, except per share data)20222021
Revenue$446,159 $437,553 
Cost of services and products400,679 380,896 
Gross margin45,480 56,657 
Selling, general and administrative expense46,519 42,874 
Income (loss) from operations(1,039)13,783 
Interest income796 519 
Interest expense, net of amounts capitalized(9,443)(10,407)
Equity in income (losses) of unconsolidated affiliates294 534 
Other income (expense), net444 (1,453)
Income (loss) before income taxes(8,948)2,976 
Provision (benefit) for income taxes10,262 12,341 
Net Income (Loss)$(19,210)$(9,365)
Weighted-average shares outstanding
    Basic99,963 99,461 
    Diluted99,963 99,461 
Earnings (loss) per share
    Basic$(0.19)$(0.09)
    Diluted$(0.19)$(0.09)
   Three Months Ended Sep 30, Nine Months Ended Sep 30,
(in thousands, except per share data) 2017 2016 2017 2016
Revenue $476,120
 $549,275
 $1,437,332
 $1,783,158
Cost of services and products 421,235
 513,832
 1,284,021
 1,555,002
 Gross Margin 54,885
 35,443
 153,311
 228,156
Selling, general and administrative expense 44,354
 47,299
 133,540
 153,533
 Income (loss) from Operations 10,531
 (11,856) 19,771
 74,623
Interest income 1,997
 684
 5,379
 2,421
Interest expense, net of amounts capitalized (8,650) (6,325) (22,517) (18,924)
Equity in income (losses) of unconsolidated affiliates (424) (246) (1,798) 543
Other income (expense), net (1,287) 570
 (3,901) (6,823)
 Income (Loss) before Income Taxes 2,167
 (17,173) (3,066) 51,840
Provision for (benefits from) income taxes 3,935
 (5,375) 4,104
 16,226
 Net income (loss) $(1,768) $(11,798) $(7,170) $35,614
         
Weighted average shares outstanding        
    Basic 98,270
 98,061
 98,224
 98,025
    Diluted 98,270
 98,061
 98,224
 98,384
Earnings (Loss) per Share        
    Basic $(0.02) $(0.12) $(0.07) $0.36
    Diluted $(0.02) $(0.12) $(0.07) $0.36
Cash Dividends declared per Share $0.15
 $0.27
 $0.45
 $0.81

The accompanying Notes are an integral part of these Consolidated Financial Statements.



3

Table of Contents

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)

Three Months Ended March 31,
(in thousands)20222021
Net income (loss)$(19,210)$(9,365)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments9,871 (2,856)
 
Change in unrealized gains for available-for-sale debt securities (1)
— 1,054 
Total other comprehensive income (loss)9,871 (1,802)
Comprehensive income (loss)$(9,339)$(11,167)
(1)There is no income tax expense or benefit associated with the three months ended March 31, 2022 and 2021 due to an offsetting valuation allowance.
          
   Three Months Ended Sep 30, Nine Months Ended Sep 30,
(in thousands) 2017 2016 2017 2016
Net Income (Loss) $(1,768) $(11,798) $(7,170) $35,614
Other comprehensive income (loss), net of tax:        
 Foreign currency translation adjustments 16,547
 16,411
 20,269
 31,246
Total other comprehensive income 16,547
 16,411
 20,269
 31,246
Total Comprehensive Income $14,779
 $4,613
 $13,099
 $66,860


The accompanying Notes are an integral part of these Consolidated Financial Statements.



4
Table of Contents
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 Three Months Ended March 31,
(in thousands)20222021
Cash Flows from Operating Activities:
Net income (loss)$(19,210)$(9,365)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization32,019 36,471 
Deferred income tax provision (benefit)(168)(1,136)
Net loss (gain) on sales of property and equipment(36)152 
Noncash compensation2,572 3,161 
Noncash impact of lease accounting(1,776)(2,542)
Excluding the effects of acquisitions, increase (decrease) in cash from:
Accounts receivable and contract assets(47,580)(11,616)
Inventory(8,578)10,628 
Other operating assets2,948 (1,672)
Currency translation effect on working capital, excluding cash5,359 (670)
Current liabilities(35,726)(20,373)
Other operating liabilities(10,325)(4,761)
Total adjustments to net income (loss)(61,291)7,642 
Net Cash Provided by (Used in) Operating Activities(80,501)(1,723)
Cash Flows from Investing Activities:
Purchases of property and equipment(19,319)(10,699)
Proceeds from redemption of investments in Angolan bonds— 2,361 
Distributions of capital from unconsolidated affiliates— 1,195 
Proceeds from sale of property and equipment36 2,136 
Net Cash Provided by (Used in) Investing Activities(19,283)(5,007)
Cash Flows from Financing Activities:
Other financing activities(2,202)(1,806)
Net Cash Provided by (Used in) Financing Activities(2,202)(1,806)
Effect of exchange rates on cash1,891 (737)
Net Increase (Decrease) in Cash and Cash Equivalents(100,095)(9,273)
Cash and Cash Equivalents—Beginning of Period538,114 452,016 
Cash and Cash Equivalents—End of Period$438,019 $442,743 
  Nine Months Ended Sep 30,
(in thousands) 2017 2016
Cash Flows from Operating Activities:    
Net income (loss) $(7,170) $35,614
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 160,480
 193,960
Deferred income tax provision (benefit) (25,065) (6,704)
Inventory write-downs —
 30,490
Net loss on sales of property and equipment 429
 516
Noncash compensation 10,854
 10,546
Excluding the effects of acquisitions, increase (decrease) in cash from:    
Accounts receivable 25,501
 102,361
Inventory 35,000
 768
Other operating assets (20,162) 57,879
Currency translation effect on working capital, excluding cash 253
 15,592
Current liabilities (56,148) (161,488)
Other operating liabilities 20,042
 (17,861)
Total adjustments to net income 151,184
 226,059
Net Cash Provided by Operating Activities 144,014
 261,673
Cash Flows from Investing Activities:    
Purchases of property and equipment (59,900) (83,389)
Business acquisitions, net of cash acquired (11,278) (2,500)
Other investing activities (10,777) (39,818)
Distributions of capital from unconsolidated affiliates 2,556
 5,108
Dispositions of property and equipment 635
 3,217
Net Cash Used in Investing Activities (78,764) (117,382)
Cash Flows from Financing Activities:   
Cash dividends (44,220) (79,429)
Other financing activities (1,772) (1,927)
Net Cash Used in Financing Activities (45,992) (81,356)
Effect of exchange rates on cash 2,930
 (6,545)
Net Increase in Cash and Cash Equivalents 22,188
 56,390
Cash and Cash Equivalents—Beginning of Period 450,193
 385,235
Cash and Cash Equivalents—End of Period $472,381
 $441,625

The accompanying Notes are an integral part of these Consolidated Financial Statements.





5
Table of Contents
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
   
Common StockAdditional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Accumulated Other Comprehensive Income (Loss)Oceaneering Shareholders' EquityNon-controlling InterestTotal Equity
(in thousands)
Balance, December 31, 2021$27,709 $173,608 $(631,811)$1,301,913 $(366,458)$504,961 $6,063 $511,024 
Net income (loss)— — — (19,210)— (19,210)— (19,210)
Other comprehensive income (loss)— — — — 9,871 9,871 — 9,871 
Restricted stock unit activity— (19,082)19,452 — — 370 — 370 
Restricted stock activity— (6,466)6,466 — — — — — 
Balance, March 31, 2022$27,709 $148,060 $(605,893)$1,282,703 $(356,587)$495,992 $6,063 $502,055 
Common StockAdditional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Accumulated Other Comprehensive Income (Loss)Oceaneering Shareholders' EquityNon-controlling InterestTotal Equity
(in thousands)
Balance, December 31, 2020$27,709 $192,492 $(660,021)$1,351,220 $(359,306)$552,094 $6,063 $558,157 
Net income (loss)— — — (9,365)— (9,365)— (9,365)
Other comprehensive income (loss)— — — — (1,802)(1,802)— (1,802)
Restricted stock unit activity— (13,642)14,997 — — 1,355 — 1,355 
Restricted stock activity— (10,439)10,439 — — — — — 
Balance, March 31, 2021$27,709 $168,411 $(634,585)$1,341,855 $(361,108)$542,282 $6,063 $548,345 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

6
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    SUMMARY OF MAJOR ACCOUNTING POLICIES


Basis of Presentation. Oceaneering International, Inc. ("Oceaneering", "we"(“Oceaneering,” “we” or "us"“us”) has prepared these unaudited consolidated financial statements pursuant to instructions for quarterly reports on Form 10-Q, which we are required to file with the U.S.United States Securities and Exchange Commission (the "SEC"“SEC”). These financial statements do not include all information and footnotes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("(“U.S. GAAP"GAAP”). These financial statements reflect all adjustments that we believe are necessary to present fairly our financial position as of September 30, 2017March 31, 2022 and our results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, all such adjustments are of a normal and recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2016.2021. The results for interim periods are not necessarily indicative of annual results.
Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering and our 50% or more owned and controlled subsidiaries. We also consolidate entities that are determined to be variable interest entities if we determine that we are the primary beneficiary; otherwise, we account for those entities using the equity method of accounting. We use the equity method to account for our investments in unconsolidated affiliated companies of which we own an equity interest of between 20% and 50% and as to which we have significant influence, but not control, over operations. We use the cost method for all other long-term investments. Investments in entities that we do not consolidate are reflected on our balance sheet in Other non-currentother noncurrent assets. All significantWe eliminate intercompany transactions and accounts and transactions have been eliminated.in consolidation.
Use of Estimates.The preparation of financial statements in conformity with U.S. GAAP requires that our management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities atas of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Reclassifications. Certain amounts from prior periods have been reclassified to conform with the current period presentation.
Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or less from the date of investment.
Accounts Receivable – Allowances for Doubtful Accounts. Credit Loss—Financial Assets Measured at Amortized Costs. We determine the need foridentify allowances for doubtfulcredit loss based on future expected losses when accounts usingreceivable, contract assets or held-to-maturity loan receivables are created rather than when losses are probable.
We use the loss-rate method in developing the allowance for credit losses, which involves identifying pools of assets with similar risk characteristics, reviewing historical losses within the last five years and consideration of reasonable supportable forecasts of economic indicators. Changes in estimates, developing trends and other new information could have material effects on future evaluations.
We monitor the credit quality of our accounts receivable and other financing receivable amounts by frequent customer interaction, following economic and industry trends and reviewing specific identification method. customer data. Our other receivable amounts include contract assets and held-to-maturity loans receivable, which we consider to have a low risk of loss.
We are monitoring the impacts from the coronavirus (“COVID-19”) outbreak, the Russia-Ukraine conflict and volatility in the oil and natural gas markets on our customers and various counterparties. We have considered the current and expected economic and market conditions, as a result of COVID-19 and the Russia-Ukraine conflict, in calculating credit loss expense for the three-month periods ended March 31, 2022 and 2021 and determined the impacts are de minimis.
As of March 31, 2022, our allowance for credit losses was $0.7 million for accounts receivable and $0.3 million for other receivables.
Financial assets are written off when deemed uncollectible and there is no reasonable expectation of recovering the contractual cash flows. During the three-month period ended March 31, 2022, we did not write off any financial assets.
7
Table of Contents
We have elected to apply the practical expedient available under Accounting Standards Codification (“ASC”) Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as amended (“ASC 326”), to exclude the accrued interest receivable balance that is included in our held-to-maturity loans receivable. The amount excluded as of March 31, 2022 and December 31, 2021 was $1.2 million.
Accounts receivable are considered to be past-due after the end of the contractual terms agreed to with the customer. There were no material past-due amounts that we consider uncollectible for our financial assets as of March 31, 2022. We generally do not generally require collateral from our customers.
Inventory. Inventory is valued at the lower of cost or net realizable value. We determine cost using the weighted-average method. We periodically review the value of items in inventory and record write-downs or write-offs of inventory based on our assessment of market conditions. Write-downs and write-offs are charged to cost of services and products. We did not record any write-downs or write-offs of inventory in the three-month periods ended March 31, 2022 and 2021.
Property and Equipment, and Long-Lived Intangible Assets and Right-of-Use Operating Lease Assets. We provide for depreciation of property and equipment on the straight-line method over their estimated useful lives. We charge the costs of repair and maintenance of property and equipment to operations as incurred, whileand we capitalize the costs of improvements that extend asset lives or functionality. Upon the disposition of property and equipment, the related cost and accumulated depreciation accounts are relieved, and any resulting gain or loss is included as an adjustment to cost of services and products.
IntangibleWe capitalize interest on assets where the construction period is anticipated to be more than three months. We did not capitalize interest in the three-month periods ended March 31, 2022 and 2021. We do not allocate general administrative costs to capital projects.
Long-lived intangible assets, primarily acquired in connection with business combinations, include trade names, intellectual property and customer relationships and are being amortized over their respective estimated useful lives.
We capitalize interest on assets where the construction period is anticipated to be more than three months. We capitalized $1.1 million and $1.0 million of interest in the three-month periods ended September 30, 2017 and 2016, respectively, and $3.3 million and $2.8 million in the nine-month periods ended September 30, 2017 and 2016, respectively. We do not allocate general administrative costs to capital projects.
Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our property and equipment, and long-lived intangible assets and right-of-use operating lease assets to determine whether any events or changes in circumstances indicate that the carrying amountamounts of the assetassets may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market

conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. We did not identify indicators of impairment for property and equipment, long-lived intangible assets or right-of-use operating lease assets for the three-month periods ended March 31, 2022 and 2021.
For assets held for sale or disposal, the fair value of the asset is measured using fair market value less estimated costs to sell. Assets are classified as held-for-saleheld for sale when we have a plan for disposal of certain assets and those assets meet the held for sale criteria.

For additional information regarding right-of-use operating lease assets, see “Leases” below.
Business Acquisitions. We account for business combinations using the acquisition method of accounting, and, in each case, we allocate the acquisition price to the assets acquired and liabilities assumed based on their fair market values at the date of acquisition.

On August 31, 2017, we acquired a 60% ownership interest in Dalgidj LLC ("Dalgidj") for approximately $12.4 million.  Of the $12.4 million, $4.4 millionGoodwill. Our goodwill is expected to be paid during the fourth quarter of 2017, and $3.0 million is expected to be paid in 2018. Therefore, $7.4 million has not yet been reflected in Business acquisitions in our Consolidated Statements of Cash Flows. In connection with the purchase of the equity interest, we advanced Dalgidj $6.4 million to pay off certain Dalgidj indebtedness.

Dalgidj is an Azerbaijan company that provides office and yard facilities for warehousing, logistics and administration to foreign and local companies in the Caspian Sea basin.  Dalgidj also owns a 49% interest in a joint venture, which provides remotely operated vehicle solutions, air diving services, and engineering and project management services. 

