YEARS
1964-2014
...where safety comes first, employees and customers are treated fairly,
and service is based on the best available technology.
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2014 ANNUAL REPORT
Oceaneering at a Glance
Oceaneering is a global provider of engineered services and products, primarily to the offshore oil and
gas industry, with a focus on deepwater applications. Through the use of its applied technology expertise,
Oceaneering also serves the defense, entertainment, and aerospace industries. At year end, Oceaneering
employed approximately 12,400 people in 28 countries.
ROVs are submersible vehicles teleoperated by technicians
Remotely Operated Vehicles
from a control van onboard a floating drilling rig or vessel. They are piloted by means of a
microprocessor-based control system through an armored, electrical, fiber-optic umbilical. ROVs
are the key technology enabling the performance of critical oilfield tasks in deepwater. These tasks
include drill support, subsea hardware installation and construction, subsea infrastructure
inspections and surveys, and subsea production facility operation and maintenance.
We own and operate the largest fleet of oilfield work class ROVs in the world. At the end
of 2014, we had 336 ROVs, about 36% of the industry’s vehicles. We were the primary provider of
these vehicles to perform drill support service, with an estimated market share of 59%, almost
three times that of the second largest supplier.
Subsea Products We manufacture a variety of specialty subsea oilfield products.
These encompass production control umbilicals, tooling and subsea work systems, installation
workover control systems (IWOCS), and subsea hardware.
While most of our subsea products are sold, we also rent tooling and provide IWOCS and
subsea work systems as a service, including hydrate remediation, dredging, and decommissioning.
Subsea Projects We perform subsea oilfield hardware installation and inspection,
maintenance, and repair services, principally in the U.S. Gulf of Mexico (GOM) and offshore
Angola. We service deepwater projects with dynamically positioned vessels that have our
ROVs onboard, and shallow water projects with our manned diving operation, utilizing dive
support vessels and saturation diving systems.
Commencing in 2015, we plan to provide survey and satellite-based positioning services
on a global basis, primarily offshore. These include ocean-bottom mapping in deepwater
utilizing customized autonomous underwater vehicles.
Asset Integrity We provide asset integrity management,
corrosion management, inspection, and non-destructive testing
services, principally to the oil and gas, power generation, and
petrochemical industries. These services are performed on
facilities onshore and offshore, both topside and subsea.
Advanced Technologies We provide engineering
services and related manufacturing, principally to the U.S.
Department of Defense, NASA and its prime contractors,
and the commercial theme park industry. The U.S. Navy
is our largest non-oilfield customer, for whom we perform
work predominantly on surface ships and submarines.
Commemorating 50 Years
The company was founded as World Wide
Divers in 1964 to provide air and mixed gas
diving services to oil and gas companies,
initially in the U.S. Gulf of Mexico. In 1969
the company merged with two other privately
held diving companies to form Oceaneering
International, Inc. Oceaneering went public
in 1975 on the NASDAQ Exchange, ticker OCER,
and in 1991 was listed on the New York Stock
Exchange, ticker OII.
Over the past fifty years the company
has grown to be a global provider of engineered
services and products, primarily to the offshore
oil and gas industry, with a focus on deepwater
applications. We are best known today as
being the worldwide leader in providing work
class ROV services and a large supplier of
specialty subsea products.
Courtesy of U.S. Navy
74834_Narr r1.qxp_2014 NEW 3/14/15 2:18 PM Page 1
Financial Highlights
($ in thousands, except per share amounts)
2014
2013 % Increase
$3,659,624
$3,287,019
Revenue
Gross Margin
Operating Income
Net Income
859,201
628,330
428,329
Diluted Earnings Per Share
$4.00
765,536
545,116
371,500
$3.42
11%
12%
15%
15%
17%
Oceaneering achieved record earnings and
EPS for 2014. These results were achieved
due to our global focus on deepwater
and subsea completion activity and
solid operational execution.
Revenue
7%
14%
16%
Operating Income
2%
7%
29%
Remotely Operated Vehicles
14%
Subsea Products
Subsea Projects
Asset Integrity
41%
34%
Advanced Technologies
36%
OCE ANE ERI NG I NTE RN ATIONAL, INC. 2014 ANNUAL REPORT
1
74834_Narr r2.qxp_2014 NEW 3/17/15 1:58 PM Page 2
2014 Letter to Shareholders
I am pleased to report that we achieved record EPS for the fifth consecutive
year. At $4.00, our EPS for 2014 was up 17% over 2013, and we realized the
highest annual operating income margin in our history. This was accomplished
on the strength of best-ever performances by our Remotely Operated Vehicles
(ROV), Subsea Products, and Subsea Projects business segments.
Compared to 2013, ROV results improved on the expansion of our fleet in
response to higher global demand to provide drill support and vessel-based
services and an improvement in operating margin. Subsea Products growth was
attributable to higher demand for each of our major product lines, led by tooling
and umbilicals. Subsea Projects operating income grew on increased deepwater
vessel service activity and the commencement of diving services offshore Angola.
Our ability to produce exceptional results in 2014 was largely attributable
to our global focus on deepwater and subsea completion activity and solid
operational execution. I recognize and thank our employees worldwide who made
this happen through their commitment to safety, quality, and creativity within
the framework of our core values.
In 2014 we more than doubled our committed bank facilities to $800 million,
consisting of a $500 million revolver and a $300 million three-year delayed-draw
term loan, on which we had drawn $250 million at year end. We also issued
$500 million of ten-year senior notes through a public offering, in November, to
add a layer of long-term debt to our balance sheet and achieve a more efficient
capital structure.
Total capital allocation spending was approximately $1.1 billion in 2014.
We invested $387 million in organic capital expenditures, of which $189 million
was spent on expanding and upgrading our ROV fleet, and $40 million on
acquisitions. We also paid $110 million of cash dividends and spent $590 million
on the repurchase of 8.9 million shares of our common stock – approximately
8% of our shares outstanding at the end of 2013. We completed our 2010 stock
repurchase program in mid-December, and our Board of Directors authorized a new
10 million share repurchase program. The cash dividends, share repurchases, and
our new share repurchase program underscore our willingness to return cash to
our shareholders and confidence in Oceaneering’s financial strength and future
business prospects.
Entering 2014 the deepwater market we serve was coming under heightened
investment scrutiny – due to sharp cost inflation in recent years, recurrent project
delays, and pressure on our customers to rein in capital investment and increase
dividends and share repurchases. And, at mid-year, the price of Brent crude oil,
which had traded predominantly above $100 per barrel since 2011, started to
decline due to a growing supply-driven imbalance relative to the demand for oil.
By the end of 2014, the price of Brent crude had plummeted by over 50% to
about $55 per barrel from around $115 in June, and continued to fall in early
2015 to below $50.
Thus, heading into 2015 we are faced with a slowdown in deepwater activity
due to this oil price decline and the growing prospect that a depressed oil price
environment could be prolonged. This has led to announced plans by our customers
2
“
When Johnny and I founded
World Wide Divers, we could not
even imagine the Oceaneering of
today. All we could do is create a
culture where safety came first,
employees and customers were
treated fairly, and service was
based on the best available
technology. It is wonderful that
Oceaneering conducts its business
today with those same precepts.
It is hard to imagine what
Oceaneering will look like fifty
years from now.
”
D. Michael Hughes
Director and Co-Founder
Oceaneering International, Inc.
74834_Narr r1.qxp_2014 NEW 3/14/15 2:18 PM Page 3
to reduce their 2015 exploration and development expenditures, which have
adversely impacted our earnings prospects. While work on most deepwater projects
already approved and underway is likely to continue, the urgency to start new
projects is in question until the commodity price stabilizes and improves.
For 2015 we are forecasting EPS in the range of $3.10 to $3.50. Compared to
2014, our forecast assumptions are that demand and pricing for many of the
services and products we offer will be down. Consequently, we are forecasting
that all of our oilfield business segments will have lower operating income in
2015 than in 2014. Our EPS range includes the impact of right-sizing and cost
reduction initiatives we have underway. We will take further measures if demand
falls short of our expected levels.
Certainly this is a challenging time, but we believe we are well positioned
to make the most of it. Market conditions may change, but our commitment to
deliver results to our shareholders remains the same. We have a seasoned
management team in place that has experienced serious oilfield service industry
down cycles before. We are confident in our ability to quickly adjust our business
plan and take advantage of opportunities as may be dictated by the market.
We are focused on cash flow generation and cost control.
Despite our lower 2015 earnings outlook, we are confident that our liquidity
and projected cash flow provide us with ample resources to continue investing
in Oceaneering’s future as opportunities arise and returning capital to our
shareholders. We have announced an agreement to acquire C & C Technologies,
Inc. (C&C) for approximately $230 million. We expect to complete the acquisition
in April 2015. C&C is a global provider of survey services, principally to the oil
and gas industry in deepwater. We expect the C&C acquisition to be accretive to
our 2015 earnings and plan to include its results in our Subsea Projects segment.
For 2015 we are planning to reduce our organic capital expenditures to between
$200 million and $250 million.
We remain convinced that our strategy to focus on providing services and
products that facilitate deepwater exploration and production remains sound.
Deepwater is expected to continue to play a critical role in global oil supply
growth despite its large capital commitments and technical challenges, and the
current commodity price environment. Therefore, we anticipate demand for our
deepwater services and products will rebound and rise over time, and believe our
long-term business prospects remain promising. We are well positioned to supply
a wide range of the services and products required to safely support the deepwater
efforts of our customers.
2014 marked our 50th year in business and my 35th year with the company.
I am grateful for the opportunity to have been a part of the firm’s evolution and
growth, and look forward to leading Oceaneering to another year of substantial
earnings in 2015.
M. Kevin McEvoy
Chief Executive Officer
“
Our ability to produce
exceptional results in 2014 was
largely attributable to our global
focus on deepwater and subsea
completion activity and solid
operational execution. I recognize
and thank our employees worldwide
who made this happen through
their commitment to safety,
quality, and creativity within the
framework of our core values.”
OCE ANE ERI NG I NTE RNATIONAL, INC. 2014 ANNUAL REPORT
3
74834_Narr r1.qxp_2014 NEW 3/14/15 2:18 PM Page 4
Directors and Officers
Oceaneering Locations
Directors
Corporate Headquarters
Oceaneering International, Inc.
11911 FM 529
Houston, Texas 77041-3000
Telephone: (713) 329-4500
Regional Headquarters
Oceaneering International, Inc.
5004 Railroad Avenue
Morgan City, Louisiana 70380
Telephone: (985) 329-3900
Oceaneering International Services Limited
Oceaneering House
Pitmedden Road, Dyce
Aberdeen AB21 ODP, Scotland
Telephone: (44-1224) 758500
Oceaneering International Dubai LLC
Al Moosa Tower 2, Suite 15
Sheikh Zayed Road
Dubai, United Arab Emirates
Telephone: (971-4) 311-7500
Oceaneering Advanced Technologies
7001 Dorsey Road
Hanover, Maryland 21076
Telephone: (443) 459-3700
Marine Production Systems do Brasil Ltda.
Avenida Rio Branco, 123 / 14th Floor
Centro – Rio de Janeiro, RJ
20040-005, Brazil
Telephone: (55-21) 2517-7100
Oceaneering International Pte Ltd
31 International Business Park
#04-03A
Singapore 609921
Telephone: (65) 6933 7250
Oceaneering AS
Vestre Svanholmen 24
4313 Sandnes
Stavanger
Norway
Telephone: (47) 52 91 30 00
Oceaneering Australia Pty. Ltd.
634 Karel Avenue
Jandakot, Western Australia 6164
Australia
Telephone: (61-8) 6499 0000
Oceaneering Angola, S.A.
Avenida Deolinda Rodrigues
Edifico No495
Terra Nova
Luanda
Angola
Telephone: (244) 222 6354000
T. Jay Collins
Former Chief Executive Officer of Oceaneering
International, Inc. and a Director of:
Murphy Oil Corporation; Nautronix Group Limited;
Pason Systems Inc.; and Texas Institute of Science, Inc.
Jerold J. DesRoche
An Owner of National Power
John R. Huff, Chairman
A Director of Hi-Crush GP LLC, the general partner of
Hi-Crush Partners LP, and Suncor Energy Inc.
D. Michael Hughes
Owner of The Broken Arrow Ranch and
affiliated businesses
M. Kevin McEvoy
Chief Executive Officer of Oceaneering International, Inc.
Paul B. Murphy, Jr.
Chief Executive Officer, President, and a Director of
Cadence Bancorp, LLC, and a Director of:
Cadence Bank, N.A.; the Federal Reserve Bank of
Dallas-Houston Branch; and Hines Real Estate
Investment Trust, Inc.
Harris J. Pappas
President of Pappas Restaurants, Inc.
and a Director of Luby’s, Inc.
Executive Officers
M. Kevin McEvoy
Chief Executive Officer
Roderick A. Larson
President and Chief Operating Officer
Marvin J. Migura
Executive Vice President
W. Cardon Gerner
Senior Vice President and Chief Financial Officer
David K. Lawrence
Senior Vice President, General Counsel, and Secretary
Alan R. Curtis
Senior Vice President, Operations Support
Charles W. Davison, Jr.
