UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended			September 30, 2021

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)

Delaware						95-2628227
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
11911 FM 529
Houston,			Texas			77041
(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 class			Trading Symbol(s)			Name of each exchange on which registered
Common stock, par value $0.25 per share			OII			New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

☐ Yes   þ No

Number of shares of Common Stock outstanding as of October 22, 2021: 99,798,705 

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Oceaneering International, Inc.

Form 10-Q

Table of Contents

 

Part I						Financial Information
Item 1.						Financial Statements
									Consolidated Balance Sheets
									Consolidated Statements of Operations
									Consolidated Statements of Comprehensive Income (Loss)
									Consolidated Statements of Cash Flows
									Consolidated Statements of Equity
									Notes to Consolidated Financial Statements
Item 2.						Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.						Quantitative and Qualitative Disclosures About Market Risk
Item 4.						Controls and Procedures
Part II						Other Information
Item 1.						Legal Proceedings
Item 6.						Exhibits
Signatures

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Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1.Financial Statements

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

						Sep 30, 2021						Dec 31, 2020
(in thousands, except share data)
						(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents						$	447,725					$	452,016
Accounts receivable, net						293,126						296,214
Contract assets, net						254,672						221,997
Inventory, net						128,869						141,241
Other current assets						60,743						58,795
Total Current Assets						1,185,135						1,170,263
Property and equipment, at cost						2,446,348						2,456,602
Less accumulated depreciation						1,935,620						1,865,495
Net property and equipment						510,728						591,107
Other Assets:
Goodwill						34,936						35,016
Other noncurrent assets						105,402						108,250
Right-of-use operating lease assets						145,771						141,206
Total other assets						286,109						284,472
Total Assets						$	1,981,972					$	2,045,842
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable						$	97,836					$	94,207
Accrued liabilities						302,656						292,863
Contract liabilities						50,754						50,046
Total current liabilities						451,246						437,116
Long-term debt						739,980						805,251
Long-term operating lease liabilities						157,510						156,074
Other long-term liabilities						84,139						89,244
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						170,787						192,492
Treasury stock; 11,035,383 and 11,525,725 shares, at cost						(631,942)						(660,021)
Retained earnings						1,340,726						1,351,220
Accumulated other comprehensive loss						(364,246)						(359,306)
Oceaneering shareholders' equity						543,034						552,094
Noncontrolling interest						6,063						6,063
Total equity						549,097						558,157
Total Liabilities and Equity						$	1,981,972					$	2,045,842

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

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OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

									Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except per share data)									2021						2020						2021						2020
Revenue									$	466,814					$	439,743					$	1,402,566					$	1,403,627
Cost of services and products									406,966						410,092						1,217,664						1,284,687
			Gross margin						59,848						29,651						184,902						118,940
Selling, general and administrative expense									44,079						49,396						132,531						152,856
Long-lived assets impairments									—						—						—						68,763
Goodwill impairment									—						40,875						—						343,880
			Income (loss) from operations						15,769						(60,620)						52,371						(446,559)
Interest income									662						414						1,864						2,202
Interest expense, net of amounts capitalized									(9,616)						(9,250)						(29,752)						(33,323)
Equity in income (losses) of unconsolidated affiliates									189						131						1,101						2,002
Other income (expense), net									(814)						(2,836)						(4,222)						(13,624)
			Income (loss) before income taxes						6,190						(72,161)						21,362						(489,302)
Provision (benefit) for income taxes									13,560						7,204						31,856						(17,551)
			Net Income (Loss)						$	(7,370)					$	(79,365)					$	(10,494)					$	(471,751)
Weighted-average shares outstanding
Basic									99,797						99,297						99,675						99,209
Diluted									99,797						99,297						99,675						99,209
Earnings (loss) per share
Basic									$	(0.07)					$	(0.80)					$	(0.11)					$	(4.76)
Diluted									$	(0.07)					$	(0.80)					$	(0.11)					$	(4.76)

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

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OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

									Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)									2021						2020						2021						2020
Net income (loss)									$	(7,370)					$	(79,365)					$	(10,494)					$	(471,751)
Other Comprehensive Income (Loss):
			Foreign currency translation adjustments						(8,988)						13,204						(5,376)						(46,492)
			Change in unrealized gains for available-for-sale debt securities (1)						(249)						—						436						—
Total other comprehensive income (loss)									(9,237)						13,204						(4,940)						(46,492)
			Comprehensive income (loss)						$	(16,607)					$	(66,161)					$	(15,434)					$	(518,243)
(1)			There is no net income tax expense or benefit associated with the three- and nine-month periods ended September 30, 2021 due to a valuation allowance offset.

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

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OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

						Nine Months Ended September 30,
(in thousands)						2021						2020
Cash Flows from Operating Activities:
Net income (loss)						$	(10,494)					$	(471,751)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, including goodwill impairment						105,937						482,445
Loss on impairment of long-lived assets						—						68,763
Deferred income tax provision (benefit)						(1,801)						(8,211)
Inventory write-downs						—						7,038
Net loss (gain) on sales of property and equipment and other						2,318						1,597
Noncash compensation						8,101						6,252
Noncash impact of lease accounting						(4,636)						(1,838)
Excluding the effects of acquisitions, increase (decrease) in cash from:
Accounts receivable and contract assets						(29,587)						87,999
Inventory						12,371						19,179
Proceeds from interest rate swaps						—						12,840
Other operating assets						(7,624)						(4,639)
Currency translation effect on working capital, excluding cash						(142)						3,256
Current liabilities						14,130						(158,496)
Other operating liabilities						(3,254)						(12,071)
Total adjustments to net income (loss)						95,813						504,114
Net Cash Provided by (Used in) Operating Activities						85,319						32,363
Cash Flows from Investing Activities:
Purchases of property and equipment						(35,816)						(45,840)
Proceeds from redemption of investments in Angolan bonds						4,486						—
Distributions of capital from unconsolidated affiliates						3,108						5,374
Proceeds from sale of property and equipment						4,129						1,752
Other investing activities						1,157						—
Net Cash Provided by (Used in) Investing Activities						(22,936)						(38,714)
Cash Flows from Financing Activities:
Repurchase of 2024 Senior Notes						(63,010)						—
Other financing activities						(1,727)						(1,725)
Net Cash Provided by (Used in) Financing Activities						(64,737)						(1,725)
Effect of exchange rates on cash						(1,937)						(6,802)
Net Increase (Decrease) in Cash and Cash Equivalents						(4,291)						(14,878)
Cash and Cash Equivalents—Beginning of Period						452,016						373,655
Cash and Cash Equivalents—End of Period						$	447,725					$	358,777

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

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OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

						Common Stock						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Income (Loss)												Oceaneering Shareholders' Equity						Non-controlling Interest						Total 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
Net income (loss)						—						—						—						6,241						—												6,241						—						6,241
Other comprehensive income (loss)						—						—						—						—						6,099												6,099						—						6,099
Restricted stock unit activity						—						(409)						2,456						—						—												2,047						—						2,047
Balance, June 30, 2021						27,709						168,002						(632,129)						1,348,096						(355,009)												556,669						6,063						562,732
Net income (loss)						—						—						—						(7,370)						—												(7,370)						—						(7,370)
Other comprehensive income (loss)						—						—						—						—						(9,237)												(9,237)						—						(9,237)
Restricted stock unit activity						—						2,785						187						—						—												2,972						—						2,972
Balance, September 30, 2021						$	27,709					$	170,787					$	(631,942)					$	1,340,726					$	(364,246)											$	543,034					$	6,063					$	549,097
						Common Stock						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Income (Loss)												Oceaneering Shareholders' Equity						Non-controlling Interest						Total Equity
(in thousands)
Balance, December 31, 2019						$	27,709					$	207,130					$	(681,640)					$	1,850,244					$	(334,097)											$	1,069,346					$	6,063					$	1,075,409
Cumulative effect of ASC 326 adoption						—						—						—						(2,273)						—												(2,273)						—						(2,273)
Net income (loss)						—						—						—						(367,598)						—												(367,598)						—						(367,598)
Other comprehensive income (loss)						—						—						—						—						(70,325)												(70,325)						—						(70,325)
Restricted stock unit activity						—						(11,816)						13,262						—						—												1,446						—						1,446
Restricted stock activity						—						(5,992)						5,992						—						—												—						—						—
Balance, March 31, 2020						27,709						189,322						(662,386)						1,480,373						(404,422)												630,596						6,063						636,659
Net income (loss)						—						—						—						(24,788)						—												(24,788)						—						(24,788)
Other comprehensive income (loss)						—						—						—						—						10,629												10,629						—						10,629
Restricted stock unit activity						—						1,790						1,119						—						—												2,909						—						2,909
Balance, June 30, 2020						27,709						191,112						(661,267)						1,455,585						(393,793)												619,346						6,063						625,409
Net income (loss)						—						—						—						(79,365)						—												(79,365)						—						(79,365)
Other comprehensive income (loss)						—						—						—						—						13,204												13,204						—						13,204
Restricted stock unit activity						—						(862)						1,033						—						—												171						—						171
Balance, September 30, 2020						$	27,709					$	190,250					$	(660,234)					$	1,376,220					$	(380,589)											$	553,356					$	6,063					$	559,419

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF MAJOR ACCOUNTING POLICIES

Basis of Presentation. Oceaneering International, Inc. (“Oceaneering,” “we” or “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 United States Securities and Exchange Commission (the “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”). These financial statements reflect all adjustments that we believe are necessary to present fairly our financial position as of September 30, 2021 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, 2020. 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 noncurrent assets. We eliminate intercompany transactions and accounts 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 as 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.