As a result of the Dalgidj acquisition, we have recognized $5.4 million in Noncontrolling interest on our Consolidated Balance Sheets. Net income attributable to noncontrolling interest for the one month since we acquired Dalgidj was not significant. The operating results of Dalgidj are reflected in our Subsea Projects segment.

Goodwill. In our annual evaluation of goodwillevaluated for impairment annually and whenever we first assessed qualitative factors to determine whether the existence ofidentify certain triggering events or circumstances led to a determination that it waswould more likely than not thatreduce the fair value of a reporting unit was less thanbelow its carrying amount. If, after assessing the totality of events or circumstances, we determined it was more likely than not that the fair value of a reporting unit was less than its carrying amount, we were required to perform the first step of the two-step impairment test. We tested the goodwill attributable to each of our reporting units for impairment as of December 31, 2016 and concluded that there was no impairment. In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04 "Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment." This update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this update are effective beginning January 1, 2020. Early adoption is permitted for testing dates after January 1, 2017, and the update is to be applied on a prospective basis. We adopted this update effective January 1, 2017.

In addition to our annual evaluation of goodwill, forwe perform a qualitative or quantitative impairment upontest. Under the occurrence of a triggering event,qualitative approach, if we review our goodwill to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.amount, we are required to perform the quantitative analysis to determine the fair value for the reporting unit. We then compare the fair value of the reporting unit with its carrying amount and recognize an impairment loss for the amount by which the carrying amount exceeds the fair value of the reporting unit. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. We also consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We did not identify indicators of impairment for goodwill for the three-month periods ended March 31, 2022 and 2021.

8
Table of Contents
Foreign Currency Translation.The functional currency for severalmost of our foreign subsidiaries is the applicable local currency. Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect atas of the balance sheet date, and the resulting translation adjustments are recognized, net of tax, in accumulated other comprehensive income (loss) as a component of shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Operations. We recorded $0.4 million and $(1.9) million of foreign currency transaction gains (losses) in the three-month periods ended March 31, 2022 and 2021, respectively. Those amounts are included as a component of other income (expense), net in our Consolidated Statement of Operations.

Revenue Recognition. All our revenue is realized through contracts with customers. We recognize our revenue according to the contract type. On a daily basis, we recognize service revenue over time for contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly. We use an input method to recognize revenue, because each day of service provided represents value to the customer. The performance obligations in these contracts are satisfied, and revenue is recognized, as the work is performed. When appropriate, we apply the practical expedient to recognize revenue for the amount invoiced when the invoice corresponds directly to the value of our performance to date.
New Accounting Standards. We account for significant fixed-price contracts, mainly relating to our Manufactured Products segment, and to a lesser extent in our Offshore Projects Group (“OPG”) and Aerospace and Defense Technologies (“ADTech”) segments, by recognizing revenue over time using an input, cost-to-cost measurement percentage-of-completion method. This commonly used method allows appropriate calculation of progress on our contracts. A performance obligation is satisfied as we create a product on behalf of the customer over the life of the contract. The remainder of our revenue is recognized at the point in time when control transfers to the customer, thus satisfying the performance obligation.
We have elected to recognize the cost for freight and shipping as an expense when incurred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by us from customers, are excluded from revenue.
In May 2014,our service-based business lines, we principally charge on a dayrate basis for services provided. In our product-based business lines, predominantly in our Manufactured Products segment, we recognize revenue and profit using the FASB issued ASU 2014-09, "percentage-of-completion method and exclude uninstalled materials and significant inefficiencies from the measure of progress.
We apply judgment in the determination and allocation of transaction price to performance obligations, and the subsequent recognition of revenue, based on the facts and circumstances of each contract. We routinely review estimates related to our contracts and, when required, reflect revisions to profitability in earnings immediately. If an element of variable consideration has the potential for a significant future reversal of revenue, we will constrain that variable consideration to a level intended to remove the potential future reversal. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine it. We did not have any material adjustments to transaction prices during the three months ended March 31, 2022 and 2021. There could be significant adjustments to overall contract costs in the future, due to changes in facts and circumstances.
In general, our payment terms consist of those services billed regularly as provided and those products delivered at a point in time, which are invoiced after the performance obligation is satisfied. Our product and service contracts with milestone payments due at agreed progress points during the contract are invoiced when those milestones are reached, which may differ from the timing of revenue recognition. Our payment terms generally do not provide financing of contracts to customers, nor do we receive financing from customers as a result of these terms.
See Note 3—“Revenue” for more information on our revenue from contracts with customers.
Leases. We determine whether a contract is or contains a lease at inception, whether as a lessee or a lessor. We take into consideration the elements of an identified asset, right to control and the receipt of economic benefit in making those determinations.
As a lessor, we lease certain types of equipment along with the provision of services and utilize the expedient allowing us to combine the lease and non-lease components into a combined component that is accounted for (1) under “Leases” (“ASC 842”), when the lease component is predominant, and (2) under the accounting standard
9
Table of Contents
“Revenue from Contracts with Customers." ASU 2014-09, as amended, completesCustomers” (“ASC 606”), when the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. ASU 2014-09service component is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is not permitted before periods beginning after December 15, 2016, andpredominant. In general, when we have electeda service component, it is typically the predominant element and leads to apply ASU 2014-09 by recognizing the cumulative effectaccounting under ASC 606.
As a lessor, we lease certain types of applying ASU 2014-09equipment, often providing services at the datesame time. These leases can be priced on a dayrate or lump-sum basis for periods ranging from a few days to multi-year contracts. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our customer's discretion. These leases generally do not contain options to purchase, material restrictions or covenants that impact our accounting for leases.
As a lessee, we lease land, buildings, vessels and equipment for the operation of initial applicationour business and not adjusting comparative information.

We have formed a project team to implement this standard. Our project team has now producedsupport some of our service line revenue streams. These generally carry lease terms that range from days for operational and support equipment to 15 years for land and buildings. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our discretion. When the procedures and control changes required to address the impacts that ASU 2014-09 may have on our business. We are nowexercise of those options is reasonably certain, we include them in the process of training our staff on the procedures and controls going into effect January 1, 2018. We continue to believe that our project plan will enable us to complete all of the required work to train our people; implement our new procedures and controls; and calculate the cumulative effect of applying ASU 2014-09 at the date of initial application, in line with the timeline and requirements of the standard. 
In our service based business lines, which principally charge on a day rate basis for services provided, we see no significant impact in the amount or pattern of revenue and profit recognition as a result of the implementation of ASC 2014-09. In our product based business lines, we expect impacts on the pattern of our revenue and profit recognition as a result of the implementation of ASC 2014-09.
Based on our overall assessment performed to date, welease assessment. Our leases do not expectcontain material restrictions or covenants that impact our accounting for them, nor do we provide residual value guarantees.
As a significant adjustmentlessee, we utilize the practical expedients to retained earnings being made on January 1, 2018.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10) Recognition and Measurementnot recognize leases with an initial lease term of Financial Assets and Financial Liabilities." This update:

requires equity investments (except those accounted for under the equity method of accounting12 months or those that result in consolidation of the investee) to be measured at fair value, with changes in fair value recognized in net income;
simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment — when a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value;
eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet;
requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments;
requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)less on the balance sheet and to combine lease and non-lease components together and account for the combined component as a lease for all asset classes, except real estate.
Right-of-use operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement or modification date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the accompanying notesinformation available at commencement or modification date in determining the present value of future payments. In determining the incremental borrowing rate, we considered our external credit ratings, bond yields for us and our identified peers, the risk-free rate in geographic regions where we operate, and the impact associated with providing collateral over a similar term as the lease for an amount equal to the financial statements;future lease payments. Our right-of-use operating lease assets also include any lease prepayments made and
clarifies exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that an entity should evaluate the needwe will exercise that option. Lease expense for a valuation allowanceminimum lease payments is recognized on a deferred tax asset related to available-for-sale securities in combination withstraight-line basis over the entity’s other deferred tax assets.lease term.

ASU 2016-01 will be effective for us beginning on January 1, 2018. We are currently assessing
2.    ACCOUNTING STANDARDS UPDATE
Recently Issued Accounting Standards. In March 2020, the impactFinancial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the requirementsEffects of Reference Rate Reform on Financial Reporting,” which provides temporary optional expedients and exceptions to existing guidance on applying contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Interbank Offered Rate (“LIBOR”), which is scheduled to be phased out in June 2023, to alternate rates such as the Secured Overnight Financing Rate (“SOFR”). This ASU 2016-01was effective upon issuance and can be applied prospectively through December 31, 2022. Our prior five-year revolving credit facility, which has been replaced, referenced LIBOR-based rates. We will apply this guidance in connection with our entry into our new senior secured credit facility in April 2022, which references SOFR rates. See Note 10—“Subsequent Event” for information on the retirement of our prior revolving credit facility and entry into our new senior secured credit facility in April 2022. We do not expect this ASU to have a material impact on our consolidated financial statements, but will continue to monitor potential impacts until the transition to this standard is complete.

10
Table of Contents
3.    REVENUE

Revenue by Category

The following tables presents revenue disaggregated by business segment, geographical region, and future disclosures.timing of transfer of goods or services.

Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021
Business Segment:
Energy Services and Products
Subsea Robotics$127,989 $119,119 
Manufactured Products82,692 86,825 
Offshore Projects Group97,397 89,234 
Integrity Management & Digital Solutions56,570 54,048 
Total Energy Services and Products364,648 349,226 
Aerospace and Defense Technologies81,511 88,327 
Total$446,159 $437,553 
Geographic Operating Areas:
Foreign:
Africa$63,409 $62,792 
Asia and Australia49,561 37,547 
Norway45,277 52,294 
United Kingdom38,757 43,180 
Brazil30,351 20,653 
Other23,048 20,435 
Total Foreign250,403 236,901 
United States195,756 200,652 
Total$446,159 $437,553 
Timing of Transfer of Goods or Services:
Revenue recognized over time$417,003 $408,173 
Revenue recognized at a point in time29,156 29,380 
Total$446,159 $437,553 
In February 2016,
Contract Balances
Our contracts with milestone payments have, in the FASB issued ASU No. 2016-02, "Leases." This update requires reporting entitiesaggregate, a significant impact on the contract asset and the contract liability balances. Milestones are contractually agreed with customers and relate to separatesignificant events across the lease components from the non-lease componentscontract lives. Some milestones are achieved before revenue is recognized, resulting in a contract and recognize leaseliability, while other milestones are achieved after revenue is recognized, resulting in a contract asset.

11
Table of Contents
The following table provides information about contract assets and leasecontract liabilities from contracts with customers.
Three months ended
(in thousands)Mar 31, 2022Mar 31, 2021
Total contract assets, beginning of period$164,847 $221,997 
Revenue accrued414,636 411,653 
Amounts billed(407,532)(388,303)
Total contract assets, end of period$171,951 $245,347 
Total contract liabilities, beginning of period$88,175 $50,046 
Deferrals of milestone payments27,101 24,637 
Recognition of revenue for goods and services(30,507)(26,777)
Total contract liabilities, end of period$84,769 $47,906 
   
Performance Obligations

As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) was $229 million. In arriving at this value, we have used two expedients available to us and are not disclosing amounts in relation to performance obligations: (1) that are part of contracts with an original expected duration of one year or less; or (2) on contracts where we recognize revenue in line with the billing. Of this amount, we expect to recognize revenue of $190 million over the next 12 months, and we expect to recognize substantially all of the remaining balance of $39 million within the next 24 months.
Due to the nature of our service contracts in our Subsea Robotics, OPG, Integrity Management & Digital Solutions (“IMDS”) and ADTech segments, the majority of our contracts either have initial contract terms of one year or less or have customer option cancellation clauses that lead us to consider the original expected duration of one year or less.
In our Manufactured Products and ADTech segments, we have long-term contracts that extend beyond one year, and these make up the majority of the performance obligations balance reported as of March 31, 2022. We also have shorter-term product contracts with an expected original duration of one year or less that have been excluded.
Where appropriate, we have made estimates within the transaction price of elements of variable consideration within the contracts and constrained those amounts to a level where we consider it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The amount of revenue recognized in the three months ended March 31, 2022 and 2021 that was associated with performance obligations completed or partially completed in prior periods was not significant.
As of March 31, 2022, there were no significant outstanding liability balances for refunds or returns due to the nature of our contracts and the services and products we provide. Our warranties are limited to assurance warranties that are of a standard length and are not considered to be material rights. The majority of our contracts consist of a single performance obligation. When there are multiple obligations, we look for observable evidence of stand-alone selling prices on which to base the allocation. This involves judgment as to the appropriateness of the observable evidence relating to the facts and circumstances of the contract. If we do not have observable evidence, we estimate stand-alone selling prices by taking a cost-plus-margin approach, using typical margins from the type of product or service, customer and regional geography involved.

Costs to Obtain or Fulfill a Contract
In line with the available practical expedient, we capitalize costs to obtain a contract when those amounts are significant and the contract is expected at inception to exceed one year in duration. Otherwise, the costs are expensed in the period when incurred. Costs to obtain a contract primarily consist of bid and proposal costs, which are incremental to our fixed costs. There were no balances or amortization of costs to obtain a contract in the current reporting periods.

Costs to fulfill a contract primarily consist of certain mobilization costs incurred to provide services or products to our customers. These costs are deferred and amortized over the period of contract performance. The closing balance of
12
Table of Contents
costs to fulfill a contract was $8.6 million and $7.8 million as of March 31, 2022 and December 31, 2021, respectively. For the three-month periods ended March 31, 2022 and 2021, we recorded amortization expense of $1.8 million and $1.0 million, respectively. No impairment costs were recognized.

4.    INCOME TAXES

Our tax provision is based on (1) our earnings for the period and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographical mix of our results. The effective tax rate for the three-month periods ended March 31, 2022 and 2021 was different than the U.S. federal statutory rate of 21%, primarily due to the geographical mix of revenue and earnings, changes in valuation allowances and uncertain tax positions, and other discrete items; therefore, we do not believe a discussion of the effective tax rate is meaningful. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur incremental tax consequences upon the distribution of such earnings.