Senior Vice President, Subsea Products
Knut Eriksen
Senior Vice President, Business Development
Clyde W. Hewlett
Senior Vice President, Subsea Services
Kevin F. Kerins
Senior Vice President, ROVs
John R. Kreider
Senior Vice President, Advanced Technologies
Michael C. Leys
Senior Vice President, Asset Integrity
Robert P. Moschetta
Senior Vice President, Health Safety Environment/
Training/Quality
4
Financial Section 2014
OCE ANE ERI NG IN TER NATIONAL, INC. 2014 ANNUAL RE PORT
5
PERFORMANCE GRAPH
The following graph compares our total shareholder return to the Standard & Poor's 500 Stock Index ("S&P 500")
and the PHLX Oil Service Sector Index from December 31, 2009 through December 31, 2014. The PHLX Oil Service
Sector Index is designed to track the performance of a set of companies involved in the oil services sector.
It is assumed in the graph that: (1) $100 was invested in Oceaneering Common Stock, the S&P 500 and the PHLX
Oil Service Sector Index on December 31, 2009; (2) the peer group investment is weighted based on the market
capitalization of each individual company within the peer group at the beginning of each period; and (3) any
dividends are reinvested. The shareholder return shown is not necessarily indicative of future performance.
$300
$250
$200
$150
$100
$50
$0
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
Oceaneering
S&P 500
PHLX Oil Service Sector Index
2009
2010
2011
2012
2013
2014
December
31,
Oceaneering
S&P 500
100.00
125.82
159.30
188.26
279.27
211.36
100.00
115.06
117.49
136.30
180.44
205.14
PHLX Oil Service Sector
100.00
125.75
110.96
112.95
144.17
108.18
OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT7
PERFORMANCE GRAPH
The following graph compares our total shareholder return to the Standard & Poor's 500 Stock Index ("S&P 500")
and the PHLX Oil Service Sector Index from December 31, 2009 through December 31, 2014. The PHLX Oil Service
Sector Index is designed to track the performance of a set of companies involved in the oil services sector.
It is assumed in the graph that: (1) $100 was invested in Oceaneering Common Stock, the S&P 500 and the PHLX
Oil Service Sector Index on December 31, 2009; (2) the peer group investment is weighted based on the market
capitalization of each individual company within the peer group at the beginning of each period; and (3) any
dividends are reinvested. The shareholder return shown is not necessarily indicative of future performance.
$300
$250
$200
$150
$100
$50
$0
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
Oceaneering
S&P 500
PHLX Oil Service Sector Index
2009
2010
2011
2012
2013
2014
December
31,
Oceaneering
S&P 500
100.00
125.82
159.30
188.26
279.27
211.36
100.00
115.06
117.49
136.30
180.44
205.14
PHLX Oil Service Sector
100.00
125.75
110.96
112.95
144.17
108.18
OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT7
Oceaneering Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol OII. We submitted to the New York
Stock Exchange during 2014 a certification of our Chief Executive Officer regarding compliance with the
Exchange's corporate governance listing standards. We also included as exhibits to our annual report on
Form 10-K, as filed with the SEC, the certifications of our principal executive officer and principal financial officer
required under Section 302 of the Sarbanes-Oxley Act of 2002.
The following table sets out, for the periods indicated, the high and low sales prices for our common stock as
reported on the New York Stock Exchange (consolidated transaction reporting system):
For the quarter ended:
March 31
June 30
September 30
December 31
2014
2013
High
Low
High
Low
$
79.13 $
78.13
79.05
72.19
66.00 $
68.96
62.86
56.58
67.11 $
76.60
84.64
87.64
54.27
58.08
72.70
75.60
On February 6, 2015, there were 394 holders of record of our common stock. On that date, the closing sales price,
as quoted on the New York Stock Exchange, was $55.84. In 2014, we declared quarterly cash dividends of $0.22
per share in the first quarter and $0.27 per share in each of the second, third and fourth quarters. In 2013, we
declared quarterly cash dividends of $0.18 per share in the first quarter and $0.22 per share in each of the
second, third and fourth quarters. It is our intent to continue to pay a quarterly cash dividend; however, payment
of future cash dividends will be at the discretion of our board of directors in accordance with applicable law, after
taking into account various factors, including our financial condition, earnings, capital requirements, legal
requirements, regulatory constraints, industry practice and any other factors that our board of directors believes
are relevant.
In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares of our common
stock. Through December 31, 2014 under this plan, we repurchased the 12 million shares of our common stock
for $677 million. We repurchased the following shares in the fourth quarter of 2014 to complete the
authorization under the February 2010 plan:
Period
Total number
of shares
purchased
Average
price paid
per share
October 1 through October 31, 2014
—
N/A
November 1 through November 30, 2014
1,375,900 $
70.6443
December 1 through December 31, 2014
Total
4,024,100
5,400,000 $
63.7410
65.4999
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs
—
1,375,900
4,024,100
5,400,000
Maximum
number of
shares that
may yet be
purchased
under the
plans or
programs
5,400,000
4,024,100
—
—
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Selected Financial Data
The following table sets forth certain selected historical consolidated financial data and should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operation and our
Consolidated Financial Statements and Notes included in this report. The following information may not be
indicative of our future operating results.
Results of Operations:
Year Ended December 31,
(in thousands, except per share amounts)
2014
2013
2012
2011
2010
Revenue
Cost of services and products
Gross margin
Selling, general and administrative expense
Income from operations
Net income
Cash dividends declared per Share
Diluted earnings per share
Depreciation and amortization
Capital expenditures, including business
acquisitions
$
$
$
$
$
$
$ 3,659,624 $ 3,287,019 $ 2,782,604 $ 2,192,663 $ 1,917,045
2,800,423
2,521,483
859,201
230,871
765,536
220,420
2,154,746
627,858
199,261
1,683,904
1,450,725
508,759
173,928
466,320
156,820
628,330 $
545,116 $
428,597
$
334,831 $
309,500
428,329 $
371,500 $
235,658 $
200,531
1.03 $
4.00 $
0.84 $
3.42 $
0.45 $
2.16 $
—
1.82
229,779 $
202,228 $
176,483 $
151,227 $
153,651
289,017 $
0.69 $
2.66 $
426,671 $
393,590 $
309,858
$
526,645 $
207,180
Other Financial Data:
(dollars in thousands)
Working capital ratio
Working capital
Total assets
Long-term debt
Shareholders' equity
As of December 31,
2014
2013
2012
2.52
1.97
1.95
2011
1.96
2010
2.24
$ 1,034,413
706,187
$
585,805 $ 482,747 $
543,646
$ 3,511,701
$ 3,128,500
$ 2,768,118 $ 2,400,544 $ 2,030,506
$
750,000
— $
94,000 $ 120,000 $
—
$ 1,657,620
$ 2,043,440
$ 1,815,460 $ 1,557,962 $ 1,390,215
$
$
Goodwill as a percentage of Shareholders'
equity
20 %
17 %
20 %
21 %
10 %
8OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT9
Oceaneering Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol OII. We submitted to the New York
Stock Exchange during 2014 a certification of our Chief Executive Officer regarding compliance with the
Exchange's corporate governance listing standards. We also included as exhibits to our annual report on
Form 10-K, as filed with the SEC, the certifications of our principal executive officer and principal financial officer
required under Section 302 of the Sarbanes-Oxley Act of 2002.
The following table sets out, for the periods indicated, the high and low sales prices for our common stock as
reported on the New York Stock Exchange (consolidated transaction reporting system):
For the quarter ended:
March 31
June 30
September 30
December 31
2014
2013
High
Low
High
Low
$
79.13 $
66.00 $
78.13
79.05
72.19
68.96
62.86
56.58
67.11 $
76.60
84.64
87.64
54.27
58.08
72.70
75.60
On February 6, 2015, there were 394 holders of record of our common stock. On that date, the closing sales price,
as quoted on the New York Stock Exchange, was $55.84. In 2014, we declared quarterly cash dividends of $0.22
per share in the first quarter and $0.27 per share in each of the second, third and fourth quarters. In 2013, we
declared quarterly cash dividends of $0.18 per share in the first quarter and $0.22 per share in each of the
second, third and fourth quarters. It is our intent to continue to pay a quarterly cash dividend; however, payment
of future cash dividends will be at the discretion of our board of directors in accordance with applicable law, after
taking into account various factors, including our financial condition, earnings, capital requirements, legal
requirements, regulatory constraints, industry practice and any other factors that our board of directors believes
are relevant.
In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares of our common
stock. Through December 31, 2014 under this plan, we repurchased the 12 million shares of our common stock
for $677 million. We repurchased the following shares in the fourth quarter of 2014 to complete the
authorization under the February 2010 plan:
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs
—
1,375,900
4,024,100
5,400,000
Maximum
number of
shares that
may yet be
purchased
under the
plans or
programs
5,400,000
4,024,100
—
—
Total number
of shares
purchased
Average
price paid
per share
Period
Total
October 1 through October 31, 2014
—
N/A
November 1 through November 30, 2014
1,375,900 $
70.6443
December 1 through December 31, 2014
4,024,100
5,400,000 $
63.7410
65.4999
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Selected Financial Data
The following table sets forth certain selected historical consolidated financial data and should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operation and our
Consolidated Financial Statements and Notes included in this report. The following information may not be
indicative of our future operating results.
Results of Operations:
(in thousands, except per share amounts)
Revenue
Cost of services and products
Gross margin
Selling, general and administrative expense
Income from operations
Net income
Cash dividends declared per Share
Diluted earnings per share
Depreciation and amortization
Capital expenditures, including business
acquisitions
Other Financial Data:
2013
2014
Year Ended December 31,
2012
$ 3,659,624 $ 3,287,019 $ 2,782,604 $ 2,192,663 $ 1,917,045
1,450,725
466,320
156,820
2,154,746
627,858
199,261
1,683,904
508,759
173,928
2,800,423
859,201
230,871
2,521,483
765,536
220,420
2011
2010
$
$
$
$
$
$
628,330 $
545,116 $
428,329 $
1.03 $
4.00 $
229,779 $
371,500 $
0.84 $
3.42 $
202,228 $
$
428,597
289,017 $
0.69 $
2.66 $
176,483 $
334,831 $
309,500
235,658 $
0.45 $
2.16 $
151,227 $
200,531
—
1.82
153,651
426,671 $
393,590 $
309,858
$
526,645 $
207,180
(dollars in thousands)
2014
2013
As of December 31,
2012
2011
2010
Working capital ratio
Working capital
Total assets
Long-term debt
Shareholders' equity
Goodwill as a percentage of Shareholders'
equity
2.52
$ 1,034,413
$ 3,511,701
750,000
$
$ 1,657,620
1.97
$
706,187
$ 3,128,500
$
$ 2,043,440
— $
1.96
1.95
585,805 $ 482,747 $
2.24
$
543,646
$ 2,768,118 $ 2,400,544 $ 2,030,506
—
$ 1,815,460 $ 1,557,962 $ 1,390,215
94,000 $ 120,000 $
20 %
17 %
20 %
21 %
10 %
8OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT9
Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this annual report, including, without limitation, statements regarding the following
matters are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995:
industry conditions;
• our business strategy;
• our plans for future operations;
•
• seasonality;
• our expectations about 2015 earnings per share and segment operating results, and the factors underlying
those expectations, including our expectations about demand for our deepwater oilfield services and
products as a result of the factors we specify in "Overview" and "Results of Operations" below;
• projections relating to floating rigs to be placed in service and subsea tree orders and installations;
• the adequacy of our liquidity and capital resources to support our operations and internally generated
growth initiatives;
• our projected capital expenditures for 2015;
• our expectations regarding the acquisition of C & C Technologies, Inc.;
• our plans to add ROVs to our fleet;
• our intentions relating to the subsea support vessel scheduled for delivery in 2016;
• our belief that our goodwill will not be impaired during 2015;
• the adequacy of our accruals for uninsured expected liabilities from workers' compensation, maritime
employer's liability and general liability claims;
• our belief that our total unrecognized tax benefits will not significantly increase or decrease in the next
12 months;
• our anticipated tax rates and underlying assumptions;
• our expectations about the cash flows from our investment in Medusa Spar LLC, and the factors underlying
those expectations;
• our expectations regarding shares repurchased under our share repurchase plan;
• our backlog; and
• our expectations regarding the effect of inflation in the near future.
These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we
refer to under the headings "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS" and "Risk
Factors" in Part I of our annual report on Form 10-K. 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.
Overview
The table that follows sets out our revenue and operating results for 2014, 2013 and 2012.
(dollars in thousands)
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Net Income
Year Ended December 31,
2013
2012
$ 3,287,019 $ 2,782,604
627,858
2014
$ 3,659,624
859,201
23%
628,330
17%
428,329
765,536
23%
545,116
17%
371,500
23%
428,597
15%
289,017
Our business substantially depends on the level of capital spending on offshore developments by our customers in the
oil and gas industry. During 2014, we generated approximately 93% of our revenue, and 98% of our operating income
before Unallocated Expenses, from services and products we provided to the oil and gas industry. In 2014, our revenue
increased by 11%, with the largest percentage increase occurring in our Subsea Products segment, which increased
21%, on higher demand for each of our major product lines.