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.

Allowances for Credit Loss—Financial Assets Measured at Amortized Costs. We identify allowances for credit loss based on future expected losses when accounts receivable, 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 three 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 customer data. Our other receivable amounts include contract assets and held-to-maturity loans receivable, which historically we consider to have a low risk of loss.

We are monitoring the impacts from the coronavirus (“COVID-19”) pandemic 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, in determining credit loss expense for the three- and nine-month periods ended September 30, 2021 and 2020.

As of September 30, 2021, our allowance for credit losses was $1.5 million for accounts receivable and $0.8 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- and nine-month periods ended September 30, 2021, we wrote off accounts receivable of less than $0.1 million and $3.1 million, respectively, that previously had been reserved.

We have elected to apply the practical expedient available under “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as amended, (“ASC 326”) to exclude the accrued

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interest receivable balance that is included in our held-to-maturity loans receivable. The amount excluded as of September 30, 2021 and December 31, 2020 was $1.3 million and $1.5 million, respectively.

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 September 30, 2021. We generally do not require collateral from our customers. As of September 30, 2021, our accounts receivable included $11 million from one of our customers in our Manufactured Products segment that is a subsidiary of a China-based company that has been and remains subject to well-published financial challenges. See Note 8—”Commitments and Contingencies” for discussion regarding our outstanding accounts receivable from this customer.

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- and nine-month periods ended September 30, 2021, as compared to $7.0 million of write-downs and write-offs in the three- and nine-month periods ended September 30, 2020.

Property and Equipment, 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 estimated useful lives. We charge the costs of repair and maintenance of property and equipment to operations as incurred, and 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.

We capitalize interest on assets where the construction period is anticipated to be more than three months. We did not capitalize interest in the three- and nine-month periods ended September 30, 2021 and 2020. 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.

Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our property and equipment, long-lived intangible assets and right-of-use operating lease assets to determine whether any events or changes in circumstances indicate that the carrying amounts of the assets 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. For information regarding write-downs and write-offs of property and equipment, long-lived intangible assets and right-of-use operating lease assets in the three- and nine-month periods ended September 30, 2020, see Note 4—“Impairments” and Note 10—“Business Segment Information.” We did not identify indicators of impairment for property and equipment, long-lived intangible assets and right-of-use operating lease assets for the three- and nine-month periods ended September 30, 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 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.

Goodwill. Our goodwill is evaluated for impairment annually and whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In our annual evaluation of goodwill, we perform a qualitative or quantitative impairment test. Under the qualitative approach, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying 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

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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. For information regarding impairments of goodwill during the three- and nine-month periods ended September 30, 2020, see Note 4—“Impairments” and Note 10—“Business Segment Information.” We did not identify indicators of impairment for goodwill for the three- and nine-month periods ended September 30, 2021.

Foreign Currency Translation. The functional currency for most 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 as 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 $(0.3) million and $(4.0) million of foreign currency transaction gains (losses) in the three- and nine-month periods ended September 30, 2021, respectively. We recorded $(2.5) million and $(13) million of foreign currency transaction gains (losses) in the three- and nine-month periods ended September 30, 2020, 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.

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 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 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. During the three- and nine-month periods ended September 30, 2021, we recognized a projected loss of $2.1 million for a contract in our Subsea Robotics segment. We did not have any material adjustments during the three- and nine-month periods ended September 30, 2020. 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

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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 “Revenue from Contracts with Customers” (“ASC 606”), when the service component is predominant. In general, when we have a service component, it is typically the predominant element and leads to accounting under ASC 606.

As a lessor, we lease certain types of equipment, often providing services at the same 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 our business and to support 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 exercise of those options is reasonably certain, we include them in the lease assessment. Our leases do not contain material restrictions or covenants that impact our accounting for them, nor do we provide residual value guarantees.

As a lessee, we utilize the practical expedients to not recognize leases with an initial lease term of 12 months or 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 information 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 future lease payments. Our right-of-use operating lease assets also include any lease prepayments made and 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 we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

2.    ACCOUNTING STANDARDS UPDATE

Recently Adopted Accounting Standards. On January 1, 2021, we adopted Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification 740 (“ASC 740”), “Income Taxes,” and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Our adoption of ASU 2019-12 on January 1, 2021, did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards. In March 2020, the Financial Accounting Standards Board issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects 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 was effective upon issuance and can be applied

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prospectively through December 31, 2022. We do not expect this ASU to have a material impact on our consolidated financial statements.

3.    REVENUE

Revenue by Category

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

												Three Months Ended												Nine Months Ended
(in thousands)												Sep 30, 2021						Sep 30, 2020												Sep 30, 2021						Sep 30, 2020
Business Segment:
			Energy Services and Products
						Subsea Robotics						$	143,710					$	119,617											$	404,200					$	378,621
						Manufactured Products						75,359						110,416												241,311						377,520
						Offshore Projects Group						95,580						73,212												292,765						221,306
						Integrity Management & Digital Solutions						62,806						53,933												180,924						172,631
			Total Energy Services and Products									377,455						357,178												1,119,200						1,150,078
			Aerospace and Defense Technologies									89,359						82,565												283,366						253,549
						Total						$	466,814					$	439,743											$	1,402,566					$	1,403,627
Geographic Operating Areas:
			Foreign:
						Africa						$	78,890					$	43,077											$	213,087					$	158,143
						Norway						51,269						57,138												160,923						154,745
						United Kingdom						46,254						68,568												135,401						191,781
						Asia and Australia						43,919						30,715												123,616						113,517
						Brazil						30,238						19,296												78,411						64,902
						Other						22,912						22,071												69,183						69,355
			Total Foreign									273,482						240,865												780,621						752,443
			United States									193,332						198,878												621,945						651,184
Total												$	466,814					$	439,743											$	1,402,566					$	1,403,627
Timing of Transfer of Goods or Services:
			Revenue recognized over time									$	437,086					$	411,809											$	1,316,733					$	1,306,889
			Revenue recognized at a point in time									29,728						27,934												85,833						96,738
Total												$	466,814					$	439,743											$	1,402,566					$	1,403,627

Contract Balances

Our contracts with milestone payments have, in the aggregate, a significant impact on the contract asset and the contract liability balances. Milestones are contractually agreed with customers and relate to significant events across the contract lives. Some milestones are achieved before revenue is recognized, resulting in a contract liability, while other milestones are achieved after revenue is recognized, resulting in a contract asset.

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The following table provides information about contract assets and contract liabilities from contracts with customers.

						Nine Months Ended
(in thousands)						Sep 30, 2021						Sep 30, 2020
Total contract assets, beginning of period						$	221,997					$	221,288
Revenue accrued						1,355,567						1,271,033
Amounts billed						(1,322,892)						(1,271,561)
Total contract assets, end of period						$	254,672					$	220,760
Total contract liabilities, beginning of period						$	50,046					$	117,342
Deferrals of milestone payments						47,246						46,223
Recognition of revenue for goods and services						(46,538)						(117,999)
Total contract liabilities, end of period						$	50,754					$	45,566

Performance Obligations

As of September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) was $221 million. In arriving at this value, we have used two practical 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 $119 million over the next 12 months, and we expect to recognize substantially all of the remaining balance of $102 million within the next 24 months. As of September 30, 2021, our contract assets included $38 million from one of our customers in our Manufactured Products segment that is a subsidiary of a China-based company that has been and remains subject to well-published financial challenges. See Note 8—”Commitments and Contingencies” for discussion regarding our contract assets due from this customer.

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 September 30, 2021. 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 nine months ended September 30, 2021 that was associated with performance obligations completed or partially completed in prior periods was not significant.

As of September 30, 2021, 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.

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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 costs to fulfill a contract was $8.1 million and $8.3 million as of September 30, 2021 and December 31, 2020, respectively. For the three- and nine-month periods ended September 30, 2021, we recorded amortization expense of $1.2 million and $3.4 million, respectively. For the three- and nine-month periods ended September 30, 2020, we recorded amortization expense of $1.5 million and $5.3 million, respectively. No impairment costs were recognized.

4.    IMPAIRMENTS

Goodwill

We did not identify any triggering events and, accordingly, no impairments of goodwill were recorded in the three- and nine-month periods ended September 30, 2021.

After reallocation of our goodwill to our new segments in the third quarter of 2020, we determined that impairment indicators were present and performed quantitative analyses for our Subsea Robotics and Manufactured Products reporting units. Based on these quantitative analyses, the fair value was determined to be less than the carrying value for our Manufactured Products unit, but not for our Subsea Robotics reporting unit. As a result, for our Manufactured Products unit, we recorded a pre-tax goodwill impairment loss of $41 million in the three-month period ended September 30, 2020.