On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in the United States. In accordance with the rules and procedures under the CARES Act, we filed certain refund claims to carry back a portion of our U.S. net operating loss. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expect to receive combined refunds of approximately $33 million, of which we have received $10 million as of March 31, 2022. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of March 31, 2022.
We conduct our international operations in jurisdictions that have varying laws and regulations regarding income and other taxes, some of which are subject to interpretation. We recognize the expense or benefit for an uncertain tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the uncertain tax position is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.
We have accrued a net total of $15 million and $12 million in other long-term liabilities on theour balance sheet for substantially all lease arrangements. ASU No. 2016-02 is effectiveworldwide unrecognized tax liabilities as of March 31, 2022 and December 31, 2021, respectively. We account for us beginning January 1, 2019. We are currently evaluating the requirementsany applicable interest and penalties related to uncertain tax positions as a component of ASU 2016-02 and have not yet determined its impact onour provision for income taxes in our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation – Stock Compensation – Improvements Changes in our management's judgment related to Employee Share-Based Payment Accounting." This update simplifies several aspects of accounting for share-

based payment transactions, including thethose liabilities would affect our effective income tax consequences, classificationrate in the periods of awards as either equity or liabilities,change.
Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following table lists the classification on the statementearliest tax years open to examination by tax authorities where we have significant operations:
JurisdictionPeriods
United States2014
United Kingdom2019
Norway2017
Angola2013
Brazil2017
Australia2017

We have ongoing tax audits in various jurisdictions. The outcome of cash flows. In addition, the update allowsthese audits may have an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The element of the update that will have the most impact on our financial statements will beuncertain tax positions for income tax consequences. See Note 6 -"Income Taxes" - for the effect this update has had on our income taxesreturns subsequently filed in 2017. Excess tax benefits and tax deficiencies on share-based compensation awards are now included in our tax provision within our condensed consolidated statementthose jurisdictions.

13
Table of operations as discrete items in the reporting period in which they occur, rather than (as was the previous accounting treatment) recording in additional paid-in capital on our condensed consolidated balance sheets. We have also elected to continue our current policy of estimating forfeitures of share-based compensation awards at the time of grant and revising in subsequent periods to reflect actual forfeitures. In our consolidated statement of cash flows for the nine-month period ended September 30, 2016, we have reclassified two items to conform with the presentation specified under ASU 2016-09: (1) we have reclassified the effect related to the tax deficiency associated with share-based compensation from financing activities to operating activities; and (2) we have reclassified the amounts related to withholding tax payments from operating activities to financing activities. Other than these two cash flow items applied retrospectively, we have implemented ASU 2016-09 prospectively beginning January 1, 2017.Contents

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740) – Intra-Entity Transfers of Assets Other than Inventory." Current U.S. GAAP generally prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The amendments in this update will eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included within the scope of this update are intellectual property and property, plant, and equipment. The exception for an intra-entity transfer of inventory will remain in place. The amendments in this update are effective for us beginning January 1, 2018. We do not anticipate that this update will have a material effect on our consolidated financial statements.

2.    INVENTORY5.    SELECTED BALANCE SHEET INFORMATION
The following is information regarding our inventory:
(in thousands) Sep 30, 2017 Dec 31, 2016
Inventory, net:    
 Remotely operated vehicle parts and components $119,976
 $118,236
 Other inventory, primarily raw materials 125,807
 161,894
 Total $245,783
 $280,130

selected balance sheet accounts:
 

(in thousands)Mar 31, 2022Dec 31, 2021
Inventory:
Remotely operated vehicle parts and components$73,411 $72,572 
Other inventory, primarily raw materials88,850 81,110 
Total$162,261 $153,682 
Other current assets:
Prepaid expenses$60,825 $62,171 
Angolan bonds6,229 6,229 
Total$67,054 $68,400 
Accrued liabilities:
Payroll and related costs$108,132 $134,538 
Accrued job costs51,022 49,032 
Income taxes payable39,395 35,826 
Current operating lease liability20,021 18,781 
Other54,081 52,482 
Total$272,651 $290,659 
3.

6.    DEBT
Long-term Debtdebt consisted of the following: 
(in thousands)Mar 31, 2022Dec 31, 2021
4.650% Senior Notes due 2024$400,000 $400,000 
6.000% Senior Notes due 2028300,000 300,000 
Interest rate swap settlements6,037 6,572 
Unamortized debt issuance costs(4,229)(4,505)
Long-term debt$701,808 $702,067 
 (in thousands) Sep 30, 2017 Dec 31, 2016
4.650% Senior Notes due 2024:    
 Principal amount of the notes $500,000
 $500,000
 Issuance costs, net of amortization (4,870) (5,385)
 Fair value of interest rate swaps on $200 million of principal 675
 (1,557)
Term Loan Facility 300,000
 300,000
Revolving Credit Facility —
 —
Long-term Debt $795,805
 $793,058


In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "Senior Notes"“2024 Senior Notes”). We pay interest on the 2024 Senior Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to mature on November 15, 2024.


In February 2018, we completed the public offering of $300 million aggregate principal amount of 6.000% Senior Notes due 2028 (the “2028 Senior Notes”). We pay interest on the 2028 Senior Notes on February 1 and August 1 of each year. The 2028 Senior Notes are scheduled to mature on February 1, 2028. We used the net proceeds from the 2028 Senior Notes to repay our term loan indebtedness described further below.

We may redeem some or all of the 2024 Senior Notes and 2028 Senior Notes (collectively, the “Senior Notes”) at specified redemption prices. In the three months ended March 31, 2022 and 2021, we did not repurchase any of the Senior Notes.

In October 2014, we entered into a new credit agreement (as amended, the "Credit Agreement"“Prior Credit Agreement”) with a group of banks to replace our prior principal credit agreement.banks. The originalPrior Credit Agreement from October 2014 has been amended three times, and it currently providesinitially provided for a $500 million five-year revolving credit facility (the “Prior Revolving Credit Facility”). The Prior Credit Agreement also provided for a $300 million term loan, (the "Term Loan Facility")which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and a $500 million revolving credit facility (the "Revolvingcash on hand.

14
Table of Contents
In February 2018, we entered into Agreement and Amendment No. 4 to the Prior Credit Facility"Agreement ("Amendment No. 4"), which mature in October 2019 and October 2021, respectively. Subject. Amendment No. 4 amended the Prior Credit Agreement to, certain conditions,among other things, extend the aggregate commitments undermaturity of the Prior Revolving Credit Facility may be increased by up to $300 million at any time upon agreement between us and existing or additional lenders. BorrowingsJanuary 25, 2023. As of March 31, 2022, we had no borrowings outstanding under the Prior Revolving Credit Facility. See Note 10—“Subsequent Event” for information on the retirement of our Prior Revolving Credit Facility and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of the Credit Agreemententry into a new senior secured credit facility in 2014 and pursuant to its terms, we repaid all amounts outstanding under, and terminated, our prior principal credit agreement.

Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the Adjusted Base Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage Ratio. The commitment fees are included as interest expense in our consolidated financial statements.

The Credit Agreement contains various covenants that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets and enter into certain restrictive agreements. We are also subject to a maximum adjusted total capitalization ratio (as defined in the Credit Agreement) of 55%. The Credit Agreement includes customary events of default and associated remedies.April 2022. As of September 30, 2017,March 31, 2022, we were in compliance with all the covenants set forth in the Prior Credit Agreement.


We had two interest rate swaps in place relating to a total of $200 million of the 2024 Senior Notes for the period to November 2024. The agreements swapped the fixed interest rate of 4.65% on $100 million of the 2024 Senior Notes to the floating rate of one-month LIBOR plus 2.426% and on another $100 million to one-month LIBOR plus 2.823%. In March 2020, we settled both interest rate swaps with the counterparty for cash proceeds of $13 million. The settlement resulted in a $13 million increase to our long-term debt balance that will be amortized to interest expense prospectively through the maturity date for the 2024 Senior Notes using the effective interest method. As a result, we amortized $0.5 million and $0.6 million, respectively, to interest expense for the in the three-month periods ended March 31, 2022 and 2021.

We incurred $6.9 million and $4.2 million of issuance costs related to the 2024 Senior Notes and $2.2the 2028 Senior Notes, respectively, and $3.0 million of new loan costs, including costs of the Amendments,amendments prior to Amendment No. 4, related to the Prior Credit Agreement. These costs, net of accumulated amortization, are included as a reduction of long-term debt on our Consolidated Balance Sheets, as they pertain to the Senior Notes, and in other noncurrent assets, as they pertain to the Prior Credit Agreement. We are amortizing these costs which are included on our balance sheet, net of accumulated amortization, as a reduction of debtto interest expense through the respective maturity dates for the Senior Notes and as an other non-current asset for the Prior Credit Agreement tousing the straight-line method, which approximate the effective interest expense over ten yearsrate method. See Note 10—“Subsequent Event” for the Senior Notes and over six years for the Credit Agreement. Please refer to Note 4 - "Commitments and Contingencies" - for more information on our interest rate swaps.the retirement of the Prior Revolving Credit Facility and entry into a new senior secured credit facility in April 2022.




4.7.    COMMITMENTS AND CONTINGENCIES


Litigation. On June 17, 2014, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of the then current members of our board of directors and one of our former directors, as defendants, and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff asserted, on behalf of our company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of our board of directors relating to nonexecutive director compensation. The plaintiff sought relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ fees and other costs.  We and the defendants filed a motion to dismiss the complaint and a supporting brief.  Subsequently, the parties to the litigation jointly requested and received a series of extension orders from the Court to extend the time for certain filings.  The last such extension expired on September 16, 2016.  By letter dated August 30, 2017, we received notice from the Office of the Register in Chancery advising the parties that the Court was closing the matter for failure to prosecute or to comply with an order of the Court. 

In the ordinary course of business, we are, from time to time, involved in litigation or subject to actions for damages alleging personal injurydisputes, governmental investigations or claims related to our business activities, including, among other things:

•performance- or warranty-related matters under the general maritime laws of the United States, including theour customer and supplier contracts and other business arrangements; and
•workers’ compensation claims, Jones Act for alleged negligence. We report actions for personal injury to our insurance carriersclaims, occupational hazard claims, premises liability claims and believe that the settlement or disposition of those claims will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.other claims.


Various other actions and claims are pending against us, most of which are covered by insurance. Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate liability, if any, that may result from these other actions and claims will not materially affecthave a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, because of the inherent uncertainty of litigation and other dispute resolution proceedings and, in some cases, the availability and amount of potentially available insurance, we can provide no assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material effect on our consolidated financial condition, results of operations or cash flows or financial position.for the fiscal period in which that resolution occurs.


Financial Instruments and Risk Concentration. In the normal course of business, we manage risks associated with foreign exchange rates and interest rates through a variety of strategies, including the use of hedging transactions. As a matter of policy, we do not use derivative instruments unless we have an underlying exposure. Other financial instruments that potentially subject us to concentrations of credit risk are principally cash and cash equivalents and accounts receivable.


The carrying values of cash and cash equivalents approximate their fair values due to the short-term maturity of the underlying instruments. Accounts receivable are generated from a broad group of customers, primarily from within the energy industry, which is our major source of revenue. Due to their short-term nature, carrying values of our accounts receivable and accounts payable approximate fair market values. We had borrowings of $300 million as of September 30, 2017 under our Term Loan Facility. Due to the short-term nature of the associated interest rate periods, the carrying value of our debt under the Term Loan Facility approximates its fair value. The fair value of this debt is classified as Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than quoted prices in active markets for similar assets and liabilities that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities).


We estimated the aggregate fair market value of the Senior Notes to be $499$688 million as of September 30, 2017,March 31, 2022, based on quoted prices. Since the market for the Senior Notes is not an active market, the fair value of the Senior Notes is classified within Level 2 in the fair value hierarchy under U.S. GAAP.GAAP (inputs other than quoted prices in active

15
Table of Contents
We have two interest rate swaps in place on a total of $200 million ofmarkets for similar assets and liabilities that are observable or can be corroborated by observable market data for substantially the Senior Notesfull terms for the period to November 2024. The agreements swap the fixed interest rate of 4.650% on $100 million of the Senior Notesassets or liabilities).

Foreign currency gains (losses) related to the floating rateAngolan kwanza of one month LIBOR plus 2.426%$0.9 million and on another $100$(1.4) million in the three-month periods ended March 31, 2022 and 2021, respectively, were primarily related to one month LIBOR plus 2.823%. We estimate the combined fair value of the interest rate swaps to be a net asset of $0.7 million as of September 30, 2017, with $0.4 million included on our balance sheet in our other long-term liabilities, and $1.1 million included in non-current assets. These values were arrived at using a discounted cash flow model using Level 2 inputs.

Since the second quarter of 2015, theincreasing (declining) exchange raterates for the Angolan kwanza relative to the U.S. dollar generally has been declining, although the exchange rate was relatively stable during the three- and nine- month periods ended September 30, 2017. As our functional currency in Angola is the U.S. dollar, wedollar. We recorded foreign currency transaction gains (losses) related to the Angolan kwanza of $0.7 million and $(7.6) million in the three- and nine-month periods ended September 30, 2016, respectively, as a component of Otherother income (expense), net in our Consolidated Statements of Operations for those respective periods. Our foreign currency transaction gains orOperations.

losses related primarily to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. ConversionAny conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank has slowed this process since mid-2015, causing our kwanza cash balances to subsequently increase.Angola. As of September 30, 2017,March 31, 2022 and December 31, 2021, we had the equivalent of approximately $26$1.7 million and $1.0 million, respectively, of kwanza cash balances in Angola reflected on our balance sheet.Consolidated Balance Sheets.
To mitigate our currency exposure risk in Angola, through September 30, 2017, we have used kwanza to purchase $70 million equivalent Angolan central bank (Banco Nacional de Angola) bonds with various maturities throughout 2018 and 2020. Thesebonds. The bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. WeAs of March 31, 2022 and December 31, 2021, we had $6.2 million, respectively, of Angolan bonds on our Consolidated Balance Sheets. Because we intend to sell the bonds if we are able to repatriate the proceeds, we have classified these instrumentsbonds as held-to-maturity,available-for-sale securities, and havethey are recorded in other current assets in our Consolidated Balance Sheets. During the original cost onthree-month period ended March 31, 2021, we sold a portion of these bonds for $2.4 million and recognized a gain of $0.3 million as a component of other income (expense), net in our balance sheet as other non-current assets. Consolidated Statement of Operations. We did not sell any of our Angolan bonds in the three-month period ended March 31, 2022.
We estimated the fair market value of the Angolan bonds to be $68$6.4 million at September 30, 2017as of March 31, 2022 and December 31, 2021, respectively, using quoted market prices. Since the market for the Angolan bonds is not an active market, the fair value of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP. As of March 31, 2022 and December 31, 2021, we have $0.2 million in unrealized gains, net of tax, related to these bonds as a component of accumulated other comprehensive loss in our Consolidated Balance Sheets.