The $428 million consolidated net income we earned in 2014 was the highest in our history. The $57 million
increase from 2013 net income was attributable to higher profit contributions from all of our oilfield operating
segments, most notably:
revenue;
• our Subsea Products segment, which had $50 million more operating income on $211 million more
• our ROV segment, which had $39 million more operating income on $87 million more revenue; and
• our Subsea Projects segment, which had $14 million more operating income on $79 million more revenue.
In 2014, we invested in the following major capital projects:
• additions of and upgrades to our work-class ROVs;
• expenditures in our Subsea Products segment, including growth of our tooling and installation and
workover control systems capabilities, expansion of our Houston manufacturing facilities and
establishment of manufacturing capabilities in Angola; and
• additions of capabilities in our Subsea Projects segment, including $40 million related to a new subsea
support vessel scheduled for delivery in 2016.
We expect our 2015 diluted earnings per share to be in the range of $3.10 to $3.50, as compared to $4.00 in
2014. We anticipate a decrease in our total overall operating income margin percentage of approximately 2%. We
anticipate lower global demand for deepwater drilling, field development, and inspection, maintenance and repair
activities due to the decline of oil prices since the start of the fourth quarter of 2014. Compared to 2014, in 2015
we are forecasting decreases in each of our oilfield operating business segments, including:
• ROVs on lower service demand to support drilling and vessel-based projects and reduced revenue per day;
• Subsea Products on lower demand to support field development projects and for BOP system replacements;
• Subsea Projects on lower vessel pricing in the U.S. Gulf of Mexico and reduced use of a third vessel on our
BP Angola project; and
• Asset Integrity on reduced demand for our services and generally lower pricing.
We use our ROVs to provide drilling support, vessel-based inspection, maintenance and repair, subsea hardware
installation, construction, and pipeline inspection services to customers in the oil and gas industry. The largest
percentage of our ROVs has historically been used to provide drill support services. Therefore, the number of
floating drilling rigs on hire is a leading market indicator for this business. The following table shows average
floating rigs under contract and our ROV utilization.
Average number of floating rigs under contract
ROV days on hire (in thousands)
ROV utilization
2014
2013
2012
280
98
83%
275
92
85%
268
82
80%
Demand for floating rigs is our primary driver of growth prospects. According to industry data published by IHS
Petrodata, at the end of 2014, there were 323 floating drilling rigs in the world, with 275 of the rigs under
contract. Of the 275 rigs under contract, 193 are contracted through 2015. We estimate approximately 20
floating rigs will be placed in service during 2015, and we have ROV contracts on 11 of those. Competitors have
the ROV contracts on three rigs, leaving six contract opportunities. Recent new rig additions have approximated
the number of rigs being idled or retired, resulting in flat ROV demand. We anticipate that recently announced
cuts in our customers' 2015 capital spending budgets will adversely affect our ROV demand.
10OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT11
Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this annual report, including, without limitation, statements regarding the following
matters are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995:
• our business strategy;
• our plans for future operations;
•
industry conditions;
• seasonality;
• our expectations about 2015 earnings per share and segment operating results, and the factors underlying
those expectations, including our expectations about demand for our deepwater oilfield services and
products as a result of the factors we specify in "Overview" and "Results of Operations" below;
• projections relating to floating rigs to be placed in service and subsea tree orders and installations;
• the adequacy of our liquidity and capital resources to support our operations and internally generated
growth initiatives;
• our projected capital expenditures for 2015;
• our expectations regarding the acquisition of C & C Technologies, Inc.;
• our plans to add ROVs to our fleet;
• our intentions relating to the subsea support vessel scheduled for delivery in 2016;
• our belief that our goodwill will not be impaired during 2015;
• the adequacy of our accruals for uninsured expected liabilities from workers' compensation, maritime
employer's liability and general liability claims;
• our belief that our total unrecognized tax benefits will not significantly increase or decrease in the next
12 months;
• our anticipated tax rates and underlying assumptions;
• our expectations about the cash flows from our investment in Medusa Spar LLC, and the factors underlying
those expectations;
• our backlog; and
• our expectations regarding shares repurchased under our share repurchase plan;
• our expectations regarding the effect of inflation in the near future.
These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we
refer to under the headings "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS" and "Risk
Factors" in Part I of our annual report on Form 10-K. 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 table that follows sets out our revenue and operating results for 2014, 2013 and 2012.
Overview
(dollars in thousands)
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Net Income
Year Ended December 31,
2014
2013
2012
$ 3,659,624
$ 3,287,019 $ 2,782,604
859,201
765,536
627,858
628,330
545,116
428,597
23%
17%
23%
15%
23%
17%
428,329
371,500
289,017
Our business substantially depends on the level of capital spending on offshore developments by our customers in the
oil and gas industry. During 2014, we generated approximately 93% of our revenue, and 98% of our operating income
before Unallocated Expenses, from services and products we provided to the oil and gas industry. In 2014, our revenue
increased by 11%, with the largest percentage increase occurring in our Subsea Products segment, which increased
21%, on higher demand for each of our major product lines.
The $428 million consolidated net income we earned in 2014 was the highest in our history. The $57 million
increase from 2013 net income was attributable to higher profit contributions from all of our oilfield operating
segments, most notably:
• our Subsea Products segment, which had $50 million more operating income on $211 million more
revenue;
• our ROV segment, which had $39 million more operating income on $87 million more revenue; and
• our Subsea Projects segment, which had $14 million more operating income on $79 million more revenue.
In 2014, we invested in the following major capital projects:
• additions of and upgrades to our work-class ROVs;
• expenditures in our Subsea Products segment, including growth of our tooling and installation and
workover control systems capabilities, expansion of our Houston manufacturing facilities and
establishment of manufacturing capabilities in Angola; and
• additions of capabilities in our Subsea Projects segment, including $40 million related to a new subsea
support vessel scheduled for delivery in 2016.
We expect our 2015 diluted earnings per share to be in the range of $3.10 to $3.50, as compared to $4.00 in
2014. We anticipate a decrease in our total overall operating income margin percentage of approximately 2%. We
anticipate lower global demand for deepwater drilling, field development, and inspection, maintenance and repair
activities due to the decline of oil prices since the start of the fourth quarter of 2014. Compared to 2014, in 2015
we are forecasting decreases in each of our oilfield operating business segments, including:
• ROVs on lower service demand to support drilling and vessel-based projects and reduced revenue per day;
• Subsea Products on lower demand to support field development projects and for BOP system replacements;
• Subsea Projects on lower vessel pricing in the U.S. Gulf of Mexico and reduced use of a third vessel on our
BP Angola project; and
• Asset Integrity on reduced demand for our services and generally lower pricing.
We use our ROVs to provide drilling support, vessel-based inspection, maintenance and repair, subsea hardware
installation, construction, and pipeline inspection services to customers in the oil and gas industry. The largest
percentage of our ROVs has historically been used to provide drill support services. Therefore, the number of
floating drilling rigs on hire is a leading market indicator for this business. The following table shows average
floating rigs under contract and our ROV utilization.
Average number of floating rigs under contract
ROV days on hire (in thousands)
ROV utilization
2014
2013
2012
280
98
83%
275
92
85%
268
82
80%
Demand for floating rigs is our primary driver of growth prospects. According to industry data published by IHS
Petrodata, at the end of 2014, there were 323 floating drilling rigs in the world, with 275 of the rigs under
contract. Of the 275 rigs under contract, 193 are contracted through 2015. We estimate approximately 20
floating rigs will be placed in service during 2015, and we have ROV contracts on 11 of those. Competitors have
the ROV contracts on three rigs, leaving six contract opportunities. Recent new rig additions have approximated
the number of rigs being idled or retired, resulting in flat ROV demand. We anticipate that recently announced
cuts in our customers' 2015 capital spending budgets will adversely affect our ROV demand.
10OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT11
In addition to floating rig demand, subsea tree completions are another leading indicator of the strength of the
deepwater market and the primary demand driver for our Subsea Products lines. According to industry data
published by Quest Offshore Resources, Inc. in November 2014, the global market for subsea tree orders is
expected to increase approximately 43% in the 2014-2018 time period compared to the previous five years.
Additionally, Quest projects that subsea tree installations during the same time period will increase approximately
32% compared to the previous five-year period, and the installed subsea completion base will have a net increase
of approximately 1,100 trees, or 27%. However, due to recent declines in the price of crude oil, we believe some
scheduled future tree installations may be delayed.
Critical Accounting Policies and Estimates
We have based the following discussion and analysis of our financial condition and results of operations on our
consolidated financial statements, which we have 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 of assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the periods we present. We base our estimates on historical experience,
available information and other assumptions we believe to be reasonable under the circumstances. On an ongoing
basis, we evaluate our estimates; however, our actual results may differ from these estimates under different
assumptions or conditions. The following discussion summarizes the accounting policies we believe (1) require
our management's most difficult, subjective or complex judgments and (2) are the most critical to our reporting of
results of operations and financial position.
Revenue Recognition. We recognize our revenue according to the type of contract involved. On a daily basis, we
recognize revenue under contracts that provide for specific time, material and equipment charges, which we bill
periodically, ranging from weekly to monthly.
We account for significant fixed-price contracts, which we enter into mainly in our Subsea Products segment, and
occasionally in our Subsea Projects and Advanced Technologies segments, using the percentage-of-completion
method. In 2014, we accounted for 15% of our revenue using the percentage-of-completion method. In
determining whether a contract should be accounted for using the percentage-of-completion method, we consider
whether:
• the customer provides specifications for the construction of facilities or production of goods or for the
provision of related services;
• we can reasonably estimate our progress towards completion and our costs;
• the contract includes provisions as to the enforceable rights regarding the goods or services to be
provided, consideration to be received and the manner and terms of payment;
• the customer can be expected to satisfy its obligations under the contract; and
• we can be expected to perform our contractual obligations.
Under the percentage-of-completion method, we generally recognize estimated contract revenue based on costs
incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor,
productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors,
including weather or other factors outside of our control, may also affect the progress and estimated cost of a
project's completion and, therefore, the timing of income and revenue recognition. We routinely review estimates
related to our contracts and reflect revisions to profitability in earnings immediately. 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. In prior years, we have recorded adjustments to earnings as a result of revisions to contract
estimates. Although we are continually striving to accurately estimate our contract costs and profitability,
adjustments to overall contract costs could be significant in future periods.
We recognize the remainder of our revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.
Property and Equipment and Long-lived Intangible Assets. We evaluate our property and equipment and long-
lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be appropriate. We base these evaluations on a comparison of the assets' carrying values to
forecasts of undiscounted cash flows associated with the assets or quoted market prices. If an impairment has
occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. Our
expectations regarding future sales and undiscounted cash flows are highly subjective, cover extended periods of
time and depend on a number of factors outside our control, such as changes in general economic conditions,
laws and regulations. Accordingly, these expectations could differ significantly from year to year.
We charge the costs of repair and maintenance of property and equipment to operations as incurred, while we
capitalize the costs of improvements that extend asset lives or functionality.
Goodwill. We account for business combinations using the acquisition method of accounting, with the
acquisition price being allocated to the assets acquired and liabilities assumed based on their fair market values
at the date of acquisition. In September 2011, the Financial Accounting Standards Board ("FASB") issued an
update regarding goodwill impairment testing. Under the update, an entity has the option to first assess
qualitative factors to determine whether the existence of events or circumstances leads to a determination that it
is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing
the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a
reporting unit exceeds its carrying amount, performing the two-step impairment test is unnecessary. However, if
an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. The
provisions of the update have not had a material effect on our financial position or results of operations. For
reporting units with significant goodwill, we do not believe our goodwill will be impaired during 2015.
Loss Contingencies. We self-insure for workers' compensation, maritime employer's liability and comprehensive
general liability claims to levels we consider financially prudent, and beyond the self-insurance level of exposure
we carry insurance, which can be by occurrence or in the aggregate. We determine the level of accruals for claims
exposure by reviewing our historical experience and current year claim activity. We do not record accruals on a
present-value basis. We review larger claims with insurance adjusters and establish specific reserves for known
liabilities. We establish an additional reserve for incidents incurred but not reported to us for each year using our
estimates and based on prior experience. We believe we have established adequate accruals for uninsured
expected liabilities arising from those obligations. However, it is possible that future earnings could be affected
by changes in our estimates relating to these matters.
We are involved in various claims and actions against us, most of which are covered by insurance. We believe that
our ultimate liability, if any, that may result from those claims and actions will not materially affect our financial
position, cash flows or results of operations.
Income Taxes. Our tax provisions are based on our expected taxable income, statutory rates and tax-planning
opportunities available to us in the various jurisdictions in which we operate. Determination of taxable income in
any jurisdiction requires the interpretation of the related tax laws. We are at risk that a taxing authority's final
determination of our tax liabilities may differ from our interpretation. Our effective tax rate may fluctuate from
year to year as our operations are conducted in different taxing jurisdictions, the amount of pre-tax income
fluctuates, the amounts of foreign income we anticipate will be repatriated and our estimates regarding the
realizability of items such as foreign tax credits may change. In 2014, 2013 and 2012, we recorded reductions of
income tax expense of $0.9 million, $0.7 million and $3.0 million, respectively, resulting from a combination of
expiring statutes of limitations and the resolution of uncertain tax positions related to certain tax liabilities we
recorded in prior years. Current income tax expense represents either nonresident withholding taxes or the
liabilities expected to be reflected on our income tax returns for the current year, while the net deferred income
tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on our
balance sheet.
We establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion
or all of the deferred tax assets will not be realized in the future. We currently have no valuation allowances.
While we have considered estimated future taxable income and ongoing prudent and feasible tax-planning
12OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT13
In addition to floating rig demand, subsea tree completions are another leading indicator of the strength of the
deepwater market and the primary demand driver for our Subsea Products lines. According to industry data
published by Quest Offshore Resources, Inc. in November 2014, the global market for subsea tree orders is
expected to increase approximately 43% in the 2014-2018 time period compared to the previous five years.
Additionally, Quest projects that subsea tree installations during the same time period will increase approximately
32% compared to the previous five-year period, and the installed subsea completion base will have a net increase
of approximately 1,100 trees, or 27%. However, due to recent declines in the price of crude oil, we believe some
scheduled future tree installations may be delayed.
Critical Accounting Policies and Estimates
We have based the following discussion and analysis of our financial condition and results of operations on our
consolidated financial statements, which we have 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 of assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the periods we present. We base our estimates on historical experience,
available information and other assumptions we believe to be reasonable under the circumstances. On an ongoing
basis, we evaluate our estimates; however, our actual results may differ from these estimates under different
assumptions or conditions. The following discussion summarizes the accounting policies we believe (1) require
our management's most difficult, subjective or complex judgments and (2) are the most critical to our reporting of
results of operations and financial position.
Revenue Recognition. We recognize our revenue according to the type of contract involved. On a daily basis, we
recognize revenue under contracts that provide for specific time, material and equipment charges, which we bill
periodically, ranging from weekly to monthly.
We account for significant fixed-price contracts, which we enter into mainly in our Subsea Products segment, and
occasionally in our Subsea Projects and Advanced Technologies segments, using the percentage-of-completion
method. In 2014, we accounted for 15% of our revenue using the percentage-of-completion method. In
determining whether a contract should be accounted for using the percentage-of-completion method, we consider
whether:
• the customer provides specifications for the construction of facilities or production of goods or for the
provision of related services;
• we can reasonably estimate our progress towards completion and our costs;
• the contract includes provisions as to the enforceable rights regarding the goods or services to be
provided, consideration to be received and the manner and terms of payment;
• the customer can be expected to satisfy its obligations under the contract; and
• we can be expected to perform our contractual obligations.
Under the percentage-of-completion method, we generally recognize estimated contract revenue based on costs
incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor,
productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors,
including weather or other factors outside of our control, may also affect the progress and estimated cost of a
project's completion and, therefore, the timing of income and revenue recognition. We routinely review estimates
related to our contracts and reflect revisions to profitability in earnings immediately. 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. In prior years, we have recorded adjustments to earnings as a result of revisions to contract
estimates. Although we are continually striving to accurately estimate our contract costs and profitability,
adjustments to overall contract costs could be significant in future periods.
We recognize the remainder of our revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.
Property and Equipment and Long-lived Intangible Assets. We evaluate our property and equipment and long-
lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be appropriate. We base these evaluations on a comparison of the assets' carrying values to
forecasts of undiscounted cash flows associated with the assets or quoted market prices. If an impairment has
occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. Our
expectations regarding future sales and undiscounted cash flows are highly subjective, cover extended periods of
time and depend on a number of factors outside our control, such as changes in general economic conditions,
laws and regulations. Accordingly, these expectations could differ significantly from year to year.
We charge the costs of repair and maintenance of property and equipment to operations as incurred, while we
capitalize the costs of improvements that extend asset lives or functionality.
Goodwill. We account for business combinations using the acquisition method of accounting, with the
acquisition price being allocated to the assets acquired and liabilities assumed based on their fair market values
at the date of acquisition. In September 2011, the Financial Accounting Standards Board ("FASB") issued an
update regarding goodwill impairment testing. Under the update, an entity has the option to first assess
qualitative factors to determine whether the existence of events or circumstances leads to a determination that it
is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing
the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a
reporting unit exceeds its carrying amount, performing the two-step impairment test is unnecessary. However, if
an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. The
provisions of the update have not had a material effect on our financial position or results of operations. For
reporting units with significant goodwill, we do not believe our goodwill will be impaired during 2015.
Loss Contingencies. We self-insure for workers' compensation, maritime employer's liability and comprehensive
general liability claims to levels we consider financially prudent, and beyond the self-insurance level of exposure
we carry insurance, which can be by occurrence or in the aggregate. We determine the level of accruals for claims
exposure by reviewing our historical experience and current year claim activity. We do not record accruals on a
present-value basis. We review larger claims with insurance adjusters and establish specific reserves for known
liabilities. We establish an additional reserve for incidents incurred but not reported to us for each year using our
estimates and based on prior experience. We believe we have established adequate accruals for uninsured
expected liabilities arising from those obligations. However, it is possible that future earnings could be affected
by changes in our estimates relating to these matters.
We are involved in various claims and actions against us, most of which are covered by insurance. We believe that
our ultimate liability, if any, that may result from those claims and actions will not materially affect our financial
position, cash flows or results of operations.
Income Taxes. Our tax provisions are based on our expected taxable income, statutory rates and tax-planning
opportunities available to us in the various jurisdictions in which we operate. Determination of taxable income in
any jurisdiction requires the interpretation of the related tax laws. We are at risk that a taxing authority's final
determination of our tax liabilities may differ from our interpretation. Our effective tax rate may fluctuate from
year to year as our operations are conducted in different taxing jurisdictions, the amount of pre-tax income
fluctuates, the amounts of foreign income we anticipate will be repatriated and our estimates regarding the
realizability of items such as foreign tax credits may change. In 2014, 2013 and 2012, we recorded reductions of
income tax expense of $0.9 million, $0.7 million and $3.0 million, respectively, resulting from a combination of
expiring statutes of limitations and the resolution of uncertain tax positions related to certain tax liabilities we
recorded in prior years. Current income tax expense represents either nonresident withholding taxes or the
liabilities expected to be reflected on our income tax returns for the current year, while the net deferred income
tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on our
balance sheet.
We establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion
or all of the deferred tax assets will not be realized in the future. We currently have no valuation allowances.
While we have considered estimated future taxable income and ongoing prudent and feasible tax-planning
12OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT13
strategies in assessing the need for the valuation allowances, changes in these estimates and assumptions, as well
as changes in tax laws, could require us to provide for valuation allowances for our deferred tax assets. These
provisions for valuation allowances would impact our income tax provision in the period in which such
adjustments are identified and recorded.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that is greater than 50% likely of being realized upon ultimate settlement.
We account for any applicable interest and penalties on uncertain tax positions as a component of our provision
for income taxes on our financial statements. We decreased our provision for income taxes in 2014 by
$0.4 million for penalties and interest for uncertain tax positions, which brought our total liabilities for penalties
and interest on uncertain tax positions to $2.9 million on our balance sheet at December 31, 2014. Including
associated foreign tax credits and penalties and interest, we have accrued a net total of $6.5 million in the
caption "other long-term liabilities" on our balance sheet at December 31, 2014 for unrecognized tax benefits.
All additions or reductions to those liabilities affect our effective income tax rate in the periods of change.
We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12
months.
For a summary of our major accounting policies and a discussion of recently adopted accounting standards, please
see Note 1 to our Consolidated Financial Statements.
Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our operations and growth initiatives. At
December 31, 2014, we had working capital of $1.0 billion, including cash and cash equivalents of $431 million.
Additionally, we had $500 million available through a revolving credit facility and $50 million available under a
delayed-draw term loan facility, both under a credit agreement (the "Credit Agreement"), which is scheduled to
expire on October 25, 2019. The delayed-draw period to borrow additional funds under the term loan facility
expires in April 2015.
In October 2014, we entered into the Credit Agreement with a group of banks. The Credit Agreement provides for
a $300 million three-year delayed-draw term loan (the "Term Loan Facility") and a $500 million five-year
revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement replaces a prior credit agreement
that was scheduled to mature on January 6, 2017. Subject to certain conditions, the aggregate commitments
under the Revolving Credit Facility may be increased to up to $800 million at any time upon agreement between
us and existing or additional lenders. Borrowings under the Revolving Credit Facility and the Term Loan Facility
may be used for general corporate purposes. Simultaneously with the execution of the Credit Agreement and
pursuant to its terms, we repaid all amounts outstanding under, and terminated, the prior credit agreement.
The Term Loan Facility is scheduled to mature on October 27, 2017, and the Revolving Credit Facility is scheduled
to mature on October 25, 2019. Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or
the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin to be
initially based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on ratings
of our senior unsecured debt by both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services,
thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing
interest at the Adjusted Base Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and
from 0% to 0.500% for borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest
at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from
1.000% to 1.500% for borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the
per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50%
and (3) daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the
unused portions of the Revolving Credit Facility and the Term Loan 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, enter into
transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum
Leverage Ratio of 4.00 to 1.00. The Credit Agreement includes customary events of default and associated
remedies. As of December 31, 2014, we were in compliance with all the covenants set forth in the Credit
Agreement.
On November 21, 2014, we completed the public offering of $500 million aggregate principal amount of 4.650%
Senior Notes due 2024 (the "Senior Notes"). We will pay interest on the Senior Notes on May 15 and
November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the Senior Notes at specified redemption prices. We are using
the net proceeds from the offering for general corporate purposes, which may include funding the acquisition
described below and other capital expenditures and repurchases of outstanding shares of our common stock.
Our maximum outstanding borrowings during 2014 under the above and our prior revolving credit agreement were
$750 million, and our total interest costs, including commitment fees, were $4.5 million.
Our capital expenditures, including business acquisitions, for 2014, 2013 and 2012 were $427 million,
$394 million and $310 million, respectively. Our capital expenditures in 2014 included: $189 million for
upgrading and expanding our ROV fleet; $113 million in our Subsea Products segment, principally for growth of
our tooling and installation and workover control systems capabilities, expansion of our Houston manufacturing
facilities and establishment of manufacturing capabilities in Angola; and $92 million in our Subsea Projects
segment, including $40 million related to a new subsea support vessel scheduled for delivery in 2016. Our
capital expenditures in 2013 included $226 million for upgrading and expanding our ROV fleet and $103 million in
our Subsea Products segment, principally to increase the capabilities of our umbilical plants in the U.S. and
Scotland and to expand our rental and service tooling hardware offerings. Our capital expenditures in 2012
included $198 million for expanding and upgrading our ROV fleet. In 2012, we also invested $68 million in our
Subsea Products business, largely to increase the capabilities of our umbilical plants in Brazil and Scotland and to
expand our suite of subsea rental and service tooling.
For 2015, we expect our capital expenditures to be in the range of $200 million to $250 million, exclusive of
business acquisitions. This estimate includes $35 million in our Subsea Projects segment for construction
progress payments on a new subsea support vessel scheduled for delivery in 2016. In January 2015, we
announced that we have entered into an agreement to acquire C & C Technologies, Inc. ("C&C") for approximately
$230 million. We expect we will close the transaction in early April 2015, subject to customary closing
conditions. C&C is a provider of ocean-bottom mapping services in deepwater utilizing customized autonomous
underwater vehicles and provides marine construction surveys for both surface and subsea assets, as well as
satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C also provides land
and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow water conventional
geophysical surveys in the U.S. Gulf of Mexico.
Our capital expenditures during 2014, 2013 and 2012 included $189 million, $226 million and $198 million,
respectively, in our ROV segment, principally for additions and upgrades to our ROV fleet to expand the fleet and
replace units we retired and for facilities infrastructure to support our growing ROV fleet size. We plan to
continue adding ROVs at levels we determine appropriate to meet market opportunities as they arise. We added
49, 26, and 37 ROVs to our fleet and retired 17, 10 and 15 units during 2014, 2013 and 2012, respectively, and
transferred one to our Advanced Technologies segment in 2013, resulting in a total of 336 work-class systems in
the fleet at December 31, 2014.
14OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT15
strategies in assessing the need for the valuation allowances, changes in these estimates and assumptions, as well
as changes in tax laws, could require us to provide for valuation allowances for our deferred tax assets. These
provisions for valuation allowances would impact our income tax provision in the period in which such
adjustments are identified and recorded.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that is greater than 50% likely of being realized upon ultimate settlement.
We account for any applicable interest and penalties on uncertain tax positions as a component of our provision
for income taxes on our financial statements. We decreased our provision for income taxes in 2014 by
$0.4 million for penalties and interest for uncertain tax positions, which brought our total liabilities for penalties
and interest on uncertain tax positions to $2.9 million on our balance sheet at December 31, 2014. Including
associated foreign tax credits and penalties and interest, we have accrued a net total of $6.5 million in the
caption "other long-term liabilities" on our balance sheet at December 31, 2014 for unrecognized tax benefits.
All additions or reductions to those liabilities affect our effective income tax rate in the periods of change.