During the first quarter of 2020, due to the protracted energy downturn compounded by demand destruction resulting from the adverse impacts of the COVID-19 pandemic and insufficient control of crude oil supply levels during the quarter, as well as our customers' continued focus on cost discipline, we determined that impairment indicators were present and we were required to perform a quantitative analysis for our Subsea Products–Service, Technology and Rentals (“ST&R”), Subsea Products–Manufactured Products, Subsea Projects, Asset Integrity and Advanced Technologies–Commercial reporting units. Based on these quantitative analyses, the fair value was determined to be less than the carrying value for each of those reporting units, with the exception of Subsea Products–Manufactured Products. As a result, for our Subsea Products–ST&R, Subsea Projects, Asset Integrity and Advanced Technologies–Commercial reporting units, we recorded pre-tax goodwill impairment losses of $51 million, $130 million, $111 million and $11 million, respectively. For our Remotely Operated Vehicles (“ROV”) and Advanced Technologies–Government reporting units, qualitative assessments were performed; and we concluded that it was more likely than not the fair value of each of those reporting units was more than the carrying value of the reporting unit and, therefore, no impairments were recorded for those reporting units.

Our estimates of fair values for our reporting units determined in the first and third quarters of 2020 required us to use significant unobservable inputs, classified as Level 3 fair value measurements, including assumptions related to future performance, risk-adjusted discount rates, future commodity prices and demand for our services and estimates of expected realizable values. For our cash flow projections in each of those periods, we utilized a weighted-average cost of capital ranging from 11% to 15% and a terminal value based on the Gordon Growth Model, assuming an expected long-term growth rate of 2%.

Our third quarter 2020 change in our operating segments resulted in one reporting unit for each of our new segments. The following table reflects goodwill impairments, as recorded in the three-month period ended March 31, 2020, and allocated, based on historical cost, to our new reporting segments:

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									Three Months Ended March 31, 2020
(in thousands)									As originally recorded						As recast to reflect segment changes
Segment/Reporting Unit									Goodwill Impairment						Subsea Robotics						Manufactured Products						OPG						IMDS						Total
Subsea Products/ST&R									$	51,302					$	17,457					$	—					$	33,845					$	—					$	51,302
Subsea Projects/Subsea Projects									129,562						84,661						—						32,440						12,461						129,562
Asset Integrity/Asset Integrity									110,753						—						—						—						110,753						110,753
Advanced Technologies/Commercial									11,388						—						11,388						—						—						11,388
			Total goodwill impairment						$	303,005					$	102,118					$	11,388					$	66,285					$	123,214					$	303,005

Aside from the goodwill impairments discussed above, the changes in our reporting units' goodwill balances during the periods presented are from currency exchange rate changes.

For further information regarding goodwill by business segment, see Note 10–"Business Segment Information."

Property and Equipment and Intangible Assets

We did not identify any triggering events and, accordingly, no impairments of long-lived assets were recorded in the three- and nine-month periods ended September 30, 2021.

After reallocation of our long-lived assets to our new segments in the third quarter of 2020, we determined that impairment indicators were present and performed a quantitative assessment for our Manufactured Products asset groups. Based on that assessment, we concluded that it was more likely than not that the fair value of the asset groups within Manufactured Products was more than the carrying value of each asset group and, therefore, no impairment was required. We did not identify any triggering events for our asset groups other than those included in Manufactured Products during the third quarter of 2020.

During the first quarter of 2020, due to the protracted energy downturn compounded by demand destruction resulting from the adverse impacts of the COVID-19 pandemic and insufficient control of crude oil supply levels during the quarter, as well as our customers' continued focus on cost discipline, we determined that impairment indicators were present within certain of our asset groups. To measure fair value for these asset groups, we used the following approaches:

•Subsea Distribution Solutions U.K. - We utilized the cost approach and considered economic obsolescence under the income approach to determine fair value of the property and equipment.

•Subsea Distribution Solutions Brazil and Angola - We utilized a combination of market and cost approaches to measure fair values.

•Shallow Water vessels - We utilized the cost approach and considered historical, current and anticipated dayrates and utilization to measure market value.

•Renewables and Special Projects - We utilized a combination of market and cost approaches to measure fair values.

•Oceaneering Entertainment Systems and Oceaneering Automated Guided Vehicles (“AGV”) Systems - We utilized a combination of market and cost approaches to measure fair value.

Our estimates of fair value for these asset groups required us to use significant unobservable inputs, classified as Level 3 fair value measurements, including assumptions related to future performance, risk-adjusted discount rates, future commodity prices and demand for our services and estimates of expected realizable value. In the first quarter of 2020, our cash flow projections utilized a weighted-average cost of capital ranging from 12% to 15% and a terminal value based on the Gordon Growth Model, assuming an expected long-term growth rate of 2%.

Our third quarter 2020 change in operating segments did not result in any changes in our asset groups. Our reporting units with long-lived asset impairments in the three-month period ended March 31, 2020, were realigned in our new reporting segments as follows:

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									Three Months Ended March 31, 2020
(in thousands)									As originally recorded						As recast to reflect segment changes
Segment/Reporting Unit									Long-lived Asset Impairments						Manufactured Products						OPG						IMDS						Total
Subsea Products
			Subsea Distribution Solutions U.K.						$	6,543					$	6,543					$	—					$	—					$	6,543
			Subsea Distribution Solutions Brazil						9,834						9,834						—						—						9,834
			Subsea Distribution Solutions Angola						38,482						38,482						—						—						38,482
Subsea Projects
			Shallow Water vessels						3,894						—						3,894						—						3,894
			Renewables and Special Projects Group						3,628						—						3,628						—						3,628
			Global Data Solutions						167						—						—						167						167
Advanced Technologies
			Oceaneering Entertainment Systems						5,065						5,065						—						—						5,065
			Oceaneering AGV Systems						1,150						1,150						—						—						1,150
			Total long-lived asset impairments						$	68,763					$	61,074					$	7,522					$	167					$	68,763

5.    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 from the sources of our results. The effective tax rate for the three- and nine-month periods ended September 30, 2021 and 2020 was different than the federal statutory rate of 21%, primarily due to the geographical mix of operating revenue and results, 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 or deferred taxes related to balance sheet translation gains or losses.

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 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 the enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expected to receive combined refunds of approximately $33 million, of which we have received $10 million as of September 30, 2021. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of September 30, 2021. In 2020, we also realized a non-cash tax benefit of $8.4 million due to the carryback provision of the CARES Act recognized as a reduction in long-term liabilities.

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 $14 million and $15 million in other long-term liabilities on our balance sheet for worldwide unrecognized tax liabilities as of September 30, 2021 and December 31, 2020, respectively. We account for any applicable interest and penalties related to uncertain tax positions as a component of our provision for income taxes in our consolidated financial statements. Changes in our management's judgment related 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 table lists the earliest tax years open to examination by tax authorities where we have significant operations:

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Jurisdiction						Periods
United States						2014
United Kingdom						2019
Norway						2016
Angola						2013
Brazil						2016
Australia						2016

We have ongoing tax audits in various jurisdictions. The outcome of these audits may have an impact on uncertain tax positions for income tax returns subsequently filed in those jurisdictions.

6.    SELECTED BALANCE SHEET INFORMATION

The following is information regarding selected balance sheet accounts:

 

(in thousands)									Sep 30, 2021						Dec 31, 2020
Inventory:
			Remotely operated vehicle parts and components						$	62,978					$	62,788
			Other inventory, primarily raw materials						65,891						78,453
			Total						$	128,869					$	141,241
Other current assets:
			Prepaid expenses						$	54,078					$	48,616
			Angolan bonds						6,665						10,179
			Total						$	60,743					$	58,795
Accrued liabilities:
			Payroll and related costs						$	130,555					$	135,042
			Accrued job costs						50,323						47,721
			Income taxes payable						46,706						35,929
			Current operating lease liability						20,008						18,798
			Other						55,064						55,373
			Total						$	302,656					$	292,863

7.    DEBT

Long-term debt consisted of the following: 

			(in thousands)						Sep 30, 2021						Dec 31, 2020
4.650% Senior Notes due 2024									$	436,990					$	500,000
6.000% Senior Notes due 2028									300,000						300,000
Interest rate swap settlements									7,772						10,870
Unamortized debt issuance costs									(4,782)						(5,619)
Long-term debt									$	739,980					$	805,251

In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the “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.

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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 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 September 30, 2021, we repurchased approximately $33 million in aggregate principal amount of the 2024 Senior Notes in open market transactions. The aggregate purchase price in the three months ended September 30, 2021 included accrued and unpaid interest to the repurchase date of $0.4 million, and we recorded loss on extinguishment of debt of $0.3 million (including premiums and fees associated with the repurchases). In the nine months ended September 30, 2021, we repurchased approximately $63 million in aggregate principal amount of the 2024 Senior Notes in open market transactions. The aggregate purchase price in the nine months ended September 30, 2021 included accrued and unpaid interest to the repurchase date of $0.7 million, and we recorded loss on extinguishment of debt of $0.4 million (including premiums and fees associated with the repurchases).

