| Commitments and Contingencies | 13. Commitments and Contingencies
In 2008, we received U.S. federal grand jury subpoenas and
subsequent inquiries from U.S. governmental agencies requesting
records related to our compliance with U.S. export trade laws and
regulations. We have cooperated fully with agents from the U.S.
Department of Justice, the Department of Commerce Bureau of
Industry and Security, the United States Department of Treasury,
Office of Foreign Assets Control, and U.S. Immigration and Customs
Enforcement in responding to the inquiries. We have also cooperated
with an informal inquiry from the Securities and Exchange
Commission in connection with the inquiries previously made by the
aforementioned federal agencies. We have conducted our own internal
review of this matter. At the conclusion of our internal review in
the fourth quarter of 2009, we identified possible areas of concern
and discussed these areas of concern with the relevant agencies. We
are currently negotiating a potential resolution with the agencies
involved related to these matters. We currently anticipate that any
administrative fine or penalty agreed to as part of a resolution
would be within established accruals, and would not have a material
effect on our financial position or results of operations. To the
extent a resolution is not negotiated, we cannot predict the timing
or effect that any resulting government actions may have on our
financial position or results of operations.
In addition, we are involved in various other claims, internal
investigations, regulatory agency audits and pending or threatened
legal actions involving a variety of matters. As of March 31,
2016, the Company recorded an immaterial amount for contingent
liabilities representing all contingencies believed to be probable.
The Company has also assessed the potential for additional losses
above the amounts accrued as well as potential losses for matters
that are not probable but are reasonably possible. The total
potential loss on these matters cannot be determined; however, in
our opinion, any ultimate liability, to the extent not otherwise
provided for and except for the specific cases referred to above,
will not materially affect our financial position, cash flow or
results of operations. As it relates to the specific cases referred
to above we currently anticipate that any administrative fine or
penalty agreed to as part of a resolution would be within
established accruals, and would not have a material effect on our
financial position or results of operations. To the extent a
resolution is not negotiated as anticipated, we cannot predict the
timing or effect that any resulting government actions may have on
our financial position, cash flow or results of operations. These
estimated liabilities are based on the Company’s assessment
of the nature of these matters, their progress toward resolution,
the advice of legal counsel and outside experts as well as
management’s intention and experience.
Our business is affected both directly and indirectly by
governmental laws and regulations relating to the oilfield service
industry in general, as well as by environmental and safety
regulations that specifically apply to our business. Although we
have not incurred material costs in connection with our compliance
with such laws, there can be no assurance that other developments,
such as new environmental laws, regulations and enforcement
policies hereunder may not result in additional, presently
unquantifiable, costs or liabilities to us.
Further, in some instances, direct or indirect consumers of our
products and services, entities providing financing for purchases
of our products and services or members of the supply chain for our
products and services may become involved in governmental
investigations, internal investigations, political or other
enforcement matters. In such circumstances, such investigations may
adversely impact the ability of consumers of our products, entities
providing financial support to such consumers or entities in the
supply chain to timely perform their business plans or to timely
perform under agreements with us. For example, the on-going,
publicly disclosed investigations in Brazil have adversely impacted
our shipyard customers, their customers, entities providing
financing for our shipyard customers and/or entities in the supply
chain. The investigations in Brazil have led to, and are expected
to continue to lead to, delays in deliveries to our shipyard
customers in Brazil, along with temporary suspension of performance
under our supply contracts, and could result in attempted
cancellation or other breaches of our contracts by our shipyard
customers.
In other jurisdictions, our shipyard customers’ customers in
some instances have, and may in the future, sought suspension,
delay or cancellation of the contracts or payment due between our
shipyard customers and their customers. To the extent our
shipyard customers and their customers become engaged in disputes
or litigation related to any such suspensions, delays or
cancellations, we may also become involved, either directly or
indirectly, in such disputes or litigation, as we enforce the terms
of our contracts with our shipyard customers. Further,
customers in other markets may seek delay or suspension of
deliveries, extending delivery into future periods, or may attempt
cancellations. While we manage deliveries and collection of payment
to achieve milestone payments that mitigate our financial risk,
such delays, suspensions, attempted cancellations, breaches of
contract or other similar circumstances, could adversely affect our
operating results, collections of accounts receivable and financial
condition and could reduce our backlog. |