We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12
months.
For a summary of our major accounting policies and a discussion of recently adopted accounting standards, please
see Note 1 to our Consolidated Financial Statements.
Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our operations and growth initiatives. At
December 31, 2014, we had working capital of $1.0 billion, including cash and cash equivalents of $431 million.
Additionally, we had $500 million available through a revolving credit facility and $50 million available under a
delayed-draw term loan facility, both under a credit agreement (the "Credit Agreement"), which is scheduled to
expire on October 25, 2019. The delayed-draw period to borrow additional funds under the term loan facility
expires in April 2015.
In October 2014, we entered into the Credit Agreement with a group of banks. The Credit Agreement provides for
a $300 million three-year delayed-draw term loan (the "Term Loan Facility") and a $500 million five-year
revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement replaces a prior credit agreement
that was scheduled to mature on January 6, 2017. Subject to certain conditions, the aggregate commitments
under the Revolving Credit Facility may be increased to up to $800 million at any time upon agreement between
us and existing or additional lenders. Borrowings under the Revolving Credit Facility and the Term Loan Facility
may be used for general corporate purposes. Simultaneously with the execution of the Credit Agreement and
pursuant to its terms, we repaid all amounts outstanding under, and terminated, the prior credit agreement.
The Term Loan Facility is scheduled to mature on October 27, 2017, and the Revolving Credit Facility is scheduled
to mature on October 25, 2019. Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or
the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin to be
initially based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on ratings
of our senior unsecured debt by both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services,
thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing
interest at the Adjusted Base Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and
from 0% to 0.500% for borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest
at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from
1.000% to 1.500% for borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the
per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50%
and (3) daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the
unused portions of the Revolving Credit Facility and the Term Loan 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, enter into
transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum
Leverage Ratio of 4.00 to 1.00. The Credit Agreement includes customary events of default and associated
remedies. As of December 31, 2014, we were in compliance with all the covenants set forth in the Credit
Agreement.
On November 21, 2014, we completed the public offering of $500 million aggregate principal amount of 4.650%
Senior Notes due 2024 (the "Senior Notes"). We will pay interest on the Senior Notes on May 15 and
November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the Senior Notes at specified redemption prices. We are using
the net proceeds from the offering for general corporate purposes, which may include funding the acquisition
described below and other capital expenditures and repurchases of outstanding shares of our common stock.
Our maximum outstanding borrowings during 2014 under the above and our prior revolving credit agreement were
$750 million, and our total interest costs, including commitment fees, were $4.5 million.
Our capital expenditures, including business acquisitions, for 2014, 2013 and 2012 were $427 million,
$394 million and $310 million, respectively. Our capital expenditures in 2014 included: $189 million for
upgrading and expanding our ROV fleet; $113 million in our Subsea Products segment, principally for growth of
our tooling and installation and workover control systems capabilities, expansion of our Houston manufacturing
facilities and establishment of manufacturing capabilities in Angola; and $92 million in our Subsea Projects
segment, including $40 million related to a new subsea support vessel scheduled for delivery in 2016. Our
capital expenditures in 2013 included $226 million for upgrading and expanding our ROV fleet and $103 million in
our Subsea Products segment, principally to increase the capabilities of our umbilical plants in the U.S. and
Scotland and to expand our rental and service tooling hardware offerings. Our capital expenditures in 2012
included $198 million for expanding and upgrading our ROV fleet. In 2012, we also invested $68 million in our
Subsea Products business, largely to increase the capabilities of our umbilical plants in Brazil and Scotland and to
expand our suite of subsea rental and service tooling.
For 2015, we expect our capital expenditures to be in the range of $200 million to $250 million, exclusive of
business acquisitions. This estimate includes $35 million in our Subsea Projects segment for construction
progress payments on a new subsea support vessel scheduled for delivery in 2016. In January 2015, we
announced that we have entered into an agreement to acquire C & C Technologies, Inc. ("C&C") for approximately
$230 million. We expect we will close the transaction in early April 2015, subject to customary closing
conditions. C&C is a provider of ocean-bottom mapping services in deepwater utilizing customized autonomous
underwater vehicles and provides marine construction surveys for both surface and subsea assets, as well as
satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C also provides land
and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow water conventional
geophysical surveys in the U.S. Gulf of Mexico.
Our capital expenditures during 2014, 2013 and 2012 included $189 million, $226 million and $198 million,
respectively, in our ROV segment, principally for additions and upgrades to our ROV fleet to expand the fleet and
replace units we retired and for facilities infrastructure to support our growing ROV fleet size. We plan to
continue adding ROVs at levels we determine appropriate to meet market opportunities as they arise. We added
49, 26, and 37 ROVs to our fleet and retired 17, 10 and 15 units during 2014, 2013 and 2012, respectively, and
transferred one to our Advanced Technologies segment in 2013, resulting in a total of 336 work-class systems in
the fleet at December 31, 2014.
14OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT15
In 2012, we rechartered a deepwater vessel, the Ocean Intervention III, for two years, with extension options for
up to three additional years, and which we have extended to January 2016. We have also chartered an additional
larger deepwater vessel, the Olympic Intervention IV, for an initial term of five years, which began in the third
quarter of 2008, and which we have extended to July 2016. We outfitted each of these deepwater vessels with
two of our high-specification work-class ROVs, and we have been utilizing these vessels to perform subsea
hardware installation and inspection, maintenance and repair projects, and to conduct well intervention services
in the ultra-deep waters of the U.S. Gulf of Mexico and offshore Angola. In 2012, we moved the Ocean
Intervention III to Angola and chartered the Bourbon Oceanteam 101 to work on a three-year field support
contract. We have extended the charter of the Bourbon Oceanteam 101 to January 2017. Under the field support
contract, we supply project management, engineering, and the two chartered vessels, each equipped with two
Oceaneering high-specification work-class ROVs. We are also providing ROV tooling, asset integrity services and
installation and workover control system services. We also provide other chartered vessels and one barge on an
as-requested basis from our customer. The customer for this contract has exercised its options to extend the
contract to January 2017. In March 2013, we commenced a five-year charter for a Jones Act-compliant multi-
service support vessel that we are using in the U.S. Gulf of Mexico. We have outfitted the vessel, which we have
renamed the Ocean Alliance, with two of our high-specification work-class ROVs. In January 2015, we commenced
a two-year multi-service vessel bareboat charter agreement with a customer for the use of the Ocean Alliance in
the U.S. Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multi-service subsea marine
support vessel. We have made modifications to the vessel, including reconfiguration to accommodate two of our
high-specification work-class ROVs. We anticipate we will continue to use the vessel in the U.S. Gulf of Mexico to
perform inspection, maintenance and repair projects and hardware installations. We have options to extend the
charter for up to three additional years. In November 2014, we commenced a two-year charter for the use of the
Island Pride, a multi-service subsea marine support vessel. We have modified the vessel to enhance its service
capabilities, including a reconfiguration to accommodate two of our high-specification work-class ROVs. We are
using and anticipate continuing to use the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance
and repair projects and hardware installations. We have options to extend the charter for up to three additional
years.
We also charter or lease dynamically positioned vessels on a short-term basis.
In 2010, we acquired a vessel, which we renamed the Ocean Patriot, and we have converted it to a dynamically
positioned saturation diving and ROV service vessel. We installed a 12-man saturation ("SAT") diving system and
one work-class ROV on the vessel, and we placed the vessel into service in December 2011.
During the third quarter of 2013, we signed an agreement with a shipyard for the construction of a subsea support
vessel, to be named the Ocean Evolution. We expect delivery of that vessel by the end of the first quarter of 2016.
Our cash payments for the vessel will be spread over the construction period. We intend for the vessel to be U.S.-
flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to have an overall
length of 353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-
ton active heave-compensated crane, and a working moonpool. We expect to outfit the vessel with two of our
high specification work-class ROVs. The vessel will also be equipped with a satellite communications system
capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the
vessel will be used to augment our ability to provide subsea intervention services in the ultra-deep waters of the
U.S. Gulf of Mexico. These services are required to perform inspection, maintenance and repair projects and
hardware installations.
Our principal source of cash from operating activities is our net income, adjusted for the non-cash expenses of
depreciation and amortization, deferred income taxes and noncash compensation under our restricted stock plans.
Our $722 million, $531 million and $438 million of cash provided from operating activities in 2014, 2013 and
2012, respectively, were affected by cash increases/(decreases) of $(8) million, $(102) million and $(94) million,
respectively, of changes in accounts receivable, $66 million, $(111) million and $(76) million, respectively, of
changes in inventory and $(44) million, $128 million, and $87 million, respectively, in changes in accounts
payable and accrued liabilities. In 2014, our inventory decreased as a result of the use of inventory in
progressing and completing projects that had been in our Subsea Products backlog at December 31, 2013 and our
expectation of lower Subsea Products demand in 2015 as compared to 2014. In 2013, the increases in accounts
receivable and accounts payable and accrued liabilities reflect the increase in our revenue in 2013. The increase
in inventory in 2013 is consistent with the increase in our backlog over 2012. In 2012, the increase in accounts
receivable was largely attributable to increased revenue in the fourth quarter of 2012 compared to the fourth
quarter of 2011. The increase in inventory in 2012 was principally in our Subsea Products and ROV segments:
Subsea Products in preparation for production related to the higher backlog levels at December 31, 2012 as
compared to those at December 31, 2011; and ROV in anticipation of adding additional units. In 2012, the
changes in accounts payable and accrued expenses related to higher accruals for payroll and project costs and an
increase in progress payments received from customers.
In 2014, we used a net of $419 million in investing activities, with $427 million used to fund the capital
expenditures and business acquisitions described above. In 2013, we used a net of $378 million in investing
activities, with $394 million used to fund the capital expenditures and business acquisitions described above. In
2012, we used $306 million in investing activities, with $310 million used to fund the capital expenditures and
business acquisitions described above.
In 2014, we generated $45 million in financing activities. We borrowed $742 million, net of associated expenses
and debt discount, repurchased 8.9 million shares for $590 million and paid cash dividends of $110 million. In
2013, we used $180 million in financing activities, principally for repayment against our revolving credit facility
of $94 million and the payment of cash dividends of $91 million. In 2012, we used $118 million in financing
activities, principally for the payment of cash dividends of $75 million, repayment against our revolving credit
facility of $26 million and common stock share repurchases of $19 million.
In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares of our common
stock. In 2014, we completed the purchase of the shares authorized under this plan by repurchasing the
remaining 8.9 million shares for $590 million. The total cost for the repurchase of the 12 million shares of our
common stock was $677 million. As of December 31, 2014, we retained 11.2 million of the shares we had
repurchased. We expect to hold the shares repurchased under the plan for future use.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Because of our significant foreign operations, we are exposed to currency fluctuations and exchange rate risks.
We generally minimize these risks primarily through matching, to the extent possible, revenue and expense in the
various currencies in which we operate. Cumulative translation adjustments as of December 31, 2014 relate
primarily to our net investments in, including long-term loans to, our foreign subsidiaries. A stronger U.S. dollar
against the U.K. pound sterling and the Norwegian kroner would result in lower operating income. See
"Quantitative and Qualitative Disclosures About Market Risk" below.
16OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT17
In 2012, we rechartered a deepwater vessel, the Ocean Intervention III, for two years, with extension options for
up to three additional years, and which we have extended to January 2016. We have also chartered an additional
larger deepwater vessel, the Olympic Intervention IV, for an initial term of five years, which began in the third
quarter of 2008, and which we have extended to July 2016. We outfitted each of these deepwater vessels with
two of our high-specification work-class ROVs, and we have been utilizing these vessels to perform subsea
hardware installation and inspection, maintenance and repair projects, and to conduct well intervention services
in the ultra-deep waters of the U.S. Gulf of Mexico and offshore Angola. In 2012, we moved the Ocean
Intervention III to Angola and chartered the Bourbon Oceanteam 101 to work on a three-year field support
contract. We have extended the charter of the Bourbon Oceanteam 101 to January 2017. Under the field support
contract, we supply project management, engineering, and the two chartered vessels, each equipped with two
Oceaneering high-specification work-class ROVs. We are also providing ROV tooling, asset integrity services and
installation and workover control system services. We also provide other chartered vessels and one barge on an
as-requested basis from our customer. The customer for this contract has exercised its options to extend the
contract to January 2017. In March 2013, we commenced a five-year charter for a Jones Act-compliant multi-
service support vessel that we are using in the U.S. Gulf of Mexico. We have outfitted the vessel, which we have
renamed the Ocean Alliance, with two of our high-specification work-class ROVs. In January 2015, we commenced
a two-year multi-service vessel bareboat charter agreement with a customer for the use of the Ocean Alliance in
the U.S. Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multi-service subsea marine
support vessel. We have made modifications to the vessel, including reconfiguration to accommodate two of our
high-specification work-class ROVs. We anticipate we will continue to use the vessel in the U.S. Gulf of Mexico to
perform inspection, maintenance and repair projects and hardware installations. We have options to extend the
charter for up to three additional years. In November 2014, we commenced a two-year charter for the use of the
Island Pride, a multi-service subsea marine support vessel. We have modified the vessel to enhance its service
capabilities, including a reconfiguration to accommodate two of our high-specification work-class ROVs. We are
using and anticipate continuing to use the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance
and repair projects and hardware installations. We have options to extend the charter for up to three additional
years.