In the three-month period ended June 30, 2021, we were notified by a customer in our Manufactured Products segment that it was suspending a contract that was substantially complete. Specific to this contract, we billed and received $18 million of accounts receivable in the first quarter of 2022. As of March 31, 2022, we had outstanding contract assets of approximately $17 million for the contract and contract liabilities of $5.8 million prepaid for storage of components. As of December 31, 2021, we had outstanding contract assets of approximately $33 million for the contract and contract liabilities of $11 million prepaid for storage of components. We are in discussions with the customer concerning the timing of remaining payments. We continue to believe that we will realize these contract assets at their book values, although we can provide no assurance as to the timing of receipt of the remaining payments.
5.
8.    EARNINGS (LOSS) PER SHARE, SHARE-BASED COMPENSATION AND SHARE REPURCHASE PLAN
Earnings (Loss) per Share.For each period presented, the only difference between our calculated weighted averageweighted-average basic and diluted number of shares outstanding is the effect of outstanding restricted stock units. In periods where we have a net loss, the effect of our outstanding restricted stock units is anti-dilutive, and therefore does not increase our diluted shares outstanding.
For each period presented, our net income (loss) allocable to both common shareholders and diluted common shareholders is the same as our net income (loss) in our consolidated statements of operations.

Dividends. From the second quarter of 2014 through the third quarter of 2016, we paid a quarterly dividend to our common shareholders of $0.27 per share. Starting in the fourth quarter of 2016 through the third quarter 2017, we paid a dividend of $0.15 per share. Our last quarterly dividend was $0.15 per share and was declared in July 2017 and was paid in September 2017.
Share-Based Compensation. We have no outstanding stock options and, therefore, no share-based compensation to be recognized pursuant to stock option grants.
During 2017, 2016 and 2015, weAnnually, the Compensation Committee granted restricted units of our common stock to certain of our key executives and employees. During 2017employees and 2016, our Board of Directors granted restricted common stock to our nonemployee directors. During 2015, our Board of Directors grantedThe restricted units of our common stock to our Chairman and restricted common stock to our other nonemployee directors. The restricted units granted to our key executives and key employees generally vest in full on the third anniversary of the award date, conditional on continued employment. The restricted stock unit grants including those granted to our Chairman, can vest pro rata over three years, provided the individual meets certain age and years-of-service requirements. The sharesgrants of restricted common stock we grant to our non-employeenonemployee directors were scheduled to vest in full on the first anniversary of the award date, conditional upon continued service as a director. director, except for the 2021 grant to one director who retired from our board of directors as of the date of our annual meeting of shareholders in May 2021, which vested on that date.
16
Table of Contents
Each grantee of shares of restricted stock is deemed to be the record owner of those shares during the restriction period, with the right to vote and receive any dividends on those shares. The restricted stock units outstanding have no voting or dividend rights.
For each of the restricted stock units granted in 20152020 through 2017,March 31, 2022, at the earlier of three years after grant or at termination of employment or service, the grantee will be issued one share of our common stock for each unit vested. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, respective totals of 1,212,3732,653,723 and 1,052,0072,447,259 shares of restricted stock orand restricted stock units were outstanding.
We estimate that share-based compensation cost not yet recognized related to shares of restricted stock or restricted stock units, based on their grant-date fair values, was $15$20 million at September 30, 2017.as of March 31, 2022. This expense is being recognized on a staged-vestinggraded-vesting basis over three years for awards attributable to individuals meeting certain age and years-of-service requirements, and on a straight-line basis over the applicable vesting period of one or three years for the other awards.
Share Repurchase Plan. In December 2014, our Board of Directors approved a plan toshare repurchase program under which we may repurchase up to 10 million shares of our common stock.stock on a discretionary basis. Under this plan,the program, which has no expiration date, we had repurchased 2.0 million shares of our common stock for $100 million through December 31, 2016.2015. We didhave not repurchaserepurchased any shares under thethis plan during the nine-month

period ended September 30, 2017.since 2015, and are not obligated to make any future repurchases. We account for the shares we hold in treasury under the cost method, at average cost.



6.    INCOME TAXES

During interim periods, we provide for income taxes based on our current estimated annual effective tax rate using assumptions as to (1) earnings and other factors that would affect the tax provision for the remainder of the year and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. In the nine-month period ended September 30, 2017, we recognized additional tax expense of $4.5 million from discrete items, which included a $1.4 million tax reserve for uncertain income tax positions related to foreign entity tax filings of prior years and $2.9 million as a result of our implementation of ASU 2016-09, "Compensation – Stock Compensation – Improvements to Employee Share-Based Payment Accounting." Excess tax benefits and tax deficiencies on share-based compensation awards are now included in our tax provision within our condensed consolidated statement of operations as discrete items in the reporting period in which they occur, rather than (as was the previous accounting treatment) recording in additional paid-in capital on our condensed consolidated balance sheets. See Note 1 for further discussion of ASU 2016-09.

The effective tax rate for the nine months ended September 30, 2017 was different than the federal statutory rate of 35.0%, primarily due to the geographic mix of tax jurisdictions in which we generated our earnings and losses and non-deductible expenses. It is our intention to continue to indefinitely reinvest in certain of our international operations.  We do not believe the effective tax rate before discrete items is meaningful, as the rate is less significant at a low pretax income or a pretax loss position. The effective tax rate, before discrete items, of 31.3% for the nine months ended September 30, 2016 was lower than the federal statutory rate of 35.0%, primarily due to our intention to indefinitely reinvest in certain of our international operations.  We do not provide for U.S. taxes on the portion of our foreign earnings we indefinitely reinvest. 
We conduct our international operations in a number of locations that have varying laws and regulations with regard to income and other taxes, some of which are subject to interpretation. We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement. We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12 months.
We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. Including associated foreign tax credits and penalties and interest, we have accrued a net total of $6.6 million in Other Long-term Liabilities on our balance sheet for unrecognized tax benefits as of September 30, 2017. All additions or reductions to those liabilities would affect our effective income tax rate in the periods of change.

Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following lists the earliest tax years open to examination by tax authorities where we have significant operations:
Jurisdiction                                 Periods
United States2014
United Kingdom2013
Norway2007
Angola2013
Brazil2011
Australia2013


7.9.    BUSINESS SEGMENT INFORMATION


We are a global oilfield provider oftechnology company delivering engineered services and products primarilyand robotic solutions to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of our applied technology expertise, we also serve theenergy, defense, aerospace, manufacturing and commercial theme parkentertainment industries.

Our OilfieldEnergy Services and Products business consistsleverages our asset base and capabilities for providing services and products for offshore energy operations, inclusive of the offshore renewable energy market. Our Energy Services and Products segments are:

•Subsea Robotics—Our Subsea Robotics segment provides the following:
◦Remotely Operated Vehicles ("ROVs"(“ROVs”), Subsea Products, Subsea Projects for drill support and Asset Integrity. vessel-based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance and repair;
◦ROV tooling; and
◦survey services, including hydrographic survey and positioning services and autonomous underwater vehicles for geoscience.

•Manufactured Products—Our ROVManufactured Products segment provides submersible vehicles operated from the surface to support offshore oilfollowing:
◦distribution and gas exploration, development, production and decommissioning activities. Our Subsea Products segment supplies a variety of specialty subsea hardware and related services. To improve operational efficiency, we have reorganized our Subsea Products segment into two business units: (1) manufactured products; and (2) service and rental. Manufactured products includeconnection systems including production control umbilicals and specialty field development hardware and pipeline connection and repair systems to the energy industry; and
◦autonomous mobile robot technology and entertainment systems to a variety of industries.

•Offshore Projects Group—Our OPG segment provides the following:
◦subsea hardware, while serviceinstallation and rental includes tooling, subsea work systemsintervention, including riserless light well intervention services, inspection, maintenance and repair (“IMR”) services, principally in the U.S. Gulf of Mexico and offshore Angola, utilizing owned and charter vessels;
◦installation and workover control systems. This internal reorganization did not affect our segment reporting structure or the historical comparability of our segment results. systems and ROV workover control systems;
◦project management and engineering; and
◦drill pipe riser services and systems and wellhead load relief solutions.

•Integrity Management & Digital Solutions—Our Subsea ProjectsIMDS segment provides multiservice subsea support vesselsthe following:
◦asset integrity management services;
◦software and oilfield divinganalytical solutions for the bulk cargo maritime industry; and support vessel operations, primarily
◦software, digital and connectivity solutions for inspection, maintenancethe energy industry.

17
Table of Contents
Our Aerospace and repair and installation activities. Since April 2015, we have also provided survey, autonomous underwater vehicle ("AUV") and satellite-positioning services. Our Asset IntegrityDefense Technologies segment provides inspection and assessment services, nondestructive testing and asset integrity management. Our Advanced Technologies business provides project management, engineering services and equipment for applicationsproducts, including engineering and related manufacturing in non-oilfield markets. defense and space exploration activities, principally to U.S. Government agencies and their prime contractors.

Unallocated Expenses are those not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses, including corporate administrative expenses.

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from
those used in our consolidated financial statements for the year ended December 31, 2016.


2021.
The table that follows presents Revenue,revenue, income (loss) from operations and depreciation and amortization expense, by business segment:
 Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Revenue
Energy Services and Products
Subsea Robotics$127,989 $119,119 $134,315 
Manufactured Products82,692 86,825 102,940 
Offshore Projects Group97,397 89,234 85,356 
Integrity Management & Digital Solutions56,570 54,048 60,469 
Total Energy Services and Products364,648 349,226 383,080 
Aerospace and Defense Technologies81,511 88,327 83,629 
Total$446,159 $437,553 $466,709 
Income (Loss) from Operations
Energy Services and Products
Subsea Robotics$11,552 $14,619 $21,012 
Manufactured Products2,643 2,753 (20,228)
Offshore Projects Group666 8,813 6,754 
Integrity Management & Digital Solutions3,508 2,474 6,015 
Total Energy Services and Products18,369 28,659 13,553 
Aerospace and Defense Technologies11,844 16,839 10,562 
Unallocated Expenses(31,252)(31,715)(36,687)
Total$(1,039)$13,783 $(12,572)
Depreciation and Amortization
Energy Services and Products
Subsea Robotics$19,001 $22,952 $21,029 
Manufactured Products3,072 3,227 3,111 
Offshore Projects Group7,297 7,125 7,405 
Integrity Management & Digital Solutions1,030 1,124 1,091 
Total Energy Services and Products30,400 34,428 32,636 
Aerospace and Defense Technologies656 1,276 676 
Unallocated Expenses963 767 474 
Total$32,019 $36,471 $33,786 

We determine Income (Loss) from Operations and Depreciation and Amortization by business segment for each of the periods indicated.
  Three Months Ended Nine Months Ended
(in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Revenue          
Oilfield          
Remotely Operated Vehicles $104,617
 $126,507
 $103,432
 $302,071
 $413,769
Subsea Products 143,583
 157,269
 174,893
 469,115
 542,978
Subsea Projects 80,116
 110,799
 75,545
 218,617
 378,883
Asset Integrity 61,098
 71,995
 58,192
 171,948
 215,459
Total Oilfield 389,414
 466,570
 412,062
 1,161,751
 1,551,089
Advanced Technologies 86,706
 82,705
 102,974
 275,581
 232,069
Total $476,120
 $549,275
 $515,036
 $1,437,332
 $1,783,158
Income (Loss) from Operations          
Oilfield          
Remotely Operated Vehicles $5,009
 $(23,845) $10,376
 $21,310
 $21,162
Subsea Products 12,383
 6,109
 10,552
 34,418
 71,870
Subsea Projects 6,512
 15,029
 3,000
 9,699
 32,055
Asset Integrity 3,050
 4,725
 3,755
 9,072
 4,354
Total Oilfield 26,954
 2,018
 27,683
 74,499
 129,441
Advanced Technologies 6,602
 4,357
 7,632
 19,260
 10,478
Unallocated Expenses (23,025) (18,231) (25,925) (73,988) (65,296)
Total $10,531
 $(11,856) $9,390
 $19,771
 $74,623
Depreciation and Amortization          
Oilfield          
Remotely Operated Vehicles $28,269
 $43,705
 $29,036
 $86,534
 $111,415
Subsea Products 13,340
 14,205
 12,785
 39,124
 39,964
Subsea Projects 7,881
 8,575
 7,781
 23,742
 25,447
Asset Integrity 2,139
 5,980
 1,780
 5,379
 11,736
Total Oilfield 51,629
 72,465
 51,382
 154,779
 188,562
Advanced Technologies 796
 789
 784
 2,377
 2,329
Unallocated Expenses 1,088
 946
 1,138
 3,324
 3,069
Total $53,513
 $74,200
 $53,304
 $160,480
 $193,960
We determine income (loss) from operations for each business segment before interest income or expense, other income (expense) and provision for income taxes. We do not consider an allocation of these items to be practical. Our equity in earnings (losses)
18
Table of unconsolidated affiliates is partContents
Income (Loss) from Operations
During the three-month period ended March 31, 2021 and December 31, 2021, we recorded adjustments attributable to each of our Subsea Projects segment.reporting segments as follows:

For the Three Months Ended March 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOPGIMDSADTechUnallocated ExpensesTotal
Adjustments for the effects of:
Other$395 $537 $149 $217 $10 $— $1,308 
Total of adjustments$395 $537 $149 $217 $10 $— $1,308 

For the Three Months Ended December 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOPGIMDSADTechUnallocated ExpensesTotal
Adjustments for the effects of:
Provision for Evergrande losses, net$— $29,549 $— $— $— $— 29,549 
Total of adjustments$— $29,549 $— $— $— $— $29,549 

There were no adjustments of a similar nature during the three-month period ended March 31, 2022.

0Depreciation and Amortization

Depreciation expense on property and equipment, reflected in Depreciation and Amortization, was $30 million, $35 million and $33 million in the three-month periods ended March 31, 2022 and 2021 and December 31, 2021, respectively.

Amortization expense on long-lived intangible assets, reflected in Depreciation and Amortization, was $1.6 million, $1.3 million and $0.9 million in the three-month periods ended March 31, 2022 and 2021 and December 31, 2021, respectively.

10.    SUBSEQUENT EVENT

On April 8, 2022, we entered into a new senior secured revolving credit facility with a group of banks (“Revolving Credit Facility”) that will mature in April 2026.

The Revolving Credit Facility provides a borrowing base of $215 million and includes a $100 million sublimit for the issuance of letters of credit. The Revolving Credit Facility matures in April 2026. Our obligations under the credit agreement are guaranteed by our subsidiaries Grayloc Products, L.L.C., Marine Production Systems, Ltd. and Oceaneering Canada Limited (collectively, the “Guarantors”). Obligations under the Revolving Credit Facility are secured by first priority liens on certain of our assets and those of the Guarantors, including, among other things, intellectual property, inventory, accounts receivable, equipment and equity interests in subsidiaries.