In October 2014, we entered into a credit agreement (as amended, the “Credit Agreement”) with a group of banks. The Credit Agreement initially provided for a $500 million five-year revolving credit facility (the “Revolving Credit Facility”). Subject to certain conditions, the aggregate commitments under the Revolving Credit Facility may be increased by up to $300 million at any time upon agreement between us and existing or additional lenders. Borrowings under the Revolving Credit Facility may be used for general corporate purposes. The Credit Agreement also provided for a $300 million term loan, which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and cash on hand.

In February 2018, we entered into Agreement and Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). Amendment No. 4 amended the Credit Agreement to, among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with the extending lenders, which represent 90% of the existing commitments of the lenders, such that the total commitments for the Revolving Credit Facility will be $500 million until October 25, 2021, and thereafter $450 million until January 25, 2023. As of September 30, 2021, we had no borrowings outstanding under the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility 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%; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750%. 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 and which stipulates that, among other items, we exclude any impacts associated with current and prior period impairments) of 55%. The Credit Agreement includes customary events of default and associated remedies. As of September 30, 2021, we were in compliance with all the covenants set forth in the 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, in the three- and nine-month periods ended September 30, 2021, we amortized $1.2 million and $3.1 million to interest expense, including $0.6 million and $1.2 million, respectively, for the pro-rata write-off of interest rate swap settlement gains associated with the 2024 Senior Notes repurchases discussed above. We amortized $0.6

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million and $1.3 million to interest expense for the three- and nine-month periods ended September 30, 2020, respectively.

We incurred $6.9 million and $4.2 million of issuance costs related to the 2024 Senior Notes and the 2028 Senior Notes, respectively, and $3.0 million of new loan costs, including costs of the amendments prior to Amendment No. 4, related to the 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 Credit Agreement. We are amortizing these costs to interest expense through the respective maturity dates for the Senior Notes and to January 2023 for the Credit Agreement using the straight-line method, which approximates the effective interest rate method.

8.    COMMITMENTS AND CONTINGENCIES

Litigation. In the ordinary course of business, we are, from time to time, involved in litigation or subject to disputes, governmental investigations or claims related to our business activities, including, among other things:

•performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and

•workers’ compensation claims, Jones Act claims, occupational hazard claims, premises liability claims and other claims.

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 have 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 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 estimated the aggregate fair market value of the Senior Notes to be $760 million as of September 30, 2021, 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 (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 terms for the assets or liabilities).

Foreign currency gains (losses) in the first nine months of 2021 were primarily related to declining exchange rates for multiple currencies, none that were significant, relative to the U.S. dollar. Foreign currency gain (losses in the first nine months of 2020 were primarily related to declining exchange rate for the Angolan kwanza and the Brazilian real relative to the U.S. dollar. Foreign currency gains (losses) related to the Angolan kwanza of $0.9 million and less than $0.1 million in the three-month periods ended September 30, 2021 and 2020, respectively, and $(1.0) million and $(2.2) million in the nine-month periods ended September 30, 2021 and 2020, respectively, were primarily due to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Foreign currency gains (losses) related to the Brazilian real of less than $0.1 million and $(0.7) million in the three-month periods ended September 30, 2021 and 2020, respectively, and less than $(0.1) million and $(8.4) million in the nine-month periods ended September 30, 2021 and 2020, respectively, were primarily due to the remeasurement of our U.S. dollar denominated liability balances to the Brazilian real. We recorded foreign currency transaction losses related to the Angolan kwanza and Brazilian real as a component of other income (expense), net in our Consolidated Statements of Operations.

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Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola. As of September 30, 2021 and December 31, 2020, we had the equivalent of approximately $3.5 million and $4.7 million, respectively, of kwanza cash balances in Angola reflected on our Consolidated Balance Sheets.

To mitigate our currency exposure risk in Angola, we have used kwanza to purchase equivalent Angolan central bank (Banco Nacional de Angola) bonds. 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. As of September 30, 2021 and December 31, 2020, we had $6.7 million and $10 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 bonds as available-for-sale securities, and they are recorded in other current assets on our Consolidated Balance Sheets. During the nine-month period ended September 30, 2021, we sold a portion of these bonds for $4.5 million and recognized a gain of $0.5 million as a component of interest income in our Consolidated Statement of Operations.

We estimated the fair market value of the Angolan bonds to be $6.7 million and $10 million as of September 30, 2021 and December 31, 2020, 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 September 30, 2021, we have $0.4 million in unrealized gains, net of tax, related to these bonds as a component of accumulated other comprehensive loss in our Consolidated Balance Sheets.

Due to the financial deterioration of one of our customers in our Manufactured Products segment that is a subsidiary of a China-based company that has been and remains subject to well-published financial challenges, certain projects that were in process for that customer have been delayed. As of September 30, 2021, we had outstanding accounts receivable of $11 million and contract assets of $38 million for those projects. As of December 31, 2020, we had outstanding accounts receivable of $11 million and contract assets of $40 million for those projects. As of September 30, 2021, the amount of our remaining performance obligations related to this customer was $38 million. We continue to closely monitor the contract along with the related accounts receivable and contract assets balances, while working with our customer to complete these projects. The recoverability of these amounts could be materially impacted by possible future events such as our customer’s project modifications, cancellations or bankruptcy.

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 is substantially complete. As of September 30, 2021, we had outstanding contract assets of approximately $73 million, of which we have subsequently billed $37 million. We are in discussions with the customer concerning the timing of remaining payments. We continue to believe that the project will resume and that we will realize these contract assets at their book values, although we can provide no assurance as to the timing.

9.    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-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.

Share-Based Compensation. We have no outstanding stock options and, therefore, no share-based compensation to be recognized pursuant to stock option grants.

During 2019, 2020 and through September 30, 2021, we granted restricted units of our common stock to certain of our key executives and employees. During 2019, 2020 and through September 30, 2021, our Board of Directors granted restricted common stock to our nonemployee directors. The restricted stock 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 can vest pro rata over three years, provided the individual meets certain age and years-of-service requirements. The grants of restricted stock to our nonemployee directors were scheduled to vest in full on the first anniversary of the award date conditional upon continued service as a director, except for the 2021 grant to one director who retired from our board of directors as of the date of our

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annual meeting of shareholders in May 2021, which vested on that date. 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 2020 through September 30, 2021, 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, 2021 and December 31, 2020, respective totals of 2,476,614 and 1,955,346 shares of restricted stock and 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 $14 million as of September 30, 2021. This expense is being recognized on a graded-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 share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. Under the program, which has no expiration date, we had repurchased 2.0 million shares for $100 million through December 31, 2015. We have not repurchased any shares under this plan since 2015, and we are not obligated to make any future repurchases. We account for the shares we hold in treasury under the cost method, at average cost.

10.    BUSINESS SEGMENT INFORMATION

We are a global provider of engineered services and products, primarily to the offshore energy industry. Through the use of our applied technology expertise, we also serve the defense, aerospace and commercial theme park industries.

Our Energy Services and Products business leverages our asset base and capabilities for providing services and products predominantly 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:

◦ROVs for drilling support and 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 Manufactured Products segment provides the following:

◦distribution and connection systems including production control umbilicals and field development hardware and pipeline connection and repair systems to the energy industry; and AGV technology and entertainment systems to a variety of industries.

•Offshore Projects Group—Our OPG segment provides the following:

◦subsea installation and intervention, 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 chartered vessels;

◦installation and workover control systems and ROV workover control systems;

◦project management and engineering; and

◦seabed preparation, route clearance and trenching services for submarine cables for the renewable energy markets.

•Integrity Management & Digital Solutions—Our IMDS segment provides the following:

◦asset integrity management services;

◦software and analytical solutions for the bulk cargo maritime industry; and

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◦software, digital and connectivity solutions for the energy industry.

Our Aerospace and Defense Technologies segment provides services and products include engineering and related manufacturing in 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, 2020.