We also charter or lease dynamically positioned vessels on a short-term basis.
In 2010, we acquired a vessel, which we renamed the Ocean Patriot, and we have converted it to a dynamically
positioned saturation diving and ROV service vessel. We installed a 12-man saturation ("SAT") diving system and
one work-class ROV on the vessel, and we placed the vessel into service in December 2011.
During the third quarter of 2013, we signed an agreement with a shipyard for the construction of a subsea support
vessel, to be named the Ocean Evolution. We expect delivery of that vessel by the end of the first quarter of 2016.
Our cash payments for the vessel will be spread over the construction period. We intend for the vessel to be U.S.-
flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to have an overall
length of 353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-
ton active heave-compensated crane, and a working moonpool. We expect to outfit the vessel with two of our
high specification work-class ROVs. The vessel will also be equipped with a satellite communications system
capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the
vessel will be used to augment our ability to provide subsea intervention services in the ultra-deep waters of the
U.S. Gulf of Mexico. These services are required to perform inspection, maintenance and repair projects and
hardware installations.
Our principal source of cash from operating activities is our net income, adjusted for the non-cash expenses of
depreciation and amortization, deferred income taxes and noncash compensation under our restricted stock plans.
Our $722 million, $531 million and $438 million of cash provided from operating activities in 2014, 2013 and
2012, respectively, were affected by cash increases/(decreases) of $(8) million, $(102) million and $(94) million,
respectively, of changes in accounts receivable, $66 million, $(111) million and $(76) million, respectively, of
changes in inventory and $(44) million, $128 million, and $87 million, respectively, in changes in accounts
payable and accrued liabilities. In 2014, our inventory decreased as a result of the use of inventory in
progressing and completing projects that had been in our Subsea Products backlog at December 31, 2013 and our
expectation of lower Subsea Products demand in 2015 as compared to 2014. In 2013, the increases in accounts
receivable and accounts payable and accrued liabilities reflect the increase in our revenue in 2013. The increase
in inventory in 2013 is consistent with the increase in our backlog over 2012. In 2012, the increase in accounts
receivable was largely attributable to increased revenue in the fourth quarter of 2012 compared to the fourth
quarter of 2011. The increase in inventory in 2012 was principally in our Subsea Products and ROV segments:
Subsea Products in preparation for production related to the higher backlog levels at December 31, 2012 as
compared to those at December 31, 2011; and ROV in anticipation of adding additional units. In 2012, the
changes in accounts payable and accrued expenses related to higher accruals for payroll and project costs and an
increase in progress payments received from customers.
In 2014, we used a net of $419 million in investing activities, with $427 million used to fund the capital
expenditures and business acquisitions described above. In 2013, we used a net of $378 million in investing
activities, with $394 million used to fund the capital expenditures and business acquisitions described above. In
2012, we used $306 million in investing activities, with $310 million used to fund the capital expenditures and
business acquisitions described above.
In 2014, we generated $45 million in financing activities. We borrowed $742 million, net of associated expenses
and debt discount, repurchased 8.9 million shares for $590 million and paid cash dividends of $110 million. In
2013, we used $180 million in financing activities, principally for repayment against our revolving credit facility
of $94 million and the payment of cash dividends of $91 million. In 2012, we used $118 million in financing
activities, principally for the payment of cash dividends of $75 million, repayment against our revolving credit
facility of $26 million and common stock share repurchases of $19 million.
In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares of our common
stock. In 2014, we completed the purchase of the shares authorized under this plan by repurchasing the
remaining 8.9 million shares for $590 million. The total cost for the repurchase of the 12 million shares of our
common stock was $677 million. As of December 31, 2014, we retained 11.2 million of the shares we had
repurchased. We expect to hold the shares repurchased under the plan for future use.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Because of our significant foreign operations, we are exposed to currency fluctuations and exchange rate risks.
We generally minimize these risks primarily through matching, to the extent possible, revenue and expense in the
various currencies in which we operate. Cumulative translation adjustments as of December 31, 2014 relate
primarily to our net investments in, including long-term loans to, our foreign subsidiaries. A stronger U.S. dollar
against the U.K. pound sterling and the Norwegian kroner would result in lower operating income. See
"Quantitative and Qualitative Disclosures About Market Risk" below.
16OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT17
Results of Operations
Additional information on our business segments is shown in Note 7 of the Notes to Consolidated Financial
Statements included in this report.
Oilfield. The table that follows sets out revenue and profitability for the business segments within our Oilfield
business. In the ROV section of the table that follows, "Days available" includes all days from the first day that
an ROV is placed in 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.
are designed for use around the world in water depths of 10,000 feet or more. We added 49, 26 and 37 ROVs in
2014, 2013 and 2012, respectively, while retiring 42 units over the three-year period and transferring one to our
Advanced Technologies segment over that period. We have grown our ROV fleet size to 336 at December 31, 2014
from 304 at December 31, 2013 and 289 at December 31, 2012. We plan to continue adding ROVs at levels we
determine appropriate to meet market opportunities.
For 2014, our ROV revenue and operating income improved over 2013 from higher demand, particularly offshore
Africa and in the U.S. Gulf of Mexico. ROV days on hire increased by 7% and revenue per day on hire increased
1%.
(dollars in thousands)
Remotely Operated Vehicles
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Days available
Days utilized
Utilization %
Subsea Products
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Backlog at end of period
Subsea Projects
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Asset Integrity
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Total Oilfield
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Year Ended December 31,
2013
2014
2012
For 2013, our ROV revenue and operating income improved over 2012 from:
$ 1,069,022
361,466
$
34%
320,550
30%
117,882
98,302
83%
1,238,746
364,760
29%
281,239
23%
690,000
588,572
124,418
21%
107,852
18%
500,237
87,236
17%
55,469
11%
$ 3,396,577
937,880
28%
765,110
23%
981,728 $
328,031
33%
281,973
29%
108,201
91,618
85%
1,027,792
311,206
30%
231,050
22%
906,000
509,440
108,758
21%
93,865
18%
481,919
81,856
17%
55,243
11%
853,520
289,929
34%
248,972
29%
102,225
82,126
80%
829,034
241,240
29%
170,959
21%
681,000
379,571
80,944
21%
63,461
17%
435,381
71,100
16%
45,196
10%
$ 3,000,879 $ 2,497,506
683,213
829,851
28%
662,131
22%
27%
528,588
21%
• higher demand:
o
o
o
o
o
in the U.S. Gulf of Mexico;
offshore Africa;
offshore India;
offshore Canada;
offshore Australia; and
• expansion of our fleet to meet the increased demand.
In 2013, our ROV general and administrative expenses included a charge of $3.3 million to record an allowance for
doubtful accounts related to a customer in Brazil that filed for restructuring under Brazilian bankruptcy law.
We anticipate ROV operating income to decrease in 2015 as a result of decreases in average revenue per day on
hire and the number of days on hire for both drilling support and vessel-based services, attributable to market
conditions described under "Overview" above. We anticipate placing more than 10 new vehicles into service in
2015. We normally expect to retire, on average, 4% to 5% of our fleet on an annual basis, although we may
exceed that in 2015 due to market conditions.
Subsea Products revenue, operating income and margin were higher in 2014 than in 2013 from increased demand
across our major product lines, led by tooling and umbilicals. Subsea Products revenue, operating income and
margin were higher in 2013 than in 2012 from increased demand across our major product lines, principally for
subsea hardware used in offshore field developments and for clamp connector systems.
We anticipate our Subsea Products segment operating income in 2015 to be lower than in 2014, as we expect
lower demand to support field abandonment projects and for BOP control system replacements. Our Subsea
Products backlog was $690 million at December 31, 2014, approximately 24% lower than it was at
December 31, 2013. The decrease in backlog is attributable to umbilicals.
Our 2014 revenue and operating income for Subsea Projects was higher than in 2013 on increased deepwater
vessel service activity, including work associated with the Bourbon Evolution 803, a vessel we chartered on a
short-term basis during 2014 and have extended to April 2015. We also commenced diving services offshore
Angola in 2014. Our 2013 revenue and operating income was higher than in 2012 on increased deepwater vessel
service activity. For 2015, we anticipate lower operating income resulting from lower vessel pricing in the U.S.
Gulf of Mexico and the completion during 2015 of the work associated with the Bourbon Evolution 803.
Our Asset Integrity results in 2014 were fairly comparable to those of 2013. This segment's revenue and operating
income were higher in 2013 over 2012 due to high demand in most of our geographic areas, particularly Africa
and Australia. We anticipate our 2015 operating income for Asset Integrity to be lower than in 2014 on reduced
demand as a result of planned maintenance deferrals by our customers and generally lower pricing.
In response to continued increasing demand to support deepwater drilling and vessel-based inspection,
maintenance and repair ("IMR") and installation work, we have continued to build new ROVs. These new vehicles
18OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT19
Results of Operations
Statements included in this report.
Additional information on our business segments is shown in Note 7 of the Notes to Consolidated Financial
Oilfield. The table that follows sets out revenue and profitability for the business segments within our Oilfield
business. In the ROV section of the table that follows, "Days available" includes all days from the first day that
an ROV is placed in 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.
are designed for use around the world in water depths of 10,000 feet or more. We added 49, 26 and 37 ROVs in
2014, 2013 and 2012, respectively, while retiring 42 units over the three-year period and transferring one to our
Advanced Technologies segment over that period. We have grown our ROV fleet size to 336 at December 31, 2014
from 304 at December 31, 2013 and 289 at December 31, 2012. We plan to continue adding ROVs at levels we
determine appropriate to meet market opportunities.
For 2014, our ROV revenue and operating income improved over 2013 from higher demand, particularly offshore
Africa and in the U.S. Gulf of Mexico. ROV days on hire increased by 7% and revenue per day on hire increased
1%.
For 2013, our ROV revenue and operating income improved over 2012 from:
• higher demand:
o
o
o
o
o
in the U.S. Gulf of Mexico;
offshore Africa;
offshore India;
offshore Canada;
offshore Australia; and
• expansion of our fleet to meet the increased demand.
In 2013, our ROV general and administrative expenses included a charge of $3.3 million to record an allowance for
doubtful accounts related to a customer in Brazil that filed for restructuring under Brazilian bankruptcy law.
We anticipate ROV operating income to decrease in 2015 as a result of decreases in average revenue per day on
hire and the number of days on hire for both drilling support and vessel-based services, attributable to market
conditions described under "Overview" above. We anticipate placing more than 10 new vehicles into service in
2015. We normally expect to retire, on average, 4% to 5% of our fleet on an annual basis, although we may
exceed that in 2015 due to market conditions.
Subsea Products revenue, operating income and margin were higher in 2014 than in 2013 from increased demand
across our major product lines, led by tooling and umbilicals. Subsea Products revenue, operating income and
margin were higher in 2013 than in 2012 from increased demand across our major product lines, principally for
subsea hardware used in offshore field developments and for clamp connector systems.
We anticipate our Subsea Products segment operating income in 2015 to be lower than in 2014, as we expect
lower demand to support field abandonment projects and for BOP control system replacements. Our Subsea
Products backlog was $690 million at December 31, 2014, approximately 24% lower than it was at
December 31, 2013. The decrease in backlog is attributable to umbilicals.
Our 2014 revenue and operating income for Subsea Projects was higher than in 2013 on increased deepwater
vessel service activity, including work associated with the Bourbon Evolution 803, a vessel we chartered on a
short-term basis during 2014 and have extended to April 2015. We also commenced diving services offshore
Angola in 2014. Our 2013 revenue and operating income was higher than in 2012 on increased deepwater vessel
service activity. For 2015, we anticipate lower operating income resulting from lower vessel pricing in the U.S.
Gulf of Mexico and the completion during 2015 of the work associated with the Bourbon Evolution 803.
Our Asset Integrity results in 2014 were fairly comparable to those of 2013. This segment's revenue and operating
income were higher in 2013 over 2012 due to high demand in most of our geographic areas, particularly Africa
and Australia. We anticipate our 2015 operating income for Asset Integrity to be lower than in 2014 on reduced
demand as a result of planned maintenance deferrals by our customers and generally lower pricing.
(dollars in thousands)
Remotely Operated Vehicles
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Days available
Days utilized
Utilization %
Subsea Products
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Backlog at end of period
Subsea Projects
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Asset Integrity
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Total Oilfield
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Year Ended December 31,
2014
2013
2012
$ 1,069,022
$
361,466
981,728 $
328,031
853,520
289,929
320,550
281,973
248,972
117,882
98,302
102,225
82,126
1,238,746
364,760
1,027,792
311,206
829,034
241,240
281,239
231,050
170,959
690,000
906,000
681,000
33%
29%
108,201
91,618
85%
30%
22%
509,440
108,758
21%
93,865
18%
481,919
81,856
17%
55,243
11%
34%
29%
80%
29%
21%
379,571
80,944
63,461
21%
17%
435,381
71,100
45,196
16%
10%
34%
30%
83%
29%
23%
588,572
124,418
107,852
21%
18%
500,237
87,236
55,469
17%
11%
$ 3,396,577
$ 3,000,879 $ 2,497,506
937,880
829,851
683,213
765,110
662,131
528,588
28%
22%
27%
21%
28%
23%
In response to continued increasing demand to support deepwater drilling and vessel-based inspection,
maintenance and repair ("IMR") and installation work, we have continued to build new ROVs. These new vehicles
18OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT19
Advanced Technologies. The table that follows sets out revenue and profitability for this segment.