We may borrow under the Revolving Credit Facility at either (1) a base rate, determined as the greatest of (A) the prime rate of Wells Fargo Bank, National Association, (B) the federal funds effective rate plus 1⁄2 of 1% and (C) Adjusted Term SOFR (as defined in the credit agreement governing the Revolving Credit Facility) for a one-month tenor plus 1%, in each case plus the applicable margin, which varies from 1.25% to 2.25% depending on our Consolidated Net Leverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility), or (2) Adjusted Term SOFR plus the applicable margin, which varies from 2.25% to 3.25% depending on our Consolidated Net Leverage Ratio. We will also pay a facility fee based on the amount of the underlying commitment that is being utilized, which fee varies from 0.300% to 0.375%, with the higher rate owed when we use the facility less.

The Revolving Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted Consolidated Net Leverage Ratio is initially 4.00 to 1.00 and decreases to 3.25 to 1.00 during the term of the facility. The minimum Consolidated Interest Coverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility) is 3.00 to 1.00 throughout the term of the facility. In addition, the Revolving Credit Facility contains various covenants
19
Table of Contents
that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets and enter into certain restrictive agreements.

In connection with entering into the Revolving Credit Facility, on April 8, 2022, we terminated our Prior Revolving Credit Facility. No borrowings were outstanding under the Prior Revolving Credit Facility. We repaid all accrued fees and expenses in connection with the termination of the Prior Revolving Credit Facility and all commitments thereunder were terminated. No early termination penalties were incurred in connection with the termination of the Prior Revolving Credit Facility.

20
Table of Contents

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

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

Certain statements we make in this quarterly report on Form 10-Q are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our expectations about:
fourth quarter•the impacts of the coronavirus (“COVID-19”) pandemic and the full year of 2017Russia-Ukraine conflict on the United States and the global economy, as well as on our business;
•our second-quarter 2022 operating results and earnings per share, and the contributions from our segments to those results, (including anticipated revenue, operating income and utilization information), as well as the items belowamount of Unallocated Expenses for the second quarter;
•tax refunds under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and other tax refunds;
•our cash tax payments and projected capital expenditures for 2022;
•free cash flow, which we define as net cash provided by operating income line;activities less cash paid for purchases of property and equipment, in 2022 and in future periods;
•increased costs to operate our earningsbusiness, including the availability and cash flows in 2018;market for our chartered vessels;
•future demand, order intake and business activity levels;
•the impactcollectability of accounts receivable and realizability of contract assets at the amounts reflected on our retained earnings as a resultmost-recent balance sheet;
•the backlog of our Manufactured Products segment, to the implementationextent backlog may be an indicator of ASC 2014-09 on January 1, 2018;future revenue or productivity;
our plans for future operations (including planned additions to and retirements from our remotely operated vehicle ("ROV") fleet, our intent regarding the new multiservice subsea support vessel scheduled for delivery at the end of December 2017 and to be placed into service during the first quarter of 2018, and other capital expenditures);
our future cash flows;
our future dividends;
•the adequacy of our liquidity, cash flows and capital resources;
•the condition of debt markets and our expectations regarding possible future debt repurchases;
•shares to be repurchased under our share repurchase plan;
our assumptions that could affect our estimated tax rate;
•the implementation of new accounting standards and related policies, procedures and controls;
•our expectations about growth in the area of energy transition;
•seasonality; and
•industry conditions.


These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we have referred to under the headings "Risk Factors"“Risk Factors” and "Cautionary“Cautionary Statement Concerning Forward-Looking Statements"Statements” in Part I of our annual report on Form 10-K for the year ended December 31, 2016.2021. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.


The following discussion should be read in conjunction with "Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” included in our annual report on Form 10-K for the year ended December 31, 2016.2021.


Executive Overview of our Results and Guidance


Our diluted earnings (loss) per share for the three- and nine-month periodsthree-month period ended September 30, 2017March 31, 2022 were $(0.02) and $(0.07)$(0.19), respectively, as compared to $(0.12)$(0.39) in the immediately preceding quarter and $0.36, respectively,$(0.09) for the corresponding periodsperiod of the prior year. Taking into account ourThe three months ended March 31, 2022 operating results through September 30, 2017unfolded largely as expected, with higher costs for hiring and our outlooktraining of personnel and mobilization of equipment, as we prepared for significant activity increases which are expected for the remainder of 2017,2022. These additional costs negatively impacted our financial results in the first quarter of 2022, mostly within our energy segments, but each of our operating segments still generated positive operating income in the first quarter of 2022. In addition to these preparatory costs, our Offshore Projects Group (“OPG”) segment experienced cost overruns on a project and schedule changes that affected the timing of project work. The OPG shortfall was largely offset by lower Unallocated Expenses and slightly improved results from our Aerospace and Defense Technologies (“ADTech”) segment.

21
Table of Contents
During the first quarter of 2022, we utilized $81 million of cash in operating activities, primarily due to an increase in working capital associated with accounts receivable reflecting higher project milestones and customers payments in the fourth quarter of 2021 that were not replicated in the first quarter of 2022, along with cash utilized in the first quarter of 2022 for increased operating costs as we prepare for higher expected activity levels in the remainder of 2022 and payments for accrued employee incentive payments related to attainment of specific performance goals in prior periods. In addition, $19 million of cash was used for maintenance and growth capital expenditures. These items were the largest contributors to our 2017 diluted earnings per share$100 million cash reduction during the first quarter of 2022.
We believe market conditions continue to be less than our 2016 diluted earnings per sharesupportive of $0.25.

a robust ramp-up in activity and pricing improvements, beginning in the second quarter of 2022 and continuing for the remainder of the year. In the nine-month periodsecond quarter of 2022, we expect significantly higher activity levels and operating results improvement in our Subsea Robotics and OPG segments, increased activity levels and operating results improvement in our Integrity Management & Digital Solutions (“IMDS”) and ADTech segments, and higher activity levels in our Manufactured Products segment. Unallocated Expenses are expected to average in the mid-$30 million range.
Results of Operations

We operate in five business segments. Our segments are contained within two businesses—services and products provided primarily to the oil and gas industry, and to a lesser extent, the offshore renewables industry (“Energy Services and Products”), and services and products provided to non-energy industries (ADTech). Our four business segments within the Energy Services and Products business are Subsea Robotics, Manufactured Products, OPG and IMDS. We report our ADTech business as one segment. Our Unallocated Expenses are those not associated with a specific business segment.

Consolidated revenue and profitability information are as follows:
Three Months Ended
(dollars in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Revenue$446,159 $437,553 $466,709 
Gross Margin45,480 56,657 79,163 
Gross Margin %10 %13 %17 %
Operating Income (Loss)(1,039)13,783 (12,572)
Operating Income (Loss) %— %3 %(3)%

We generate a material amount of our consolidated revenue from contracts for services in the U.S. Gulf of Mexico in our OPG segment, which is usually more active in the second and third quarters, as compared to the rest of the year. The European operations of our IMDS segment are also seasonally more active in the second and third quarters. Revenue in our Subsea Robotics segment is subject to seasonal variations in demand, with our first quarter generally being the low quarter of the year. The level of our Subsea Robotics seasonality depends on the number of Remotely Operated Vehicles (“ROVs”) we have engaged in vessel-based subsea infrastructure inspection, maintenance, repair and installation, which is more seasonal than drilling support. Revenue in each of our Manufactured Products and ADTech segments generally has not been seasonal.

We had operating income (losses) of $(1.0) million, $14 million and $(13) million in the three-month periods ended September 30, 2017,March 31, 2022, March 31, 2021 and December 31, 2021, respectively. Included in our operating income (losses) for the three months ended March 31, 2021 were charges of $1.3 million for other costs we recognized an additional tax expenseas we adapted our geographic footprint and staffing levels to the conditions of $4.5the markets we serve. Included in our operating income (losses) for the three months ended December 31, 2021 were charges of $30 million for discrete items, which included a $1.4 million tax reserve for uncertain income tax positions relatedprimarily due to foreign entity tax filings of prior years and $2.9 millionthe net loss related to the tax effects ontermination of a number of entertainment ride systems contracts with the difference between bookfinancially embattled developer, China Evergrande Group and tax amounts of share-based compensation paidits affiliated companies (collectively, “Evergrande”). Charges included in the three months ended March 31, 2021 and December 31, 2021 are summarized as follows:

22
Table of Contents
For the three months ended March 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOffshore Projects GroupIntegrity Management & Digital SolutionsAerospace and Defense TechnologiesUnallocated ExpensesTotal
Charges for the effects of:
Other$395 $537 $149 $217 $10 $— $1,308 
Total charges$395 $537 $149 $217 $10 $— $1,308 
For the three months ended December 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOffshore Projects GroupIntegrity Management & Digital SolutionsAerospace and Defense TechnologiesUnallocated ExpensesTotal
Charges for the effects of:
Provision for Evergrande losses, net$— $29,549 $— $— $— $— $29,549 
Total charges$— $29,549 $— $— $— $— $29,549 

There were no such charges of a similar nature during the three-month period ended March 31, 2022.

Energy Services and Products

The primary focus of our Energy Services and Products business over the last several years has been toward instituting operational efficiency programs that leverage our asset base and capabilities for providing services and products predominantly for offshore energy operations and subsea completions, inclusive of our customers’ capital and operating budgets. Increasingly, our efforts in our Energy Services business have focused on assisting our customers to reduce their carbon emissions in exploring for, developing and producing oil and natural gas and in addressing the ongoing energy transition. We are also focused on opportunities to develop and deploy our capabilities to grow business in offshore wind installations (both fixed and floating) and tidal energy solutions and to utilize our core competencies to provide engineered solutions to the wind, hydrogen and carbon-capture-and-sequestration (“CCS”) markets, as well as expanding our asset integrity management and digital solutions for those markets.

The table that follows sets out revenue and profitability for the business segments within our Energy Services and Products business. In the Subsea Robotics section of the table that follows, “ROV days available” includes all days from the first day that an ROV is placed into service until the ROV is retired. All days in this period are considered available days, including periods when an ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time when the ROVs are not available for utilization.
23
Table of Contents
Three Months Ended
(dollars in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Subsea Robotics
Revenue$127,989 $119,119 $134,315 
Gross Margin21,958 24,078 28,199 
Operating Income (Loss)11,552 14,619 21,012 
Operating Income (Loss) %9 %12 %16 %
ROV Days Available22,500 22,469 23,021 
ROV Days Utilized11,842 11,887 12,747 
ROV Utilization53 %53 %55 %
         
Manufactured Products
Revenue82,692 86,825 102,940 
Gross Margin11,002 10,004 36,516 
Operating Income (Loss)2,643 2,753 (20,228)
Operating Income (Loss) %3 %3 %(20)%
Backlog at End of Period334,000 248,000 318,000 
Offshore Projects Group
Revenue97,397 89,234 85,356 
Gross Margin7,737 15,111 12,846 
Operating Income (Loss)666 8,813 6,754 
Operating Income (Loss) %1 %10 %8 %
Integrity Management & Digital Solutions
Revenue56,570 54,048 60,469 
Gross Margin9,199 8,209 12,416 
Operating Income (Loss)3,508 2,474 6,015 
Operating Income (Loss) %6 %5 %10 %
Total Energy Services and Products
Revenue$364,648 $349,226 $383,080 
Gross Margin49,896 57,402 89,977 
Operating Income (Loss)18,369 28,659 13,553 
Operating Income (Loss) %5 %8 %4 %

Subsea Robotics. We believe we are the world's largest provider of work-class ROV services and, generally, this business segment has been the largest contributor to our Energy Services and Products business operating income. Our Subsea Robotics segment revenue reflects the utilization percentages, fleet sizes and average pricing in the respective periods. AsOur survey services business provides survey and positioning, and geoscience services. The following table presents revenue from ROV as a percentage of total Subsea Robotics revenue:

Three Months Ended
 Mar 31, 2022Mar 31, 2021Dec 31, 2021
ROV76 %78 %77 %
 
Other24 %22 %23 %

24
Table of Contents
During the first quarter of 2022, Subsea Robotics operating income decreased on lower revenue as compared to the immediately preceding quarter, primarily due to seasonal factors resulting in reduced ROV and increased costs associated with hiring, training and asset preparedness for higher expected activity levels in the remainder of 2022. Pricing for the various Subsea Robotics services remained stable during the first quarter of 2022. Subsea Robotics operating income for the first quarter of 2022 decreased on higher revenue as compared to the corresponding period of the prior year, as a result of increased costs in 2022 associated with hiring, training and asset preparedness for higher expected activity levels in the remainder of 2022.

For the three-month period ended March 31, 2022, days on hire were lower when compared to the immediately preceding quarter, due to typical lower seasonal activity. Fleet utilization was to 53% in the three-month period ended March 31, 2022 as compared to 55% and 53% for the three-month periods ended December 31, 2021 and March 31, 2021, respectively. We retired four of our implementationconventional work-class ROV systems and replaced them with three upgraded conventional work-class ROV systems and one IsurusTM work-class ROV system (which is capable of Accounting Standards Update ("ASU") 2016-09, "Compensation – Stock Compensation – Improvements to Employee Share-Based Payment Accounting," these tax effects are recognizedoperating in high-current conditions and is ideal for renewables projects and high-speed surveys) during the three months ended March 31, 2022, resulting in a total of 250 ROVs in our statementsROV fleet as of both March 31, 2022 and March 31, 2021.

Manufactured Products. Our Manufactured Products segment provides distribution systems such as production control umbilicals and connection systems made up of specialty subsea hardware, and provides turnkey solutions that include program management, engineering design, fabrication/assembly and installation of autonomous mobile robot technology to the commercial theme park industry and a variety of other industries.

Our Manufactured Products operating results in the first quarter of 2022 were higher than those of the immediately preceding quarter, due to $30 million of charges in the fourth quarter of 2021 for the net loss related to the termination of a number of entertainment ride systems contracts with Evergrande. The net loss in 2021 related to Evergrande included a reserve of $49 million in receivables and contract assets partially offset by the reclassification of $20 million of contract assets into salable inventory. Exclusive of those charges, our Manufactured Products operating results were lower in the three-month period ended March 31, 2022 as compared to the corresponding period in the prior year, primarily due to the inability to fully absorb the fixed costs of the segment over a reduced revenue base. Our energy products businesses experienced good order intake while activity in our mobility solutions businesses remained weak during the first quarter of 2022. Manufactured Products operating income for the first quarter of 2022 was relatively flat as compared to the corresponding period of the prior year on lower revenue.

Our Manufactured Products backlog was $334 million as of March 31, 2022 compared to $318 million as of December 31, 2021. Our book-to-bill ratio was 1.2 for the trailing 12 months, as compared with a book-to-bill ratio of 1.1 for the year ended December 31, 2021.