The table that follows presents revenue, income (loss) from operations and depreciation and amortization expense by business segment:

 

						Three Months Ended															Nine Months Ended
(in thousands)						Sep 30, 2021						Sep 30, 2020												Sep 30, 2021						Sep 30, 2020
Revenue
Energy Services and Products
Subsea Robotics						$	143,710					$	119,617											$	404,200					$	378,621
Manufactured Products						75,359						110,416												241,311						377,520
Offshore Projects Group						95,580						73,212												292,765						221,306
Integrity Management & Digital Solutions						62,806						53,933												180,924						172,631
Total Energy Services and Products						377,455						357,178												1,119,200						1,150,078
Aerospace and Defense Technologies						89,359						82,565												283,366						253,549
Total						$	466,814					$	439,743											$	1,402,566					$	1,403,627
Income (Loss) from Operations
Energy Services and Products
Subsea Robotics						$	19,533					$	2,127											$	55,862					$	(80,294)
Manufactured Products						809						(38,198)												4,352						(100,471)
Offshore Projects Group						7,634						(12,282)												24,443						(95,740)
Integrity Management & Digital Solutions						5,362						793												12,557						(122,567)
Total Energy Services and Products						33,338						(47,560)												97,214						(399,072)
Aerospace and Defense Technologies						14,251						13,097												50,430						39,498
Unallocated Expenses						(31,820)						(26,157)												(95,273)						(86,985)
Total						$	15,769					$	(60,620)											$	52,371					$	(446,559)
Depreciation and Amortization, including Goodwill Impairment
Energy Services and Products
Subsea Robotics						$	21,483					$	25,144											$	66,871					$	189,411
Manufactured Products						3,202						44,028												9,677						63,579
Offshore Projects Group						6,781						15,147												20,768						98,309
Integrity Management & Digital Solutions						1,114						866												3,329						125,966
Total Energy Services and Products						32,580						85,185												100,645						477,265
Aerospace and Defense Technologies						1,427						654												4,107						1,999
Unallocated Expenses						234						1,712												1,185						3,181
Total						$	34,241					$	87,551											$	105,937					$	482,445

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.

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Income (Loss) from Operations

Three Months Ended September 30, 2021 and September 30, 2020 —During the three-month period ended 9/30/2021, there were no significant adjustments. During the three-month period ended September 30, 2020, we recorded adjustments attributable to each of our reporting segments as follows:

												For the Three Months Ended September 30, 2020
(in thousands)												Subsea Robotics						Manufactured Products						OPG						IMDS						ADTech						Unallocated Expenses						Total
Adjustments for the effects of:
			Long-lived assets write-offs									$	—					$	—					$	7,243					$	—					$	—					$	—					$	7,243
			Inventory write-downs									7,038						—						—						—						—						—						7,038
			Goodwill impairment									—						40,875						—						—						—						—						40,875
			Other									2,535						2,559						5,326						83						545						—						11,048
			Total adjustments for the three months ended September 30, 2020									$	9,573					$	43,434					$	12,569					$	83					$	545					$	—					$	66,204

Nine Months Ended September 30, 2021 and September 30, 2020—During the nine-month periods ended September 30, 2021 and 2020, we recorded adjustments attributable to each of our reporting segments as follows:

												For the Nine Months Ended September 30, 2021
(in thousands)												Subsea Robotics						Manufactured Products						OPG						IMDS						ADTech						Unallocated Expenses						Total
			Loss on sale of asset									$	—					$	—					$	—					$	—					$	—					$	1,415					$	1,415
			Other									395						537						149						217						10						—						1,308
			Total adjustments for the nine months ended September 30, 2021									$	395					$	537					$	149					$	217					$	10					$	1,415					$	2,723

												For the Nine Months Ended September 30, 2020
(in thousands)												Subsea Robotics						Manufactured Products						OPG						IMDS						ADTech						Unallocated Expenses						Total
Adjustments for the effects of:
			Long-lived assets impairments									$	—					$	61,074					$	7,522					$	167					$	—					$	—					$	68,763
			Long-lived assets write-offs									7,328						—						7,243						—						—						—						14,571
			Inventory write-downs									7,038						—						—						—						—						—						7,038
			Goodwill impairment									102,118						52,263						66,285						123,214						—						—						343,880
			Other									4,834						5,755						7,947						3,850						545						455						23,386
			Total adjustments for the nine months ended September 30, 2020									$	121,318					$	119,092					$	88,997					$	127,231					$	545					$	455					$	457,638

Depreciation and Amortization, including Goodwill Impairment

Depreciation expense on property and equipment, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $33 million and $36 million in the three-month periods ended September 30, 2021 and 2020, respectively, and $103 million and $117 million in the nine-month periods ended September 30, 2021 and 2020, respectively.

Amortization expense on long-lived intangible assets, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $0.8 million and $3.5 million in the three-month periods ended September 30, 2021 and 2020, respectively, and $2.9 million and $6.9 million in the nine-month periods ended September 30, 2021 and 2020, respectively.

Goodwill impairment expense, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $41 million and $344 million in the three- and nine-month periods ended September 30, 2020, respectively. For further information regarding goodwill impairment expense, see Note 4—“Impairments.”

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Long-lived asset write-offs, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, were $7.2 million and $15 million in the three- and nine-month periods ended September 30, 2020, respectively. For further information regarding our long-lived asset write-offs, see Note 4—“Impairments.”

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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:

•the impacts of the coronavirus (“COVID-19”) pandemic on the United States and the global economy, as well as on our business;

•our fourth-quarter 2021 operating results and the contributions from our segments to those results, as well as the amount of Unallocated Expenses for the fourth 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 2021;

•free cash flow, which we define as net cash provided by operating activities less cash paid for purchases of property and equipment, in 2021 and in future periods;

•future demand, order intake and business activity levels;

•the collectability of accounts receivable and realizability of contract assets at the amounts reflected on our most-recent balance sheet;

•the backlog of our Manufactured Products segment, to the extent backlog may be an indicator of future revenue or productivity;

•the adequacy of our liquidity, cash flows and capital resources;

•the condition of debt markets and our possible future debt repurchases;

•shares to be repurchased under our share repurchase plan;

•the implementation of new accounting standards and related policies, procedures and controls;

•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” and “Cautionary Statement Concerning Forward-Looking Statements” in Part I of our annual report on Form 10-K for the year ended December 31, 2020. 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 Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2020.

Overview of our Results and Guidance

Our diluted earnings (loss) per share for the three- and nine-month periods ended September 30, 2021 were $(0.07) and $(0.11), respectively, as compared to $(0.80) and $(4.76) for the corresponding periods of the prior year. These operating results met our expectations, and each of our operating segments in the three- and nine-month periods ended September 30, 2021 contributed operating income.

Our planning and preparation were instrumental in our team’s ability to navigate through the challenges presented during the third quarter, which included hurricanes, inflation, a tightening labor market, and a constrained global supply chain. As expected, our operating results declined in the third quarter of 2021, as compared to the second quarter of 2021. Offshore work in our energy-focused businesses remained seasonally active during the third quarter. However, our operations in the Gulf of Mexico were impacted by Hurricane Ida and high loop currents.

During the first nine months of 2021, our cash decreased $4.3 million, primarily from the repurchase of $63 million in aggregate principal amount of our 2024 Senior Notes (as defined below in Liquidity and Capital Resources) through open market repurchases and $36 million for maintenance and growth capital expenditures, partially offset by the

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$85 million of cash generated from operating activities. As of September 30, 2021, with our cash balance of $448 million and an outstanding balance of $437 million on our 4.650% Senior Notes, we are well positioned to deal with this pending debt maturity. While we will continue to be prudent with our capital spending, we are focused on developing and delivering technologies to grow our businesses in the keys areas of energy transition, digital asset management, aerospace and defense, and mobile robotics, while also continuing to deploy technologies that help our customers produce hydrocarbons in the cleanest and safest manner. We believe that the technologies we deliver today, and are focused on developing in the future, will provide us with ample opportunities to grow and transform our business over the coming years.

Looking forward, we believe our consolidated fourth-quarter 2021 results will be similar to our third-quarter 2021 results on slightly higher revenue. We expect significantly higher revenue and operating profitability in our Manufactured Products segment, relatively flat activity and operating profitability in our Subsea Robotics and Integrity Management & Digital Solutions (“IMDS”) segments, relatively flat revenue with lower operating profitability in our Aerospace and Defense Technologies (“ADTech”) segment, and substantially lower seasonal activity and operating profitability in our Offshore Projects Group (“OPG”) segment. Unallocated Expenses are expected to be in the mid-$30 million range, due primarily to increased information technology infrastructure costs.

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 filed an amended 2013 income tax return that was impacted by the net operating loss carryback. Prior to the enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expected to receive combined refunds of approximately $33 million, of which we have received $10 million as of September 30, 2021. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of September 30, 2021.

Our cash tax payments for the full year of 2021 are estimated to be in the range of $40 million to $45 million, primarily due to taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations. These cash tax payments do not include the impact of $4.7 million of the CARES Act tax refunds received during the third quarter of 2021 and the remaining $23 million of the CARES Act tax refunds expected to be received in 2021 or 2022.

We are narrowing our guidance for capital expenditure to be in the range of $45 million to $55 million for the full year of 2021. We remain committed to maintaining strong liquidity for the full year of 2021 and believe that our cash position, undrawn revolving credit facility, and debt maturity profile should provide us ample resources and time to address potential opportunities to improve our returns. For 2022, we expect our capital expenditures will be higher than 2021, as we intend to refocus our efforts on growth.

Results of Operations

We operate in five business segments. The 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 and mobility solutions industries (“Energy Services and Products”) and services and products provided to non-energy industries (“Aerospace and Defense Technologies”). Our Unallocated Expenses are those not associated with a specific business segment.