(dollars in thousands)
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
$
2014
263,047
32,410
13,230
$
Year Ended December 31,
2013
286,140 $
44,576
16%
24,954
9%
12%
5%
2012
285,098
38,681
14%
21,182
7%
Advanced Technologies operating income for 2014 was lower than that of 2013 on decreased activity on
commercial theme park projects and vessel maintenance work for the U.S. Navy, and lower margins on the theme
park work we did perform. Our Advanced Technologies operating income in 2013 was higher than that of 2012
due to increases in work and operational efficiency on theme park projects and an increase in vessel maintenance
and repair work for the U.S. Navy. We expect a significant improvement in our Advanced Technologies operating
income in 2015, due to the resolution of execution issues on certain U.S. Navy and commercial projects that
hampered our results in 2014, as well as additional industrial project work.
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 and bonuses, as well as other general expenses. Our unallocated expenses within operating
income consist of those within gross margin plus general and administrative expenses related to corporate
functions.
The table that follows sets out our unallocated expenses.
(dollars in thousands)
Gross margin expenses
% of revenue
Operating expenses
% of revenue
Year Ended December 31,
2013
2014
$ (111,089) $ (108,891) $
3%
(150,010)
4%
3%
(141,969)
4%
2012
(94,036)
3%
(121,173)
4%
Our unallocated gross margin and operating expenses increased in each of 2014 and 2013, primarily due to higher
compensation related to incentive plans. We expect higher expenses in 2015, as we improve our information
technology infrastructure, including increased costs for cybersecurity.
Other. The table that follows sets forth our significant financial statement items below the operating income
line.
(dollars in thousands)
Interest income
Interest expense, net of amounts capitalized
Equity earnings (loss) of unconsolidated affiliates
Other income (expense), net
Provision for income taxes
Year Ended December 31,
2013
2014
2012
$
293 $
554 $
(4,708)
(51)
(387)
195,148
(2,194)
133
(1,273)
170,836
1,935
(4,218)
1,673
(6,065)
132,905
Interest expense increased in 2014 compared to 2013 on higher debt levels, including borrowings described in
"Liquidity and Capital Resources" above. Interest expense decreased in 2013 compared to 2012 on decreasing debt
levels as we paid down our debt to zero during 2013. We capitalized $0.7 million of interest in 2014. We did not
capitalize any interest in 2013 or 2012.
We record results from our 50% investment in Medusa Spar LLC using the equity method. Medusa Spar LLC owns
75% of a production spar in the U.S. Gulf of Mexico and earns its revenue from fees charged on production
processed through the facility. Throughput declined in each of 2014 and 2013 from the immediately preceding
year due to normal well production decline.
We expect Medusa Spar LLC revenue will decline in 2015 due to normal production declines from existing wells.
Medusa Spar LLC's revenue could be increased if the operator of the producing wells receives regulatory approval
to start producing from other zones in the existing wells, which are anticipated to have higher flow rates than the
currently-producing zones, or is able to connect more wells to the spar.
Included in other income (expenses), net are foreign currency transaction gains/(losses) of $(0.5) million,
$0.1 million and $(5.4) million for 2014, 2013 and 2012, respectively.
Our effective tax rate, including foreign, state and local taxes, was 31.3%, 31.5%, and 31.5% for 2014, 2013 and
2012, respectively, which included a combination of expiring statutes of limitations and the resolution of
uncertain tax positions of $0.9 million, $0.7 million and $3.0 million, respectively, related to certain liabilities for
uncertain tax positions we recorded in prior years. The primary difference between our effective tax rates and the
U.S. federal statutory rate of 35% reflects our intent to indefinitely reinvest in certain of our international
operations. Therefore, we are no longer providing for U.S. taxes on a portion of our foreign earnings. We
anticipate our effective tax rate in 2015 will be approximately 31.3%.
Off-Balance Sheet Arrangements
Contractual Obligations
We do not have any off-balance sheet arrangements, as defined by SEC rules.
At December 31, 2014, we had payments due under contractual obligations as follows:
(dollars in thousands)
Payments due by period
Long-term Debt
Vessel Charters
Other Operating Leases
Purchase Obligations
Total
2015
2016-2017 2018-2019 After 2019
$
750,000 $
— $
— $
500,000
294,583
177,791
288,821
101,612
25,778
258,749
250,000 $
143,250
41,825
29,462
49,721
32,126
300
—
78,062
310
Other Long-term Obligations reflected on
our balance sheet under GAAP
TOTAL
63,131
1,536
3,199
3,384
55,012
$ 1,574,326 $
387,675 $
467,736 $
85,531 $
633,384
At December 31, 2014, we had outstanding purchase order commitments totaling $289 million, including
approximately $64 million for the construction of a new subsea support vessel scheduled for delivery in 2016 and
$27 million for specialized steel tubes to be used in our manufacturing of steel tube umbilicals. We have ordered
the specialized steel tubes in advance to meet expected sales commitments. Should we decide not to accept
delivery of the steel tubes, we would incur cancellation charges of at least 10% of the amount canceled.
In 2001, we entered into an agreement with our Chairman of the Board of Directors (the "Chairman") who was
also then our Chief Executive Officer. That agreement was amended in 2006 and in 2008. Pursuant to the
amended agreement, the Chairman relinquished his position as Chief Executive Officer in May 2006 and began his
post-employment service period on December 31, 2006, which continued through August 15, 2011, during which
service period the Chairman, acting as an independent contractor, agreed to serve as nonexecutive Chairman of
our Board of Directors. The agreement provides the Chairman with post-employment benefits for ten years
following August 15, 2011. The agreement also provides for medical coverage on an after-tax basis to the
Chairman, his spouse and children for their lives. We recognized the net present value of the post-employment
20OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT21
Advanced Technologies. The table that follows sets out revenue and profitability for this segment.
(dollars in thousands)
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Year Ended December 31,
2014
2013
$
263,047
$
286,140 $
44,576
16%
24,954
9%
2012
285,098
38,681
21,182
14%
7%
32,410
13,230
12%
5%
Advanced Technologies operating income for 2014 was lower than that of 2013 on decreased activity on
commercial theme park projects and vessel maintenance work for the U.S. Navy, and lower margins on the theme
park work we did perform. Our Advanced Technologies operating income in 2013 was higher than that of 2012
due to increases in work and operational efficiency on theme park projects and an increase in vessel maintenance
and repair work for the U.S. Navy. We expect a significant improvement in our Advanced Technologies operating
income in 2015, due to the resolution of execution issues on certain U.S. Navy and commercial projects that
hampered our results in 2014, as well as additional industrial project work.
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 and bonuses, as well as other general expenses. Our unallocated expenses within operating
income consist of those within gross margin plus general and administrative expenses related to corporate
functions.
The table that follows sets out our unallocated expenses.
Year Ended December 31,
2014
2013
2012
$ (111,089) $ (108,891) $
(94,036)
(150,010)
(141,969)
(121,173)
3%
4%
3%
4%
3%
4%
(dollars in thousands)
Gross margin expenses
% of revenue
Operating expenses
% of revenue
line.
(dollars in thousands)
Interest income
Our unallocated gross margin and operating expenses increased in each of 2014 and 2013, primarily due to higher
compensation related to incentive plans. We expect higher expenses in 2015, as we improve our information
technology infrastructure, including increased costs for cybersecurity.
Other. The table that follows sets forth our significant financial statement items below the operating income
Interest expense, net of amounts capitalized
Equity earnings (loss) of unconsolidated affiliates
Other income (expense), net
Provision for income taxes
Year Ended December 31,
2014
2013
2012
$
293 $
554 $
(4,708)
(51)
(387)
195,148
(2,194)
133
(1,273)
170,836
1,935
(4,218)
1,673
(6,065)
132,905
Interest expense increased in 2014 compared to 2013 on higher debt levels, including borrowings described in
"Liquidity and Capital Resources" above. Interest expense decreased in 2013 compared to 2012 on decreasing debt
levels as we paid down our debt to zero during 2013. We capitalized $0.7 million of interest in 2014. We did not
capitalize any interest in 2013 or 2012.
We record results from our 50% investment in Medusa Spar LLC using the equity method. Medusa Spar LLC owns
75% of a production spar in the U.S. Gulf of Mexico and earns its revenue from fees charged on production
processed through the facility. Throughput declined in each of 2014 and 2013 from the immediately preceding
year due to normal well production decline.
We expect Medusa Spar LLC revenue will decline in 2015 due to normal production declines from existing wells.
Medusa Spar LLC's revenue could be increased if the operator of the producing wells receives regulatory approval
to start producing from other zones in the existing wells, which are anticipated to have higher flow rates than the
currently-producing zones, or is able to connect more wells to the spar.
Included in other income (expenses), net are foreign currency transaction gains/(losses) of $(0.5) million,
$0.1 million and $(5.4) million for 2014, 2013 and 2012, respectively.
Our effective tax rate, including foreign, state and local taxes, was 31.3%, 31.5%, and 31.5% for 2014, 2013 and
2012, respectively, which included a combination of expiring statutes of limitations and the resolution of
uncertain tax positions of $0.9 million, $0.7 million and $3.0 million, respectively, related to certain liabilities for
uncertain tax positions we recorded in prior years. The primary difference between our effective tax rates and the
U.S. federal statutory rate of 35% reflects our intent to indefinitely reinvest in certain of our international
operations. Therefore, we are no longer providing for U.S. taxes on a portion of our foreign earnings. We
anticipate our effective tax rate in 2015 will be approximately 31.3%.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by SEC rules.
Contractual Obligations
At December 31, 2014, we had payments due under contractual obligations as follows:
(dollars in thousands)
Payments due by period
Long-term Debt
Vessel Charters
Other Operating Leases
Purchase Obligations
Other Long-term Obligations reflected on
our balance sheet under GAAP
TOTAL
$
Total
750,000 $
294,583
177,791
288,821
2015
— $
101,612
25,778
258,749
2016-2017 2018-2019 After 2019
500,000
—
78,062
310
250,000 $
143,250
41,825
29,462
49,721
32,126
300
— $
63,131
$ 1,574,326 $
1,536
387,675 $
3,199
467,736 $
3,384
85,531 $
55,012
633,384
At December 31, 2014, we had outstanding purchase order commitments totaling $289 million, including
approximately $64 million for the construction of a new subsea support vessel scheduled for delivery in 2016 and
$27 million for specialized steel tubes to be used in our manufacturing of steel tube umbilicals. We have ordered
the specialized steel tubes in advance to meet expected sales commitments. Should we decide not to accept
delivery of the steel tubes, we would incur cancellation charges of at least 10% of the amount canceled.
In 2001, we entered into an agreement with our Chairman of the Board of Directors (the "Chairman") who was
also then our Chief Executive Officer. That agreement was amended in 2006 and in 2008. Pursuant to the
amended agreement, the Chairman relinquished his position as Chief Executive Officer in May 2006 and began his
post-employment service period on December 31, 2006, which continued through August 15, 2011, during which
service period the Chairman, acting as an independent contractor, agreed to serve as nonexecutive Chairman of
our Board of Directors. The agreement provides the Chairman with post-employment benefits for ten years
following August 15, 2011. The agreement also provides for medical coverage on an after-tax basis to the
Chairman, his spouse and children for their lives. We recognized the net present value of the post-employment
20OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT21
benefits over the expected service period. Our total accrued liabilities, current and long-term, under this post-
employment benefit were $5.7 million and $6.3 million at December 31, 2014 and 2013, respectively.
Controls and Procedures
Effects of Inflation and Changing Prices
Our financial statements are prepared in accordance with generally accepted accounting principles in the United
States, using historical U.S. dollar accounting, or historical cost. Statements based on historical cost, however,
do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the
dollar, especially during times of significant and continued inflation.
In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost
of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we
reflect in the original price, or through price escalation clauses in our contracts. Inflation has not had a material
effect on our revenue or income from operations in the past three years, and no such effect is expected in the
near future.
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. We do
not believe these risks are material. We have not entered into any market risk sensitive instruments for
speculative or trading purposes. We currently have one interest rate swap in place on $100 million of our 4.650%
Senior Notes. See Note 6 of Notes to Consolidated Financial Statements included in this report for a description
of this interest rate swap. We typically manage our exposure to interest rate changes through the use of a
combination of fixed- and floating-rate debt. See Note 5 of Notes to Consolidated Financial Statements included
in this report for a description of our revolving credit facility and interest rates on our borrowings. We believe
significant interest rate changes would not have a material near-term impact on our future earnings or cash flows.