Offshore Projects Group. Our OPG segment provides a broad portfolio of integrated subsea project capabilities and solution as follows:

•subsea installation and mechanical and hydraulic intervention, including riserless light well intervention
(“RLWI”) services and inspection, maintenance and repair (“IMR”) services, utilizing owned and chartered vessels;
•installation and workover control systems (“IWOCS”) and ROV workover control systems (“RWOCS”);
•project management and engineering; and
•drill pipe riser services and systems and wellhead load relief solutions.

Our OPG operating results were lower in the first quarter of 2022 as compared to the immediately preceding quarter, on higher revenue, primarily due to cost overruns on a project and lower-than-expected vessel utilization resulting from schedule changes that affected the timing of project work. As with our other offshore service businesses, we also experienced higher costs in the first quarter of 2022 associated with hiring and equipment readiness in preparation for expected increased activity in the remainder of 2022. Our OPG operating results were lower in the three months ended March 31, 2022 compared to the corresponding period of the prior year, primarily due to activity on the Angola riserless light well intervention project in the first quarter of 2021 with no comparable activity in the first quarter of 2022.

Integrity Management & Digital Solutions. Through our IMDS segment we provide asset integrity management, corrosion management, inspection and nondestructive testing services, principally to customers in the oil and gas,
25
Table of Contents
power generation and petrochemical industries. We perform these services on both onshore and offshore facilities, both topside and subsea. We also provide software, digital and connectivity solutions for the energy industry and software and analytical solutions for the bulk cargo maritime industry.

Our IMDS operating results for the first quarter of 2022 were lower, as compared to the immediately preceding quarter, primarily due to a seasonal decrease in revenue combined with less efficient absorption of fixed costs. IMDS operating results for the three-month period ended March 31, 2022 as compared to the corresponding period of the prior year, improved primarily on higher activity levels.

Aerospace and Defense Technologies. Our ADTech segment provides government services and products, including engineering and related manufacturing in defense and space exploration activities, principally to U.S. government agencies and their prime contractors.

Revenue, gross margin and operating income (loss) information for our ADTech segment are as follows:
Three Months Ended
(dollars in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Revenue$81,511 $88,327 $83,629 
Gross Margin16,870 22,110 15,863 
Operating Income (Loss)11,844 16,839 10,562 
Operating Income (Loss) %15 %19 %13 %

Our ADTech segment operating results for the first quarter of 2022 were slightly higher as compared to the immediately preceding quarter, on slightly lower revenue, due to a favorable project mix. ADTech operating results for the three-month period ended March 31, 2022 were lower when compared to the corresponding period of the prior year, on lower revenue due to decreased activity in both defense subsea technologies and space systems.

Unallocated Expenses
Our Unallocated Expenses (i.e., those not associated with a specific business segment) within gross margin consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units and bonuses, as well as other general expenses. Our Unallocated Expenses within operating expense consist of those expenses within gross margin plus general and administrative expenses related to corporate functions.

The following table sets forth our Unallocated Expenses for the periods indicated:
Three Months Ended
(dollars in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Gross margin expenses$(21,286)$(22,855)(26,677)
% of revenue5 %5 %6 %
Operating expenses(31,252)(31,715)(36,687)
Operating expenses % of revenue7 %7 %8 %

Our unallocated operating expenses for the first quarter of 2022 were lower as compared to the immediately preceding quarter primarily due to lower accruals in 2022 for incentive-based compensation. Our Unallocated operating expenses for the first quarter of 2022 were relatively flat as compared to the corresponding period of the prior year.

26
Table of Contents
Other

The following table sets forth our significant financial statement items below the income (loss) from operations effective January 1, 2017. Previously, these tax effects were reflectedline.
Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Interest income$796 $519 $613 
Interest expense, net of amounts capitalized(9,443)(10,407)(9,058)
Equity in income (losses) of unconsolidated affiliates294 534 (507)
Other income (expense), net444 (1,453)(5,547)
Provision (benefit) for income taxes10,262 12,341 11,742 

In addition to interest on borrowings, interest expense, net of amounts capitalized, includes amortization of loan costs and interest rate swap gains, fees for lender commitments under our revolving credit agreement and fees for standby letters of credit and bank guarantees that banks issue on our balance sheet as adjustments to additional paid-in capital. See Note 1 tobehalf for performance bonds, bid bonds and self-insurance requirements.

Foreign currency transaction gains and losses are the consolidated financial statements included in this report for further discussionprincipal component of ASU 2016-09.

other income (expense), net. In the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016,2021, we incurred foreign exchange lossescurrency transaction gains (losses) of $3.4$0.4 million and $6.5$(1.9) million, respectively. The foreign exchange lossescurrency gains (losses) in 2016the 2022 and 2021 periods were primarily related to increasing (declining) exchange rates for the Angolan kwanza and its declining exchange rate relative to the U.S. dollar. We did notcould incur significantfurther foreign currency exchange losses in any oneAngola if further currency duringdevaluations occur.

Our tax provision is based on (1) our earnings for the nine monthsperiod and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographical mix of our results. The effective tax rate for the three-month periods ended September 30, 2017. Our foreign exchange losses are reflected in Other income (expense)March 31, 2022 and 2021 was different than the federal statutory rate of 21%, net.


For the fourth quarter of 2017, we believe our results will be considerably lower than our third quarter resultsprimarily due to seasonalitythe geographical mix of revenue and earnings, changes in valuation allowances and uncertain tax positions, and other discrete items; therefore, we do not believe a reduced level of offshore activity. Mostdiscussion of the declineeffective tax rate is meaningful. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur incremental tax consequences upon the distribution of such earnings.

On March 27, 2020, the CARES Act was signed into law in the United States. In accordance with the rules and procedures under the CARES Act, we filed a 2014 refund claim to carry back our U.S. net operating loss generated in 2019 and amended our 2013 federal income tax return impacted by the net operating loss carryback. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expected to bereceive combined refunds of approximately $33 million, of which we have received $10 million as of March 31, 2022. The remaining refunds are classified as accounts receivable, net, in our ROV and Subsea Projects segments, with modestly lower operatingconsolidated balance sheet as of March 31, 2022.

Our income from our other oilfield segments, as we foresee very few near-term catalysts to support an improvement in our oilfield markets. For our-non-oilfield segment, Advanced Technologies, we are projecting a modest quarterly improvement. We expect Unallocated Expenses to be slightly higher.

While our fourth quarter outlook has been revised downward, we continue to believe that we will be marginally profitable at the operating income line on a consolidated basistax payments for the full year of 2017. We anticipate continued lower global demand for deepwater drilling, field development, and inspection, maintenance and repair and installation activities due2022 are estimated to be in the range of $40 million to $45 million, which includes taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the current and anticipated oil price environment, which has led to spending cuts by our customers and pricing pressure. Below the operating income line, we expect:

increased interest expense from higher interest rates, which affect our floating rate debt and our swaps to floating rates on $200 millionprofitability of fixed-rate debt; and
a loss on our equity investment in Medusa Spar LLC, as volume continues to be low in current producing zones.

Based on the current number of floating rigs working and expectations for further reductions in oil and gas industry capital and operating expenditures as offshore activities get pushed into 2019, we believe our 2018 earnings will be significantly lower than 2017. During 2018, we expect each of our operating segments will contribute positive earnings before interest, taxes and depreciation and amortization (EBITDA), and on a consolidated basis, we will generate more than sufficientsuch operations. These cash flows to service our debt and fund our anticipated maintenance and organic growth capital expenditures. While we are anticipating an increase in offshore activity levels during the second half of 2018, wetax payments do not expect this shift in momentum to beinclude expected refunds of approximately $23 million under the CARES Act.
Liquidity and Capital Resources

We consider our liquidity and capital resources adequate to offset the near-term market weakness or to present an opportunity to meaningfully improve pricing.

With an outlook for diminishingsupport our operations, capital commitments and growth initiatives. As of March 31, 2022, we had working capital of $677 million, including cash flow from operationsand cash equivalents of $438 million. Additionally, as of March 31, 2022, we had $450 million available through our prior revolving credit facility (“Prior Revolving Credit Facility”). In April 2022, we entered into a new senior secured revolving credit facility (the “Revolving Credit Facility”) that replaced our Prior Revolving Credit Facility. The Revolving Credit Facility provides a borrowing base of $215 million and includes a $100 million sublimit for the fourth quarterissuance of 2017 andletters of credit. We remain committed to maintaining strong liquidity for the full year of 2018, we feel it is prudent at this2022 and believe that our cash position, undrawn Revolving Credit Facility, and debt maturity profile should provide us ample resources and time to focusaddress potential opportunities to improve our resourcesreturns. See Note 10—“Subsequent Event” in
27
Table of Contents
the Notes to Consolidated Financial Statements in this quarterly report for information on growththe retirement of our Prior Revolving Credit Facility and positioningentry into a new senior secured credit facility in April 2022.

Our nearest maturity of indebtedness is our $400 million of 2024 Notes (as defined below) due in November 2024. In 2021, we repurchased $100 million in aggregate principal amount of the company2024 Senior Notes in open-market transactions. We may, from time to time, complete additional limited repurchases of the 2024 Notes, via open-market or privately negotiated repurchase transactions or otherwise, prior to their maturity date. We can provide no assurances as to the timing of any such additional repurchases or whether we will complete any such repurchases at all. We do not intend to disclose further information regarding any such repurchase transactions, except to the extent required in our subsequent periodic filings on Forms 10-K or 10-Q, or unless otherwise required by applicable law.

Cash flows for the future. Consequently, our Board did not declare a quarterly dividendthree months ended March 31, 2022 and 2021 are summarized as follows:
Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021
Changes in Cash:
Net Cash Used in Operating Activities$(80,501)$(1,723)
Net Cash Used in Investing Activities(19,283)(5,007)
Net Cash Used in Financing Activities(2,202)(1,806)
Effect of exchange rates on cash1,891 (737)
Net Increase (Decrease) in Cash and Cash Equivalents$(100,095)$(9,273)

Operating activities

Our primary sources and uses of cash flows from operating activities for the three months ended March 31, 2022 and 2021 are as follows:
Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021
Cash Flows from Operating Activities:
Net income (loss)$(19,210)$(9,365)
Non-cash items, net32,611 36,106 
Accounts receivable and contract assets(47,580)(11,616)
Inventory(8,578)10,628 
Current liabilities(35,726)(20,373)
Other changes(2,018)(7,103)
Net Cash Provided by (Used in) Operating Activities$(80,501)$(1,723)

The decrease in cash related to be paidaccounts receivable and contract assets in the fourth quarterthree months ended March 31, 2022 reflects the timing of 2017. While we will continueproject milestones and customer payments. The decrease in cash related to review our dividend position on a quarterly basis, we do not anticipate our Board reinstating a quarterly cash dividend until we see a significant improvementinventory in the three months ended March 31, 2022 corresponds with an increase in our market outlookbacklog. The decrease in cash related to current liabilities in the three months ended March 31, 2022 reflects the timing of vendor payments and projected free cash flow.the annual employee incentive payments related to attainment of specific performance goals in prior periods.


Critical Accounting Policies and EstimatesInvesting activities


For information about our Critical Accounting Policies and Estimates, please refer to the discussion in our annual report on Form 10-K for the year ended December 31, 2016 under the heading "Critical Accounting Policies and Estimates" in Item 7 – "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Liquidity and Capital Resources

As of September 30, 2017, we had working capital of $771 million, including $472 million of cash and cash equivalents. Additionally, we had $500 million of borrowing capacity available under our revolving credit facility under a credit agreement with a group of banks (the "Credit Agreement"). The Credit Agreement includes a $300 million, three-year term loan and a $500 million, five-year, revolving credit facility. We consider our liquidity, cash flows and capital resources to be adequate to support our existing operations and capital commitments.

Our capital expenditures of $19 million were $60 millionhigher during the first ninethree months of 2017, excluding an $11 million equity investment and advance in a business acquisition to expand our presence in the Caspian Sea region,2022, as compared to $83$11 million excluding a $3 million business acquisition, duringin the first ninethree months of 2016. We currently estimate2021, primarily due to increased spending in our Subsea Robotics segment to upgrade our fleet of work-class ROVs along with increased unallocated capital expenditures for 2017, excluding business acquisitions, willinformation technology systems.

For 2022, we expect our organic capital expenditures to be in the range of $90$70 million to $110$90 million. This includes approximately $40 million including $20to $45 million of construction progress payments formaintenance capital expenditures and $30 million to $45 million of growth capital expenditures.
28
Table of Contents

We have several deepwater vessels under a mix of short-term charters where we can see firm workload and spot charters as market opportunities arise, along with one long-term charter that began in the new deepwater multiservice subsea supportthree-months ended March 31, 2022. With the current market conditions, we anticipate adding additional charter vessels throughout the year to align with our strategy that balances vessel cost, availability and capability to be named the Ocean Evolution, discussed below.

During the third quarter of 2013, we signed an agreement with a shipyard for the construction of a subsea support vessel, to be named the Ocean Evolution.capture work. We expect to take deliverydo this through the continued utilization of a mix of short-term, spot and long-term charters.

Financing activities

In the vessel atthree months ended March 31, 2022, we used $2.2 million of cash in financing activities. In the end of December 2017 and to place it into service during the first quarter of 2018. We intend for the vessel to be U.S.-flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to have an overall length ofthree months ended March 31, 2021, we used $1.8 million in financing activities.

353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-ton active heave-compensated crane, and a working moonpool. We will outfit the vessel with two of our high specification work-class ROVs and a satellite communications system capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the vessel will be used to augment our ability to provide subsea intervention services and hardware installations in the deepwater U.S. Gulf of Mexico.

Unless indicated otherwise, each of the vessels discussed below is a deepwater multiservice subsea support vessel outfitted with two of our high-specification work-class ROVs.

Beginning in the third quarter of 2008, we chartered a vessel, the Olympic Intervention IV, for an initial term of five years. Following extension periods, the charter expired in July 2016, and we released the vessel to its owner. We had been using the Olympic Intervention IV in the U.S. Gulf of Mexico.