Consolidated revenue and profitability information are as follows:

									Three Months Ended																		Nine Months Ended
(dollars in thousands)									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
Revenue									$	466,814					$	439,743					$	498,199					$	1,402,566					$	1,403,627
Gross Margin									59,848						29,651						68,397						184,902						118,940
Gross Margin %									13		%				7		%				14		%				13		%				8		%
Operating Income (Loss)									15,769						(60,620)						22,819						52,371						(446,559)
Operating Income (Loss) %									3		%				(14)		%				5		%				4		%				(32)		%

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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 of $16 million, $23 million and $52 million in the three-month periods ended September 30, 2021 and June 30, 2021, and the nine-month period ended September 30, 2021, respectively. We had operating losses of $61 million and $447 million in the three- and nine-month periods ended September 30, 2020, respectively. We did not have significant certain changes included in our operating income and loss for the three months ended September 30, 2021. Included in our operating income and loss for the three months ended September 30, 2020 and June 30, 2021 were certain charges of $66 million and $1.4 million, respectively. Included in our operating income and loss for the nine months ended September 30, 2021 and 2020, were certain charges of $2.7 million and $458 million, respectively. These charges were primarily due to market conditions requiring impairment of certain of our assets along with other costs we recognized as we adapted our geographic footprint and staffing levels to the conditions of the markets we serve and are summarized as follows:

												For the three months ended September 30, 2020
(in thousands)												Subsea Robotics						Manufactured Products						Offshore Projects Group						Integrity Management & Digital Solutions						Aerospace and Defense Technologies						Unallocated Expenses						Total
Charges for the effects of:
			Long-lived assets write-offs									$	—					$	—					$	7,243					$	—					$	—					$	—					$	7,243
			Inventory write-downs									7,038						—						—						—						—						—						7,038
			Goodwill impairment									—						40,875						—						—						—						—						40,875
			Other									2,535						2,559						5,326						83						545						—						11,048
						Total charges						$	9,573					$	43,434					$	12,569					$	83					$	545					$	—					$	66,204

												For the three months ended June 30, 2021
(in thousands)												Subsea Robotics						Manufactured Products						Offshore Projects Group						Integrity Management & Digital Solutions						Aerospace and Defense Technologies						Unallocated Expenses						Total
Charges for the effects of:
			Loss on sale of asset									$	—					$	—					$	—					$	—					$	—					$	1,415					$	1,415
						Total charges						$	—					$	—					$	—					$	—					$	—					$	1,415					$	1,415

												For the nine months ended September 30, 2021
(in thousands)												Subsea Robotics						Manufactured Products						Offshore Projects Group						Integrity Management & Digital Solutions						Aerospace and Defense Technologies						Unallocated Expenses						Total
Charges for the effects of:
			Loss on sale of asset									$	—					$	—					$	—					$	—					$	—					$	1,415					$	1,415
			Other									395						537						149						217						10						—						1,308
						Total charges						$	395					$	537					$	149					$	217					$	10					$	1,415					$	2,723

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												For the nine months ended September 30, 2020
(in thousands)												Subsea Robotics						Manufactured Products						Offshore Projects Group						Integrity Management & Digital Solutions						Aerospace and Defense Technologies						Unallocated Expenses						Total
Charges for the effects of:
			Long-lived assets impairments									$	—					$	61,074					$	7,522					$	167					$	—					$	—					$	68,763
			Long-lived assets write-offs									7,328						—						7,243						—						—						—						14,571
			Inventory write-downs									7,038						—						—						—						—						—						7,038
			Goodwill impairment									102,118						52,263						66,285						123,214						—						—						343,880
			Other									4,834						5,755						7,947						3,850						545						455						23,386
						Total charges						$	121,318					$	119,092					$	88,997					$	127,231					$	545					$	455					$	457,638

Energy Services and Products

The primary focus of our Energy Services and Products business over the last several years has been toward leveraging our asset base and capabilities for providing services and products predominantly for offshore energy operations and subsea completions, inclusive of our customers’ operating expenses and the offshore renewable energy market.

The table that follows sets out the 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.

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									Three Months Ended																		Nine Months Ended
(dollars in thousands)									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
Subsea Robotics
			Revenue						$	143,710					$	119,617					$	141,371					$	404,200					$	378,621
			Gross Margin						28,918						13,378						31,767						84,763						54,175
			Operating Income (Loss)						19,533						2,127						21,710						55,862						(80,294)
			Operating Income (Loss) %						14		%				2		%				15		%				14		%				(21)		%
			ROV Days Available						23,002						23,000						22,750						68,221						68,500
			ROV Days Utilized						14,474						13,601						14,005						40,366						41,955
			ROV Utilization						63		%				59		%				62		%				59		%				61		%
Manufactured Products
			Revenue						75,359						110,416						79,127						241,311						377,520
			Gross Margin						8,544						11,242						8,391						26,939						42,870
			Operating Income (Loss)						809						(38,198)						790						4,352						(100,471)
			Operating Income (Loss) %						1		%				(35)		%				1		%				2		%				(27)		%
			Backlog at End of Period						334,000						318,000						315,000						334,000						318,000
Offshore Projects Group
			Revenue						95,580						73,212						107,951						292,765						221,306
			Gross Margin						13,815						(1,633)						14,566						43,492						3,632
			Operating Income (Loss)						7,634						(12,282)						7,996						24,443						(95,740)
			Operating Income (Loss) %						8		%				(17)		%				7		%				8		%				(43)		%
Integrity Management & Digital Solutions
			Revenue						62,806						53,933						64,070						180,924						172,631
			Gross Margin						11,330						7,129						10,462						30,001						22,376
			Operating Income (Loss)						5,362						793						4,721						12,557						(122,567)
			Operating Income (Loss) %						9		%				1		%				7		%				7		%				(71)		%
Total Energy Services and Products
			Revenue						$	377,455					$	357,178					$	392,519					$	1,119,200					$	1,150,078
			Gross Margin						62,607						30,116						65,186						185,195						123,053
			Operating Income (Loss)						33,338						(47,560)						35,217						97,214						(399,072)
			Operating Income (Loss) %						9		%				(13)		%				9		%				9		%				(35)		%

In general, our Energy Services and Products business focuses on supplying services and products to the oil and gas industry, and to a lesser extent, the offshore renewables and mobility solutions industries. The adverse impacts of the COVID-19 pandemic and the associated supply and demand imbalance have resulted in periods of lower levels of activity and profitability. In response, we continue to take action and implement cost efficiency initiatives. Additionally, we believe our energy businesses are positioned to benefit from improved global markets for our services and products.

Subsea Robotics. We believe we are the world's largest provider of 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. Our 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:

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									Three Months Ended																		Nine Months Ended
									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
ROV									79		%				83		%				80		%				79		%				82		%
Other									21		%				17		%				20		%				21		%				18		%

During the third quarter of 2021, Subsea Robotics revenue increased slightly as compared to the immediately preceding quarter, primarily due to favorable offshore activity levels as compared with the second quarter of 2021. Operating income for the third quarter of 2021 decreased as compared to the immediately preceding quarter, primarily due to lower margins for ROV services attributed to changes in geographic mix and a special bonus that recognized technicians for enduring extended work rotations throughout 2021 due to COVID-19 challenges. Our Subsea Robotics operating income increased as compared to the corresponding period of the prior year, primarily due to charges of $9.6 million in the three-month period ended September 30, 2020 for write-downs of inventory and other expenses. Exclusive of those charges, Subsea Robotics operating income for the third quarter of 2021 increased, as compared to the corresponding period of the prior year, as a result of increased days on hire and higher average revenue per day on hire. Subsea Robotics operating income for the nine-month period ended September 30, 2021 increased as compared to the corresponding period of the prior year due to charges of $121 million in the nine-month period ended September 30, 2020 for goodwill impairment, write-downs and write-offs of certain intangibles and inventory, and other expenses. Exclusive of those charges, Subsea Robotics operating income for the nine-month period ended September 30, 2021 increased on higher revenue, as compared to the corresponding period of the prior year as a result of higher average revenue per day in the nine months of 2021.

Fleet utilization was 63% for the three months ended September 30, 2021 as compared to 59% for the corresponding period of the prior year. Fleet utilization decreased to 59% from 61% for the nine-month periods ended September 30, 2021 and September 30, 2020, respectively. During the nine months ended September 30, 2021, we retired eight of our conventional workclass ROV systems and replaced them with five upgraded conventional workclass ROV systems and three IsurusTM workclass ROV systems (which are capable of operating in severe conditions and are ideal for renewables projects and high-speed surveys) that are currently engaged in renewables work, resulting in a total of 250 ROVs in our ROV fleet as of September 30, 2021 and September 30, 2020.

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 to the commercial theme park industry and mobile robotics solutions, including automated guided vehicle (“AGV”) technology to a variety of industries.