In 2012, we moved the chartered vessel Ocean Intervention III to Angola and also chartered the Bourbon Oceanteam 101 to work on a three-year field support vessel services contract for a unit of BP plc. We had extended the charter of the Bourbon Oceanteam 101 to January 2017. However, in early 2016, the customer exercised its right, under the field support vessel services contract, to terminate its use of the Bourbon Oceanteam 101 at the end of May 2016. Under the terms of the contract, the costs incurred by us associated with the early release and demobilization of the vessel were reimbursed by the customer. Following the release of the vessel, we redelivered it to the vessel supplier. The charter for the Ocean Intervention III expired at the end of July 2017. Under the field support vessel services contract, which has been extended through January 2019, we are continuing to supply project management and engineering services. We also provide ROV tooling, asset integrity services and installation and workover control system services as requested by the customer. Chartered vessels and barges are provided to the customer upon request. Under this arrangement, the Ocean Intervention III will beprovided for a fixed term from January 2018 until May 2018 with three one-month optional customer extension periods.
In March 2013, we commenced a five-year charter for a Jones Act-compliant multi-service support vessel, the Ocean Alliance, we have been using in the U.S. Gulf of Mexico. In January 2015, we commenced a two-year contract with a customer for the use of the Ocean Alliance. The contract expired in January 2017, and we are marketing the vessel for spot market work in the U.S. Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multi-service subsea marine support vessel. We made modifications to the vessel and used the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. In December 2016, we declined our option to extend the charter and the vessel was released.
In November 2015, we commenced a two-year charter for the use of the Island Pride, a multi-service subsea marine support vessel. We are using the vessel under a two-year contract to provide field support services off the coast of India for an oil and gas customer based in India. Our two-year contract is scheduled to end in early November. Our customer has several option periods available to them; however, they have not exercised their right to use them. The future IMR vessel work in this field is out to tender, and we are bidding for the work.

We also charter or lease vessels on a short-term basis as necessary to augment our fleet.


As of September 30, 2017,March 31, 2022, we had long-term debt in the principal amount of $800$700 million outstanding and $500$450 million available under our revolving credit facility provided under the Credit Agreement.

In October 2014, we entered into a new credit agreement (as amended, the "Credit Agreement") with a group of banks to replace our prior principal credit agreement. The original Credit Agreement from October 2014 has been amended three times and it currently provides for a $300 million term loan (the "Term Loan Facility") and a $500 million revolving credit facility (the "Revolving Credit Facility"), which mature in October 2019 and October 2021, respectively. Subject to certain conditions, the aggregate commitments under thePrior Revolving Credit Facility may be increased by upFacility. See Note 10—“Subsequent Event” in the Notes to $300 million at any time upon agreement between us and existing or additional lenders. Borrowings underConsolidated Financial Statements in this quarterly report for information on the retirement of our Prior Revolving Credit Facility and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of the Credit Agreemententry into a new senior secured credit facility in 2014 and pursuant to its terms, we repaid all amounts outstanding under, and terminated, our prior principal credit agreement.


Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the Adjusted Base Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage Ratio. The commitment fees are included as interest expense in our consolidated financial statements.

The Credit Agreement contains various covenants that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets and enter into certain restrictive agreements. We are also subject to a maximum adjusted total capitalization ratio (as defined in the Credit Agreement) of 55%. The Credit Agreement includes customary events of default and associated remedies.April 2022. As of September 30, 2017,March 31, 2022, we were in compliance with all the covenants set forth in the Prior Credit Agreement.


In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "Senior Notes"“2024 Senior Notes”). We pay interest on the 2024 Senior Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to mature on November 15, 2024.


OurIn February 2018, we completed the public offering of $300 million aggregate principal sourceamount of cash from operating activities is our net income (loss), adjusted for6.000% Senior Notes due 2028 (the “2028 Senior Notes”). We pay interest on the non-cash effects2028 Senior Notes on February 1 and August 1 of among other things, depreciation and amortization, deferred income taxes and noncash compensation under our share-based compensation plans. Our $144 million and $262 million of cash provided from operating activities in the nine-month periods ended September 30, 2017 and 2016, respectively, were principally affected by operating results and cash increases (decreases) of:each year. The 2028 Senior Notes are scheduled to mature on February 1, 2028.

$26 million and $102 million, respectively, from changes in accounts receivable;
$35 million and $1 million, respectively, from changes in inventory; and
$(56) million and $(161) million, respectively, from changes in current liabilities.


We had a decrease in cash related to accounts receivable in the nine months ended September 30, 2017 compared to 2016, as we had lower revenue in the three months ended September 30, 2017 as compared to the fourth quarter of 2016, so, combined with our cash collections, our overall accounts receivable balances decreased. The decrease in inventory levels in 2017 reflected usage on a large umbilical project and our lower Subsea Products backlog. Eachmay redeem some or all of the 20172024 Senior Notes and 2016 decreases in cash related to current liabilities reflected generally lower business levels, and decreased accruals for incentive compensation.

2028 Senior Notes at specified redemption prices. In the nine months ended September 30, 2017,2021, we used $79 million of cash in investing activities, largely related to capital expenditures of $60 million, excluding investment and advances in a business acquisition of $11 million. We also used $46repurchased $100 million in financing activities, primarily foraggregate principal amount of the payment of cash dividends of $44 million. In the nine months ended September 30, 2016, we used $117 million of cash2024 Senior Notes in investing activities. The cash used in investing activities related to capital expenditures of $83 million and other investments of $40 million. The other investments were primarily for the purchase of bonds in Angola for the purpose of mitigating our Angolan currency risk. We also used $81 million in financing activities, primarily for the payment of cash dividends of $79 million.open-market transactions.

We have not guaranteed any debt not reflected on our consolidated balance sheet, and we do not have any off-balance sheet arrangements, as defined by SEC rules.


In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock. Under this plan,In 2015, we had repurchased 2.0 million shares of our common stock for $100 million through September 30, 2017, all duringunder this plan. We have not repurchased any shares under this plan since December 2015. We account for the shares we hold in treasury under the cost method, at average cost. The timing and amount of any future repurchases will be determined by our management. We expect that any additional shares repurchased under the plan will be held as treasury stock for possible future use. The plan does not obligate us to repurchase any particular number of shares.


From the second quarterOff-Balance Sheet Arrangements

We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of 2014 through the third quarter of 2016, we paid a quarterly dividend to our common shareholders of $0.27 per share. Starting in the fourth quarter of 2016 through the third quarter of 2017, we paid a dividend of $0.15 per share. Our last quarterly dividend was declared in July 2017 at $0.15 per shareMarch 31, 2022, and paid in September 2017. With an outlook for diminishing cash flow from operations for the fourth quarter of 2017 and for the full year of 2018, we feel it is prudent at this time to focus our resources on growth and positioning our company for the future. Consequently, our Board did not declare a quarterly dividend to be paid in the fourth quarter of 2017. While we will continue to review our dividend position on a quarterly basis, we do not anticipatehave any off-balance sheet arrangements, as defined by Securities and Exchange Commission's rules.

Critical Accounting Policies and Estimates

The discussion and analysis of our Board reinstating a quarterly cash dividend until we see a significant improvementfinancial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts in our market outlookfinancial statements and projected free cash flow.accompanying notes. We disclose our significant accounting policies in Notes to Consolidated Financial Statements—Note 1—“Summary of Major Accounting Policies” in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2021, in Part II. Item 7. “Financial Statements and Supplementary Data—Note 1—Summary of Major Accounting Policies.”

For information about our critical accounting policies and estimates, see Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations

We operateOperations—Critical Accounting Policies and Estimates” in five business segments. The segments are contained within two businesses — services and products providedour annual report on Form 10-K for the year ended December 31, 2021. As of March 31, 2022, there have been no material changes to the oiljudgments, assumptions and gas industry ("Oilfield")estimates upon which our critical accounting policies and all other services and products ("Advanced Technologies"). Our Unallocated Expensesestimates are those not associated with a specific business segment.based.

Consolidated revenue and profitability information is as follows:


29


 Three Months Ended Nine Months Ended
(dollars in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Revenue $476,120
 $549,275
 $515,036
 $1,437,332
 $1,783,158
Gross Margin 54,885
 35,443
 53,571
 153,311
 228,156
Gross Margin % 12% 6 % 10% 11% 13%
Operating Income (Loss) 10,531
 (11,856) 9,390
 19,771
 74,623
Operating Income % 2% (2)% 2% 1% 4%

In our Subsea Projects segment, we generate a material amountTable of our consolidated revenue from contracts for services in the U.S. Gulf of Mexico, which has historically been more active from April through October, as compared to the rest of the year. The European operations of our Asset Integrity segment have historically been more active in the second and third quarters; however, the reduced customer spending levels in the current commodity price environment have substantially obscured this seasonality since mid-2014. Revenue in our ROV segment is generally subject to seasonal variations in demand, with our first quarter typically being the low quarter of the year. The level of our ROV seasonality primarily depends on the number of ROVs we have engaged in vessel-based subsea infrastructure inspection, maintenance and repair and installation, which is more seasonal than drilling support. Periods since mid-2014 reflect an exception, as there has been a general decline in offshore activity, which caused a decrease in our ROV days on hire and utilization during each sequential quarter from September 2014 through September 2017, with few exceptions. The number of ROV days on hire for the quarters ended September 2017, June 2017 and June 2016 were slightly higher than that of the respective immediately preceding quarters. Revenue in our Subsea Products and Advanced Technologies segments generally has not been seasonal.


Oilfield

The following table sets forth the revenues and margins for our Oilfield business segments for the periods indicated. In the ROV section of the table that follows, "Days available" includes all days from the first day that an ROV is placed into service until the ROV is retired. All days during this period are considered available days, including periods when an ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time when the ROVs are not available for utilization.
Contents
   Three Months Ended Nine Months Ended
(dollars in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Remotely Operated Vehicles          
 Revenue $104,617
 $126,507
 $103,432
 $302,071
 $413,769
 Gross Margin 12,102
 (16,288) 16,659
 41,783
 45,959
 Operating Income (Loss) 5,009
 (23,845) 10,376
 21,310
 21,162
 Operating Income (Loss) %5% (19)% 10% 7% 5%
 Days available 25,695
 29,126
 25,300
 76,214
 86,904
 Days utilized 12,742
 15,156
 12,267
 36,497
 47,218
 Utilization 50% 52 % 48% 48% 54%
            
Subsea Products          
 Revenue 143,583
 157,269
 174,893
 469,115
 542,978
 Gross Margin 24,949
 20,423
 22,762
 72,702
 119,287
 Operating Income 12,383
 6,109
 10,552
 34,418
 71,870
 Operating Income %9% 4 % 6% 7% 13%
 Backlog at end of period 284,000
 457,000
 328,000
 284,000
 457,000
            
Subsea Projects          
 Revenue 80,116
 110,799
 75,545
 218,617
 378,883
 Gross Margin 10,187
 19,321
 6,462
 20,673
 45,147
 Operating Income 6,512
 15,029
 3,000
 9,699
 32,055
 Operating Income %8% 14 % 4% 4% 8%
            
Asset Integrity          
 Revenue 61,098
 71,995
 58,192
 171,948
 215,459
 Gross Margin 9,754
 11,591
 10,004
 28,139
 29,030
 Operating Income 3,050
 4,725
 3,755
 9,072
 4,354
 Operating Income %5% 7 % 6% 5% 2%
            
Total Oilfield          
 Revenue $389,414
 $466,570
 $412,062
 $1,161,751
 $1,551,089
 Gross Margin 56,992
 35,047
 55,887
 163,297
 239,423
 Operating Income 26,954
 2,018
 27,683
 74,499
 129,441
 Operating Income %7% — % 7% 6% 8%

In general, our Oilfield business focuses on supplying services and products to the deepwater sector of the offshore market. We have experienced, and expect to continue to experience, lower global demand for deepwater drilling, field development, and inspection, maintenance and repair activities due to the general decline in oil prices since June 2014. As a result, we are forecasting an overall decrease in our oilfield operating segments for the full year of 2017 as compared to 2016.


We believe we are the world's largest provider of ROV services, and this business segment historically, but not currently, has been the largest contributor to our Oilfield business operating income. Our ROV segment revenue reflects the utilization percentages, fleet sizes and average pricing of the respective periods. Our ROV operating margins have declined as depreciation has become a higher percentage of revenue, and we have experienced lower utilization and pricing in recent years. In the full year of 2014, 2015 and 2016, ROV depreciation and amortization was 14%, 18% and 27% of ROV revenue respectively; and in the nine months ended September 30, 2017 it was 29% of ROV revenue. Our ROV operating income increased in the three- and nine-month periods ended September 30, 2017 compared to the corresponding periods of the prior year, mainly due to 2016 inventory write-downs and fixed assets write-offs totaling $36 million, substantially offset by lower utilization and lower average revenue per day on hire in 2017. During the third quarter of 2017, ROV operating income decreased compared to the immediately preceding quarter, mainly as a result of lower average revenue per day on hire and an increase in average daily operating costs. The average revenue per day on hire decreased due primarily to an unfavorable change in geographic mix, as we experienced disproportionately fewer work days in higher day rate operating areas, notably Angola. Days on hire increased 4% sequentially during the third quarter of 2017 as our fleet utilization improved to 50% from 48%. We added four new ROVs to our fleet during the nine months ended September 30, 2017 and retired five, resulting in a total of 279 ROVs in our ROV fleet. We expect our fourth quarter 2017 ROV operating income to decrease considerably from that of the third quarter due to fewer working days, largely on decreased demand to provide vessel-based services, and lower average revenue per day, partially attributable to seasonality. We also expect a decline in our average daily operating costs.

To improve operational efficiency, in 2016 we reorganized our Subsea Products segment into two business units – (1) manufactured products and (2) service and rental. Manufactured products include production control umbilicals and specialty subsea hardware, while service and rental includes tooling, subsea work systems and installation and workover control systems. This internal reorganization did not affect our segment reporting structure or the historical comparability of our segment results. The following table presents revenue from manufactured products and service and rental, as their respective percentages of total Subsea Products revenue:
   Three Months Ended Nine Months Ended
  Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Manufactured products 59% 64% 70% 67% 66%
            
Service and rental 41% 36% 30% 33% 34%
            

Our Subsea Products operating income increased in the three-month period ended September 30, 2017 compared to the corresponding periods of the prior year, mainly due to a 2016 charge of $8.2 million, predominantly for tools and inventory in our portfolio used to support deepwater drilling and operations, partially offset by lower demand and pricing in both manufactured products and service and rental in 2017. Subsea Products operating income decreased in nine-month period ended September 30, 2017 compared to the the corresponding period of the prior year, due to lower demand and pricing in both manufactured products and service and rental. Subsea Products operating income in the third quarter of 2017 was higher than that of the immediately preceding quarter due to the higher percentage of segment revenue being generated by our service and rental business and excellent execution by our umbilical business unit, partially offset by the effect of an 18% decline in revenues.

Our Subsea Products backlog was $284 million as of September 30, 2017, compared to $431 million as of December 31, 2016. The backlog decline was largely attributable to low umbilical order intake and production associated with the Shell Appomattox project in the U.S. Gulf of Mexico. We expect Subsea Products margins to weaken further into the mid-single digit range in the fourth quarter of 2017 compared to the third quarter, due to legacy contracts with better pricing having been completed and more recent contracts at more competitive pricing being executed.

Our Subsea Projects operating income was lower in the three- and nine-month periods ended September 30, 2017 compared to the corresponding periods of the prior year, as a result of generally lower vessel demand and pricing, and the release in May 2016 of the Bourbon Oceanteam 101, which was previously deployed under the field support vessel services contract offshore Angola. Our Subsea Projects operating income increased in the three-month period ended September 30, 2017 compared to the immediately preceding quarter, principally driven by seasonal improvements in U.S. Gulf of Mexico deepwater vessel work. In the fourth quarter of 2017, we expect lower operating income than we had for the third quarter, due to the seasonal decrease in deepwater vessel work in

the U.S. Gulf of Mexico, a continued low vessel price environment and current global oversupply of vessels, and a lower profit contribution from our Angola operations due to the release of the Ocean Intervention III by the customer during the third quarter of this year.

For the three-month period ended September 30, 2017, compared to the corresponding period of the prior year, Asset Integrity's operating income was lower. For nine-month period ended September 30, 2017, compared to the corresponding periods of the prior year, Asset Integrity's operating income improved on lower revenue, as we benefited from restructuring efforts we made in prior periods and 2016 operating results included a second quarter bad debt expense of $3.3 million. Asset Integrity's operating income in the three-month period ended September 30, 2017 was lower compared to the immediately preceding quarter . For the fourth quarter of 2017, we expect Asset Integrity's operating income to be lower compared to the third quarter, due to seasonal decreases.

Advanced Technologies

Revenue and margin information was as follows:
   Three Months Ended Nine Months Ended
(dollars in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Revenue $86,706
 $82,705
 $102,974
 275,581
 232,069
Gross Margin $11,833
 $9,665
 $14,133
 $36,038
 $26,092
Operating Income 6,602
 4,357
 7,632
 19,260
 10,478
Operating Income % 8% 5% 7% 7% 5%

Advanced Technologies operating income for the three- and nine-month periods ended September 30, 2017 was higher than that of the corresponding periods of the prior year, from improved execution on theme park and other commercial projects. Operating income in the third quarter of 2017 was lower than that of the immediately preceding quarter, primarily due to lower levels of work for the U.S. Navy. We expect a slight increase in our Advanced Technologies operating income in the fourth quarter of 2017 compared to the third quarter, due to increased activity on theme park projects.

Unallocated Expenses

Our Unallocated Expenses, i.e., those not associated with a specific business segment, within gross profit consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units and bonuses, as well as other general expenses. Our Unallocated Expenses within operating income consist of those expenses within gross profit plus general and administrative expenses related to corporate functions.

The following table sets forth our Unallocated Expenses for the periods indicated.
   Three Months Ended Nine Months Ended
(dollars in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Gross margin $13,940
 $9,269
 $16,449
 46,024
 37,359
Operating income 23,025
 18,231
 25,925
 73,988
 65,296
Operating income % of revenue 5% 3% 5% 5% 4%

Our Unallocated Expenses for the three- and nine-month periods ended September 30, 2017 increased compared to the corresponding periods of the prior year, primarily due to higher 2017 estimated expenses related to incentive compensation from our performance units and bonuses. Our Unallocated Expenses for the three months ended September 30, 2017 were lower compared to the immediately preceding quarter. For the fourth quarter of 2017, we expect our quarterly Unallocated Expenses to be slightly higher compared to the third quarter.


Other

The following table sets forth our significant financial statement items below the income from operations line.

   Three Months Ended Nine Months Ended
(in thousands) Sep 30, 2017 Sep 30, 2016 Jun 30, 2017 Sep 30, 2017 Sep 30, 2016
Interest income $1,997
 $684
 $2,045
 5,379
 2,421
Interest expense, net of amounts capitalized (8,650) (6,325) (7,599) (22,517) (18,924)
Equity in income (losses) of unconsolidated affiliates (424) (246) (394) (1,798) 543
Other income (expense), net (1,287) 570
 (58) (3,901) (6,823)
Provision for (benefits from) income taxes 3,935
 (5,375) 1,252
 4,104
 16,226

In addition to interest on borrowings, interest expense includes amortization of loan costs, fees for lender commitments under our revolving credit agreement and fees for standby letters of credit and bank guarantees that banks issue on our behalf for performance bonds, bid bonds and self-insurance requirements.

Foreign currency transaction gains and losses are the principal component of Other income (expense), net. In the three-month periods ended September 30, 2017 and 2016, we incurred foreign currency transaction gains (losses) of $(1.3) million and $0.6 million, respectively. In the nine-month periods ended September 30, 2017 and 2016, we incurred foreign currency transaction losses of $(3.4) million and $(6.5) million, respectively. In the three- and nine- month periods ended September 30, 2017, we did not incur significant currency losses in any one currency. The currency losses in 2016 primarily related to the Angolan kwanza and its declining exchange rate relative to the U.S. dollar, and related primarily to our cash balances in Angola. Conversion of cash balances from Angolan kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process starting in mid-2015, causing our cash balances in kwanza to increase.

The provisions for income taxes were related to U.S. income taxes that we provided at estimated annual effective rates using assumptions as to earnings and other factors that would affect the tax provision for the remainder of the year, and to the operations of foreign branches and subsidiaries that were subject to local income and withholding taxes. Factors that could affect our estimated tax rate include our profitability levels in general and the geographic mix in the sources of our results. The effective tax rate for the nine months ended September 30, 2017 was different than the federal statutory rate of 35.0%, primarily due to the geographic mix of tax jurisdictions in which we generated our earnings and losses and non-deductible expenses. It is our intention to continue to indefinitely reinvest in certain of our international operations.  We do not believe the effective tax rate before discrete items is meaningful, as the rate is less significant at a low pretax income or a pretax loss position. The effective tax rate of 31.3% for the period ended September 30, 2016 was lower than the federal statutory rate of 35.0%, primarily due to our intention to indefinitely reinvest in certain of our international operations.  We do not provide for U.S. taxes on the portion of our foreign earnings we indefinitely reinvest.


Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are currently exposed to certain market risks arising from transactions we have entered into in the normal course of business. These risks relate to interest rate changes and fluctuations in foreign exchange rates. Except for our exposure in Angola, we do not believe these risks are material. We have not entered into any market risk sensitivemarket-risk-sensitive instruments for speculative or trading purposes. When we have a significant amount of borrowings, we typically manage our exposure to interest rate changes through the use of a combination of fixed- and floating-rate debt. See Note 3 of7—“Debt” in the Notes to Consolidated Financial Statements included in this quarterly report for a description of our revolving credit facility and interest rates on our borrowings. We have two interest rate swapsborrowings and Note 10—“Subsequent Event” in place on a total of $200 million of the Senior Notes for the period to November 2024. The agreements swap the fixed interest rate of 4.650% on $100 million of the Senior Notes to Consolidated Financial Statements in this quarterly report for information on the floating rateretirement of one month LIBOR plus 2.426%our Prior Revolving Credit Facility and on another $100 million to one month LIBOR plus 2.823%.entry into a new senior secured revolving credit facility in April 2022. We believe significant interest rate changes would not have a material near-term impact on our future earnings or cash flows.
Because we operate in various oil and gas exploration and production regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar. The functional currency for severalmost of our international operations is the applicable local currency. A stronger U.S. dollar against the U.K.United Kingdom pound sterling, the Norwegian kroner and the Brazilian real maycould result in lower operating income. We manage our exposure to changes in foreign exchange rates principally through arranging compensation in U.S. dollars or freely convertible currency and, to the extent possible, by limiting compensation received in other currencies to amounts necessary to meet obligations denominated in those currencies. We use the exchange rates in effect as of the balance sheet date to translate assets and liabilities as to whichwhen the functional currency is the local currency, resulting in translation adjustments that we reflect as accumulated other comprehensive income or loss in the shareholders' equity section of our Consolidated Balance Sheets. We recorded net adjustments to our equity accounts of $20.3$9.9 million and $31.2$(2.9) million in the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016,2021, respectively. Negative adjustments reflect the net impact of the strengthening of the U.S. dollar against various foreign currencies for locations where the functional currency is not the U.S. dollar. Conversely, positive adjustments reflect the effect of a weakening U.S. dollar.


We recorded foreign currency transaction gains (losses) of $(1.3)$0.4 million and $0.6$(1.9) million in the three-month periods ended September 30, 2017March 31, 2022 and 2016, respectively, and $(3.4) million and $(6.5) million in2021, respectively. We recorded foreign currency transaction gains (losses) related to the nine-month periods ended September 30, 2017 and 2016, respectively. Those gains and losses are included in OtherAngolan kwanza as a component of other income (expense), net in our Consolidated Statements of Operations in those respective periods. Since the second quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has been declining, although the exchange rate was relatively stable during the nine-month period ended September 30, 2017. As our functional currency in Angola is the U.S. dollar, we recorded foreignForeign currency transaction gains (losses) related to the Angolan kwanza of $0.7$0.9 million and $(7.6)$(1.4) million in the three- and nine-monththree-month periods ended September 30, 2016,March 31, 2022 and 2021, respectively, as a component of Other income (expense), net in our Consolidated Statements of Operations for those respective periods. Our foreign currency transaction gains (losses) relatedwere primarily due to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. ConversionAny conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank has slowed this process since mid-2015, causing our kwanzaAngola. During 2021, we were able to repatriate $4.5 million of cash balances to subsequently increase. from Angola.

As of September 30, 2017,March 31, 2022 and December 31, 2021, we had the equivalent of approximately $26$1.7 million and $1.0 million, respectively, of kwanza cash balances in Angola reflected on our balance sheet.Consolidated Balance Sheets.


To mitigate our currency exposure risk in Angola, through September 30, 2017 we have used kwanza to purchase $70 million equivalent Angolan central bank (Banco Nacional de Angola) bonds with various maturities throughout 2018 and 2020. Thesebonds. The bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. WeAs of March 31, 2022 and December 31, 2021, we had $6.2 million of Angolan bonds on our Consolidated Balance Sheets. During the three-month period ended March 31, 2021, we sold a portion of these bonds for $2.4 million. Because we intend to sell the bonds if we are able to repatriate the proceeds, we have classified these instrumentsbonds as held-to-maturity,available-for-sale securities, and havethey are recorded the original costin other current assets on our balance sheetConsolidated Balance Sheets. We did not sell any of our Angolan bonds in the three- month period ended March 31, 2022.

We estimated the fair market value of the Angolan bonds to be $6.4 million as of March 31, 2022 and December 31, 2021, respectively, using quoted market prices. Since the market for the Angolan bonds is not an active market, the fair value of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP. As of March 31, 2022, we have $0.2 million in unrealized gains, net of tax, related to these bonds as a component of accumulated other non-current assets.comprehensive loss on our Consolidated Balance Sheets.

30
Table of Contents


Item 4.        Controls and Procedures.Procedures


In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2017March 31, 2022 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.


There has been no change in our internal control over financial reporting that occurred during the three months ended September 30, 2017March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

31
Table of Contents

PART II – OTHER INFORMATION
 
Item 1.Legal Proceedings.

Item 1.Legal Proceedings
On June 17, 2014, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of
For information regarding legal proceedings, see the then current members of our board of directorsdiscussion under the caption “Litigation” in Note 7—“Commitments and one of our former directors, as defendants, and our company, as nominal defendant,Contingencies” in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff asserted, on behalf of our company, actions for breach of fiduciary duties and unjust enrichmentNotes to Consolidated Financial Statements included in connection with prior determinations of our board of directors relating to nonexecutive director compensation. The plaintiff sought relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ fees and other costs.  We and the defendants filed a motion to dismiss the complaint and a supporting brief.  Subsequently, the parties to the litigation jointly requested and received a series of extension orders from the Court to extend the time for certain filings.  The last such extension expired on September 16, 2016.  By letter dated August 30, 2017,this report, which discussion we received notice from the Office of the Register in Chancery advising the parties that the Court was closing the matter for failure to prosecute or to comply with an order of the Court. incorporate by reference into this Item.


In the ordinary course of business, we are subject to actions for damages alleging personal injury under the general maritime laws of the United States, including the Jones Act, for alleged negligence. We report actions for personal injury to our insurance carriers and believe that the settlement or disposition of those claims will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Various other actions and claims are pending against us, most of which are covered by insurance. Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate liability, if any, that may result from these other actions and claims will not materially affect our results of operations, cash flows or financial position.




Item 6.         Exhibits.Exhibits

Index to Exhibits
Registration or File NumberForm of ReportReport DateExhibit Number
*3.011-1094510-KDec. 20003.01
*3.021-109458-KMay 20083.1
*3.031-109458-KMay 20143.1
*3.04 1-109458-KAug. 20203.01
*10.01†1-109458-KMar. 202210.1
*10.02†1-109458-KMar. 202210.2
*10.03†1-109458-KMar. 202210.3
*10.05†1-109458-KMar. 202210.4
*10.06 1-109458-KApr. 202210.1
31.01 
31.02 
32.01 
32.02 
101.INS
Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.
†Management contract or compensatory plan or arrangement.


32
     Registration or File Number Form of Report Report Date Exhibit Number
*3.01
 
Restated Certificate of Incorporation
 1-10945 10-K Dec. 2000 3.01
*3.02
 
Certificate of Amendment to Restated Certificate of Incorporation
 1-10945 8-K May 2008 3.1
*3.03
 
Certificate of Amendment to Restated Certificate of Incorporation
 1-10945 8-K May 2014 3.1
*3.04
 
Amended and Restated Bylaws
 1-10945 8-K Aug. 2015 3.1
 12.01
 
Computation of Ratio of Earnings to Fixed Charges
    
 31.01
 
Rule 13a – 14(a)/15d – 14(a) certification of principal executive officer
 31.02
 
Rule 13a – 14(a)/15d – 14(a) certification of principal financial officer
 32.01
 
Section 1350 certification of principal executive officer
 32.02
 
Section 1350 certification of principal financial officer
 101.INS
 XBRL Instance Document
 101.SCH
 XBRL Taxonomy Extension Schema Document
 101.CAL
 XBRL Taxonomy Extension Calculation Linkbase Document
 101.DEF
 XBRL Taxonomy Extension Definition Linkbase Document
 101.LAB
 XBRL Taxonomy Extension Label Linkbase Document
 101.PRE
 XBRL Taxonomy Extension Presentation Linkbase Document
            
    
 *
 Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.

Table of Contents


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
April 29, 2022
November 2, 2017
/S/    RODERICKS/    RODERICK A. LARSON
LARSON
DateRoderick A. Larson
President and Chief Executive Officer
(Principal Executive Officer)
November 2, 2017April 29, 2022
/S/    ALANS/    ALAN R. CURTIS
CURTIS
DateAlan R. Curtis
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
November 2, 2017April 29, 2022
/S/    W. CARDON GERNER
S/    WITLAND J. LEBLANC, JR.
DateW. Cardon GernerWitland J. LeBlanc, Jr.
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)



29
33