Our Manufactured Products operating results in the third quarter of 2021 were essentially flat when compared to the immediately preceding quarter, as marginally lower revenue continued to challenge our ability to leverage the cost base of this business. Our Manufactured Products operating results in the third quarter of 2021 were higher than those of the corresponding period of the prior year, primarily due to charges of $43 million in the three-month period ended September 30, 2020 for goodwill impairment and other expenses. Exclusive of those charges, Manufactured Products operating results decreased in the third quarter of 2021, as compared to the corresponding period of the prior year, primarily as a result of decreased activity in subsea umbilical and hardware throughput in the third quarter of 2021 as compared to the third quarter of 2021. Manufactured Products operating results were higher for the nine-month period ended September 30, 2021, when compared to the corresponding period of the prior year, as a result of $119 million in charges in the nine-month period ended September 30, 2020 for asset and goodwill impairments and other expenses. Exclusive of those charges, operating results decreased as compared to the corresponding period of the prior year as a result of decreased activity in subsea umbilical, connection systems and the commercial theme park entertainment systems businesses in the first nine months of 2021.

Our Manufactured Products backlog was $334 million as of September 30, 2021, compared to $266 million as of December 31, 2020. The backlog increase was primarily attributable to increased levels of bookings in 2021 in our energy-related operations. Recent award activity has been encouraging in our energy products businesses; however, activity has continued to lag in our mobility solutions businesses. Many of our non-energy-related customers have delayed investment decisions due to uncertainties regarding COVID-19 and the related potential operating risks. Due to the financial deterioration of one of our customers in our Manufactured Products segment that is a subsidiary of a China-based company that has been and remains subject to well-published financial challenges, certain projects that were in process for that customer have been delayed. As of September 30, 2021

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and December 31, 2020, we had contract assets of $38 million and $40 million, respectively for those projects. We continue to closely monitor the contract along with the related contract assets, while working with our customer to complete these projects. The recoverability of these amounts could be materially impacted by possible future events such as our customer’s project modifications, cancellations or bankruptcy. Our book-to-bill ratio was 1.0 for the trailing 12 months, as compared with a book-to-bill ratio of 0.4 for the year ended December 31, 2020.

Offshore Projects Group. Our OPG segment provides a broad portfolio of integrated subsea project capabilities and solutions, including subsea installation and intervention, installation and workover control systems (“IWOCS”) and ROV workover control systems (“RWOCS”), project management and engineering, and seabed preparation, route clearance and trenching services.

Our OPG operating results were relatively flat in the third quarter of 2021, as compared to the immediately preceding quarter, on lower revenue. Our OPG revenue in the third quarter of 2021 benefited from ongoing seasonal activity in inspection, maintenance and repair (“IMR”) work in the Gulf of Mexico, despite some work delays caused by Hurricane Ida and high loop currents; however, the conclusion of field activities on several projects in Angola was the primary driver for lower revenue in the third quarter of 2021 as compared to the immediately preceding quarter. Our OPG operating results were higher in the three months ended September 30, 2021, compared to the corresponding period of the prior year, primarily due to charges of $13 million for asset write-offs and other expenses. Exclusive of those charges, our OPG operating results improved in the third quarter of 2021 on higher revenue, primarily due to activity on the riserless light well intervention project in Angola with no comparable activity in the third quarter of 2020. Our OPG operating results were higher in the nine months ended September 30, 2021 compared to the corresponding period of the prior year, due to charges of $89 million recorded in the first nine months of 2020 for asset impairments and write-offs, goodwill impairment and other charges. Exclusive of those charges, our OPG operating results were higher in the nine-month period ended September 30, 2021 as compared to the corresponding period of the prior year, primarily due to the year-over-year contribution from our Angola riserless light well intervention campaign discussed above and higher vessel utilization.

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, 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 revenue and operating results for the third quarter of 2021 were higher as compared to the immediately preceding quarter on relatively flat revenue, primarily due to incremental benefits from ongoing efficiency improvements. IMDS operating results for the three-month period ended September 30, 2021, as compared to the corresponding period of the prior year, were higher due to nonrecurring costs on certain completed projects and lower activity levels in the third quarter of 2020. IMDS operating results for the nine-month period ended September 30, 2021, as compared to the corresponding period of the prior year, improved due to charges of $127 million recorded in the first nine months of 2020. Exclusive of those charges, operating results for the nine-month period ended September 30, 2021 were higher, as compared to the corresponding period of the prior year, due to the start-up of several new customer contracts and realization of cost improvements in 2021, and nonrecurring costs on certain projects completed in the first nine months of 2020 and lower activity levels in the first nine months of 2020.

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																		Nine Months Ended
(dollars in thousands)									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
Revenue									$	89,359					$	82,565					$	105,680					$	283,366					$	253,549
Gross Margin									20,019						16,668						24,603						66,732						51,466
Operating Income (Loss)									14,251						13,097						19,340						50,430						39,498
Operating Income (Loss) %									16		%				16		%				18		%				18		%				16		%

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Our ADTech segment operating results for the third quarter of 2021 were lower, as compared to the immediately preceding quarter, on lower revenue due to a higher component of lower margin manpower activities. Our ADTech segment operating results for the three-month period ended September 30, 2021 were higher, when compared to the corresponding period of the prior year, on higher revenue due to increased activity in defense subsea technologies. Our ADTech operating results for the nine-month period ended September 30, 2021 increased on higher levels of revenue, when compared to the corresponding period of the prior year, due to increased activity in defense subsea technologies.

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.

Unallocated Expenses information is as follows:

									Three Months Ended																		Nine Months Ended
(dollars in thousands)									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
Gross margin expenses									$	(22,778)					$	(17,133)					$	(21,392)					$	(67,025)					$	(55,579)
% of revenue									5		%				4		%				4		%				5		%				4		%
Operating expenses									(31,820)						(26,157)						(31,738)						(95,273)						(86,985)
Operating expenses % of revenue									7		%				6		%				6		%				7		%				6		%

Our Unallocated Expenses for the third quarter of 2021 were slightly higher, as compared to the immediately preceding quarter. Our Unallocated Expenses for the three- and nine-month periods ended September 30, 2021 were higher, as compared to the corresponding periods of the prior year, primarily as a result of increased accruals for incentive-based compensation.

Other

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

									Three Months Ended																		Nine Months Ended
(in thousands)									Sep 30, 2021						Sep 30, 2020						Jun 30, 2021						Sep 30, 2021						Sep 30, 2020
Interest income									$	662					$	414					$	683					$	1,864					$	2,202
Interest expense, net of amounts capitalized									(9,616)						(9,250)						(9,729)						(29,752)						(33,323)
Equity in income (losses) of unconsolidated affiliates									189						131						378						1,101						2,002
Other income (expense), net									(814)						(2,836)						(1,955)						(4,222)						(13,624)
Provision (benefit) for income taxes									13,560						7,204						5,955						31,856						(17,551)

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 behalf for performance bonds, bid bonds and self-insurance requirements.

Foreign currency transaction gains and losses are generally the principal component of other income (expense), net. In the three- and nine-month periods ended September 30, 2021, we incurred foreign currency transaction gains (losses) of $(0.3) million and $(4.0) million, respectively. In the three- and nine-month periods ended September 30, 2020, we incurred foreign currency transaction gains (losses) of $(2.5) million and $(13) million, respectively. Foreign currency gains (losses) in the first nine months of 2021 were primarily related to declining exchange rates for multiple currencies, none that were significant, relative to the U.S. dollar. Foreign currency gain (losses) in the first nine months of 2020 were primarily related to declining exchange rate for the Angolan kwanza

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and the Brazilian real relative to the U.S. dollar. We could incur further foreign currency exchange losses in Angola and Brazil if further currency devaluations occur.

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 nine-month periods ended September 30, 2021 and 2020 was different than the federal statutory rate of 21%, primarily due to the geographical mix of operating revenue and results, 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 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 receive combined refunds of approximately $33 million, of which we have received $10 million as of September 30, 2021. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of September 30, 2021.

Liquidity and Capital Resources

We consider our liquidity, cash flows and capital resources adequate to support our operations, capital commitments and growth initiatives. As of September 30, 2021, we had working capital of $734 million, including $448 million of cash and cash equivalents. Additionally, we had $500 million available through our revolving credit facility under a credit agreement further described below.

Amendment No. 4 to the Credit Agreement (as defined below) provides for a $500 million revolving credit facility until October 25, 2021 and thereafter $450 million until January 25, 2023 with a group of banks. Our revolving credit facility provided under the Credit Agreement was undrawn as of September 30, 2021, and remains undrawn as of the date of this report, and our nearest maturity of indebtedness is our $437 million of our 4.650% Senior Notes due in November 2024 (the “2024 Senior Notes”). We may, from time to time, complete additional, limited repurchases of our 2024 Senior 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 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 nine months ended September 30, 2021 and 2020 are summarized as follows:

									Nine Months Ended
			(in thousands)						Sep 30, 2021						Sep 30, 2020
Changes in Cash:
			Net Cash Provided by Operating Activities						$	85,319					$	32,363
			Net Cash Used in Investing Activities						(22,936)						(38,714)
			Net Cash Used in Financing Activities						(64,737)						(1,725)
			Effect of exchange rates on cash						(1,937)						(6,802)
			Net Increase (Decrease) in Cash and Cash Equivalents						$	(4,291)					$	(14,878)

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Operating activities

Our primary sources and uses of cash flows from operating activities for the nine months ended September 30, 2021 and 2020 are as follows:

												Nine Months Ended
			(in thousands)									Sep 30, 2021						Sep 30, 2020
Cash Flows from Operating Activities:
			Net income (loss)									$	(10,494)					$	(471,751)
			Non-cash items, net									109,919						556,046
			Accounts receivable and contract assets									(29,587)						87,999
			Inventory									12,371						19,179
			Current liabilities									14,130						(158,496)
			Other changes									(11,020)						(614)
			Net Cash Provided by (Used in) Operating Activities									$	85,319					$	32,363

The decrease in cash related to accounts receivable and contract assets in the nine months ended September 30, 2021 reflects the timing of project milestones and customer payments. The increase in cash related to current liabilities in the nine months ended September 30, 2021 reflects the timing of vendor payments and increased accruals for annual employee incentive payments related to attainment of specific performance goals.

Investing activities

Our capital expenditures of $36 million were lower during the first nine months of 2021, as compared to $46 million in the first nine months of 2020, as a result of actions we have taken beginning in 2020 to reduce costs and preserve liquidity.

For 2021, we expect our capital expenditures to be in the range of $45 million to $55 million. This includes approximately $20 million to $30 million of maintenance capital expenditures and $15 million to $35 million of growth capital expenditures.

We previously had several deepwater vessels under long-term charter. The last of our long-term charters expired in March 2018. We now have a mix of short-term charters where we can see firm workload and spot charters as market opportunities arise.

Financing activities

In the nine months ended September 30, 2021, we used $65 million of cash in financing activities primarily due to repurchases of approximately $63 million in aggregate principal amount of the 2024 Senior Notes in open market transactions. In the nine months ended September 30, 2020, we used $1.7 million in financing activities.

As of September 30, 2021, we had long-term debt in the principal amount of $737 million outstanding and $500 million available under our revolving credit facility provided under the Credit Agreement.

In October 2014, we entered into a credit agreement (as amended, the “Credit Agreement”) with a group of banks. The Credit Agreement initially provided for a $500 million five-year revolving credit facility (the “Revolving Credit Facility”). Subject to certain conditions, the aggregate commitments under the Revolving Credit Facility may be increased by up to $300 million at any time upon agreement between us and existing or additional lenders. Borrowings under the Revolving Credit Facility may be used for general corporate purposes. The Credit Agreement also provided for a $300 million term loan, which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes (as defined below), and cash on hand.

In February 2018, we entered into Agreement and Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). Amendment No. 4 amended the Credit Agreement to, among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with the extending lenders, which represent 90% of the existing commitments of

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the lenders, such that the total commitments for the Revolving Credit Facility will be $500 million until October 25, 2021, and thereafter $450 million until January 25, 2023.

Borrowings under the Revolving Credit Facility 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%; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750%. 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 London Interbank Offered Rate (“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 and which stipulates that, among other items, we exclude any impacts associated with current and prior period impairments) of 55%. The Credit Agreement includes customary events of default and associated remedies. As of September 30, 2021, we were in compliance with all the covenants set forth in the Credit Agreement.

In November 2014, we completed the public offering of $500 million aggregate principal amount of our 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 may redeem some or all of the 2024 Senior Notes and 2028 Senior Notes at specified redemption prices. In the three months ended September 30, 2021, we repurchased approximately $33 million in aggregate principal amount of the 2024 Senior Notes in open market transactions. The aggregate purchase price in the three months ended September 30, 2021 included accrued and unpaid interest to the repurchase date of $0.4 million and we recorded loss on extinguishment of debt of $0.3 million for premiums and fees associated with the repurchases. In the nine months ended September 30, 2021, we repurchased approximately $63 million in aggregate principal amount of the 2024 Senior Notes in open market transactions. The aggregate purchase price in the nine months ended September 30, 2021 included accrued and unpaid interest to the repurchase date of $0.7 million and we recorded loss on extinguishment of debt of $0.4 million including premiums and fees associated with the repurchases.

In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock. In 2015, we repurchased 2.0 million shares under 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.

Off-Balance Sheet Arrangements

We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of September 30, 2021, and we do not have any off-balance sheet arrangements, as defined in the Securities and Exchange Commission's rules.

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Critical Accounting Policies and Estimates

The discussion and analysis of our financial 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 financial statements and 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, 2020, 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—Critical Accounting Policies and Estimates” in our annual report on Form 10-K for the year ended December 31, 2020. As of September 30, 2021, there have been no material changes to the judgments, assumptions and estimates upon which our critical accounting policies and estimates are based.

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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-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 7—“Debt” in the Notes to Consolidated Financial Statements in this quarterly report for a description of our revolving credit facility and interest rates on our borrowings. We had two interest rate swaps in place relating to a total of $200 million of the 2024 Senior Notes. These agreements swapped the fixed interest rate of 4.650% on $100 million of the 2024 Senior Notes to the floating rate of one-month London Interbank Offered Rate (“LIBOR”) plus 2.426% and on another $100 million to one-month LIBOR plus 2.823%. In March 2020, we terminated these interest rate swaps. 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 regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar. The functional currency for most of our international operations is the applicable local currency. A stronger U.S. dollar against the United Kingdom pound sterling, the Norwegian kroner and the Brazilian real could 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 when the functional currency is the local currency, resulting in translation adjustments that we reflect as accumulated other comprehensive income or loss in the equity section of our Consolidated Balance Sheets. We recorded net adjustments to our equity accounts of $(9.0) million and $13 million in the three-month periods ended September 30, 2021 and 2020, respectively, and $(5.4) million and $(46) million in the nine-month periods ended September 30, 2021 and 2020, 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 $(0.3) million and $(4.0) million in the three- and nine-month periods ended September 30, 2021, and $(2.5) million and $(13) million in the three- and nine-month periods ended September 30, 2020, respectively. Foreign currency gains (losses) in the first nine months of 2021 were primarily related to declining exchange rates for multiple currencies, none that were significant, relative to the U.S. dollar. Foreign currency gain (losses) in the first nine months of 2020 were primarily related to declining exchange rate for the Angolan kwanza and the Brazilian real relative to the U.S. dollar. We recorded foreign currency transaction losses related to the Angolan kwanza and Brazilian real as a component of other income (expense), net in our Consolidated Statements of Operations in each respective period. Foreign currency transaction gains (losses) related to the Brazilian real of less than $(0.1) million in the three- and nine-month periods ended September 30, 2021 and $(0.7) million and $(8.4) million in the three- and nine-month periods ended September 30, 2020, respectively, were primarily due to the remeasurement of our U.S. dollar denominated liability balances to the Brazilian real. Foreign currency transaction gains (losses) related to the Angolan kwanza of $0.9 million and $(0.9) million in the three- and nine-month periods ended September 30, 2021 and less than $0.1 million and $(2.2) million in the three- and nine-month periods ended September 30, 2020, respectively, were primarily due to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola. During the nine months ended September 30, 2021 and the year ended December 31, 2020, we were able to repatriate $4.5 million and $11 million, respectively, of cash from Angola.

As of September 30, 2021 and December 31, 2020, we had the equivalent of approximately $3.5 million and $4.7 million, respectively, of kwanza cash balances in Angola reflected on our Consolidated Balance Sheets.

To mitigate our currency exposure risk in Angola, we have used kwanza to purchase equivalent Angolan central bank (Banco Nacional de Angola) bonds. 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. As of September 30, 2021 and December 31, 2020, we had $6.7 million and $10 million, respectively, of Angolan bonds on our Consolidated Balance Sheets. During the nine-month period ended September 30, 2021, we sold a portion of these bonds for $4.5 million. Because we intend

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to sell the bonds if we are able to repatriate the proceeds, we have classified these bonds as available-for-sale securities, and they are recorded in other current assets on our Consolidated Balance Sheets.

We estimated the fair market value of the Angolan bonds to be $6.7 million and $10 million as of September 30, 2021 and December 31, 2020, 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 September 30, 2021, we have $0.4 million in unrealized gains, net of tax, related to these bonds as a component of accumulated other comprehensive loss in our Consolidated Balance Sheets.

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Item 4.        Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “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, 2021 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, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

 

Item 1.Legal Proceedings

For information regarding legal proceedings, see the discussion under the caption “Litigation” in Note 8—“Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in this report, which discussion we incorporate by reference into this Item.

Item 6.         Exhibits

Index to Exhibits

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. 2020

3.01

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

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.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

104

Cover 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.

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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.

 

October 29, 2021						/S/    RODERICK A. LARSON
Date						Roderick A. Larson
						President and Chief Executive Officer
						(Principal Executive Officer)
October 29, 2021						/S/    ALAN R. CURTIS
Date						Alan R. Curtis
						Senior Vice President and Chief Financial Officer
						(Principal Financial Officer)
October 29, 2021						/S/    WITLAND J. LEBLANC, JR.
Date						Witland J. LeBlanc, Jr.
						Vice President and Chief Accounting Officer
						(Principal Accounting Officer)

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