Because we operate in various oil and gas exploration and production regions in the world, we conduct a portion
of our business in currencies other than the U.S. dollar. The functional currency for several of our international
operations is the applicable local currency. A stronger U.S. dollar against the U.K. pound sterling and the
Norwegian kroner would result in lower operating income. We manage our exposure to changes in foreign
exchange rates principally through arranging compensation in U.S. dollars or freely convertible currency and, to
the extent possible, by limiting compensation received in other currencies to amounts necessary to meet
obligations denominated in those currencies. We use the exchange rates in effect as of the balance sheet date to
translate assets and liabilities as to which the functional currency is the local currency, resulting in translation
adjustments that we reflect as accumulated other comprehensive income or loss in the shareholders' equity
section of our Consolidated Balance Sheets. We recorded adjustments of $(129) million, $(71) million and
$45 million to our equity accounts in 2014, 2013 and 2012, 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 dollar.
We recorded foreign currency transaction gains (losses) of $(0.5) million, $0.1 million and $(5.4) million that are
included in Other income (expense), net in our Consolidated Statements of Income in 2014, 2013 and 2012,
respectively.
Disclosure 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
December 31, 2014 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.
Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended
December 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable, but not absolute, assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the United States of America. We developed our
internal control over financial reporting through a process in which our management applied its judgment in
assessing the costs and benefits of various controls and procedures, which, by their nature, can provide only
reasonable assurance regarding the control objectives. You should note that the design of any system of controls
is based in part on various assumptions about the likelihood of future events, and we cannot assure you that any
system of controls will succeed in achieving its stated goals under all potential future conditions, regardless of
how remote. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive, financial
and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework). This evaluation included a review of the
documentation surrounding our financial reporting controls, an evaluation of the design effectiveness of these
controls, testing of the operating effectiveness of these controls and an evaluation of our overall control
environment. Based on that evaluation, our management has concluded that our internal control over financial
reporting was effective as of December 31, 2014.
Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements, has
audited our internal control over financial reporting, as stated in their report that follows.
22OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT23
benefits over the expected service period. Our total accrued liabilities, current and long-term, under this post-
Controls and Procedures
employment benefit were $5.7 million and $6.3 million at December 31, 2014 and 2013, respectively.
Effects of Inflation and Changing Prices
Our financial statements are prepared in accordance with generally accepted accounting principles in the United
States, using historical U.S. dollar accounting, or historical cost. Statements based on historical cost, however,
do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the
dollar, especially during times of significant and continued inflation.
In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost
of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we
reflect in the original price, or through price escalation clauses in our contracts. Inflation has not had a material
effect on our revenue or income from operations in the past three years, and no such effect is expected in the
near future.
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. We do
not believe these risks are material. We have not entered into any market risk sensitive instruments for
speculative or trading purposes. We currently have one interest rate swap in place on $100 million of our 4.650%
Senior Notes. See Note 6 of Notes to Consolidated Financial Statements included in this report for a description
of this interest rate swap. We typically manage our exposure to interest rate changes through the use of a
combination of fixed- and floating-rate debt. See Note 5 of Notes to Consolidated Financial Statements included
in this report for a description of our revolving credit facility and interest rates on our borrowings. We believe
significant interest rate changes would not have a material near-term impact on our future earnings or cash flows.
Because we operate in various oil and gas exploration and production regions in the world, we conduct a portion
of our business in currencies other than the U.S. dollar. The functional currency for several of our international
operations is the applicable local currency. A stronger U.S. dollar against the U.K. pound sterling and the
Norwegian kroner would result in lower operating income. We manage our exposure to changes in foreign
exchange rates principally through arranging compensation in U.S. dollars or freely convertible currency and, to
the extent possible, by limiting compensation received in other currencies to amounts necessary to meet
obligations denominated in those currencies. We use the exchange rates in effect as of the balance sheet date to
translate assets and liabilities as to which the functional currency is the local currency, resulting in translation
adjustments that we reflect as accumulated other comprehensive income or loss in the shareholders' equity
section of our Consolidated Balance Sheets. We recorded adjustments of $(129) million, $(71) million and
$45 million to our equity accounts in 2014, 2013 and 2012, 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 dollar.
We recorded foreign currency transaction gains (losses) of $(0.5) million, $0.1 million and $(5.4) million that are
included in Other income (expense), net in our Consolidated Statements of Income in 2014, 2013 and 2012,
respectively.
Disclosure 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
December 31, 2014 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.
Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended
December 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable, but not absolute, assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the United States of America. We developed our
internal control over financial reporting through a process in which our management applied its judgment in
assessing the costs and benefits of various controls and procedures, which, by their nature, can provide only
reasonable assurance regarding the control objectives. You should note that the design of any system of controls
is based in part on various assumptions about the likelihood of future events, and we cannot assure you that any
system of controls will succeed in achieving its stated goals under all potential future conditions, regardless of
how remote. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive, financial
and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework). This evaluation included a review of the
documentation surrounding our financial reporting controls, an evaluation of the design effectiveness of these
controls, testing of the operating effectiveness of these controls and an evaluation of our overall control
environment. Based on that evaluation, our management has concluded that our internal control over financial
reporting was effective as of December 31, 2014.
Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements, has
audited our internal control over financial reporting, as stated in their report that follows.
22OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT23
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Oceaneering International, Inc.
We have audited the internal control over financial reporting of Oceaneering International, Inc. and Subsidiaries
(the "Company") as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the "COSO
criteria"). The Company's management is responsible for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of the Company as of December 31, 2014 and 2013, and the
related consolidated statements of income, comprehensive income, cash flows, and shareholders' equity for each
of the three years in the period ended December 31, 2014, and our report dated February 19, 2015 expressed an
unqualified opinion thereon.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Summary of Major Accounting Policies
Selected Balance Sheet Information
Income Taxes
Selected Income Statement Information
Debt
Commitments and Contingencies
Operations by Business Segment and Geographic Area
Employee Benefit Plans
Selected Quarterly Financial Data (unaudited)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Oceaneering International, Inc.
We have audited the accompanying consolidated balance sheets of Oceaneering International, Inc. and
Subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of
income, comprehensive income, cash flows, and shareholders' equity for each of the three years in the period
ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company as of December 31, 2014 and 2013, and the consolidated results of
its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company's internal control over financial reporting as of December 31, 2014, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2015 expressed an
unqualified opinion thereon.
Houston, Texas
February 19, 2015
Houston, Texas
February 19, 2015
24OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT25
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Oceaneering International, Inc.
We have audited the internal control over financial reporting of Oceaneering International, Inc. and Subsidiaries
(the "Company") as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the "COSO
criteria"). The Company's management is responsible for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of the Company as of December 31, 2014 and 2013, and the
related consolidated statements of income, comprehensive income, cash flows, and shareholders' equity for each
of the three years in the period ended December 31, 2014, and our report dated February 19, 2015 expressed an
unqualified opinion thereon.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Summary of Major Accounting Policies
Selected Balance Sheet Information
Income Taxes
Selected Income Statement Information
Debt
Commitments and Contingencies
Operations by Business Segment and Geographic Area
Employee Benefit Plans
Selected Quarterly Financial Data (unaudited)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Oceaneering International, Inc.
We have audited the accompanying consolidated balance sheets of Oceaneering International, Inc. and
Subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of
income, comprehensive income, cash flows, and shareholders' equity for each of the three years in the period
ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company as of December 31, 2014 and 2013, and the consolidated results of
its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company's internal control over financial reporting as of December 31, 2014, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2015 expressed an
unqualified opinion thereon.
Houston, Texas
February 19, 2015
Houston, Texas
February 19, 2015
24OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT25
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Revenue
Cost of services and products
Gross Margin
Selling, general and administrative expense
Income from Operations
Interest income
Interest expense, net of amounts capitalized
Equity earnings (loss) of unconsolidated affiliates
Other income (expense), net
Income before Income Taxes
Provision for income taxes
Net Income
Cash dividends declared per Share
Basic Earnings per Share
Weighted average basic shares outstanding
Diluted Earnings per Share
Weighted average diluted shares outstanding
Year Ended December 31,
2014
2013
2012
$ 3,659,624 $ 3,287,019 $ 2,782,604
2,800,423
2,521,483
2,154,746
859,201
230,871
628,330
293
(4,708)
(51)
(387)
623,477
195,148
765,536
220,420
545,116
554
(2,194)
133
(1,273)
542,336
170,836
$
$
$
$
428,329 $
371,500 $
1.03 $
4.02 $
106,593
4.00 $
107,091
0.84 $
3.43 $
108,158
3.42 $
108,731
627,858
199,261
428,597
1,935
(4,218)
1,673
(6,065)
421,922
132,905
289,017
0.69
2.68
108,015
2.66
108,617
The accompanying Notes are an integral part of these Consolidated Financial Statements.
(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowances for doubtful accounts of $137 and
$4,168
Inventory
Other current assets
Total Current Assets
Property and Equipment, at cost
Less accumulated depreciation
Net Property and Equipment
Other Assets:
Goodwill
Investments in unconsolidated affiliates
Other non-current assets
Total Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
Total Current Liabilities
Long-term Debt
Other Long-term Liabilities
Commitments and Contingencies
Shareholders' Equity:
Common Stock, par value $0.25 per share; 180,000,000 shares authorized;
110,834,088 shares issued
Additional paid-in capital
Treasury stock; 11,220,682 and 2,636,644 shares, at cost
Retained earnings
Accumulated other comprehensive income
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
December 31,
2014
2013
$
430,714 $
91,430
778,372
375,588
128,876
1,713,550
2,660,788
1,354,966
1,305,822
768,842
441,789
131,214
1,433,275
2,380,888
1,191,789
1,189,099
331,474
32,624
128,231
492,329
344,018
37,462
124,646
506,126
$ 3,511,701 $ 3,128,500
$
123,688 $
490,260
65,189
679,137
750,000
424,944
129,632
516,628
80,828
727,088
—
357,972
27,709
229,640
(656,917)
2,240,229
(183,041)
1,657,620
27,709
222,402
(75,736)
1,921,642
(52,577)
2,043,440
$ 3,511,701 $ 3,128,500
The accompanying Notes are an integral part of these Consolidated Financial Statements.
26OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT27
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Revenue
Cost of services and products
Gross Margin
Selling, general and administrative expense
Income from Operations
Interest income
Interest expense, net of amounts capitalized
Equity earnings (loss) of unconsolidated affiliates
Other income (expense), net
Income before Income Taxes
Provision for income taxes
Net Income
Cash dividends declared per Share
Basic Earnings per Share
Weighted average basic shares outstanding
Diluted Earnings per Share
Weighted average diluted shares outstanding
2014
2012
Year Ended December 31,
2013
$ 3,659,624 $ 3,287,019 $ 2,782,604
2,154,746
627,858
199,261
428,597
1,935
(4,218)
1,673
(6,065)
421,922
132,905
289,017
0.69
2.68
108,015
2.66
108,617
2,521,483
765,536
220,420
545,116
554
(2,194)
133
(1,273)
542,336
170,836
371,500 $
0.84 $
3.43 $
108,158
3.42 $
108,731
2,800,423
859,201
230,871
628,330
293
(4,708)
(51)
(387)
623,477
195,148
428,329 $
1.03 $
4.02 $
106,593
107,091
4.00 $
$
$
$
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Accounts receivable, net of allowances for doubtful accounts of $137 and
(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents
$4,168
Inventory
Other current assets
Total Current Assets
Property and Equipment, at cost
Less accumulated depreciation
Net Property and Equipment
Other Assets:
Goodwill
Investments in unconsolidated affiliates
Other non-current assets
Total Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
Total Current Liabilities
Long-term Debt
Other Long-term Liabilities
Commitments and Contingencies
Shareholders' Equity:
110,834,088 shares issued
Additional paid-in capital
Common Stock, par value $0.25 per share; 180,000,000 shares authorized;
Treasury stock; 11,220,682 and 2,636,644 shares, at cost
Retained earnings
Accumulated other comprehensive income
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
The accompanying Notes are an integral part of these Consolidated Financial Statements.
December 31,
2014
2013
$
430,714 $
91,430
778,372
375,588
128,876
1,713,550
2,660,788
1,354,966
1,305,822
331,474
32,624
128,231
492,329
768,842
441,789
131,214
1,433,275
2,380,888
1,191,789
1,189,099
344,018
37,462
124,646
506,126
$ 3,511,701 $ 3,128,500
$
123,688 $
490,260
65,189
679,137
750,000
424,944
129,632
516,628
80,828
727,088
—
357,972
27,709
229,640
(656,917)
2,240,229
(183,041)
1,657,620
27,709
222,402
(75,736)
1,921,642
(52,577)
2,043,440
$ 3,511,701 $ 3,128,500
26OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT27
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Net Income
Other comprehensive income (loss), net of tax:
Foreign currency translation
Pension-related adjustments
Change in fair value of interest rate swap
Other comprehensive income (loss)
Comprehensive Income
Year Ended December 31,
2013
2014
2012
$
428,329 $
371,500 $
289,017
Adjustments to reconcile net income to net cash provided by
(128,666)
(1,947)
149
(130,464)
297,865 $
$
(71,282)
859
—
(70,423)
301,077 $
44,775
262
—
45,037
334,054
The accompanying Notes are an integral part of these Consolidated Financial Statements.
(in thousands)
Net income
Cash Flows from Operating Activities:
operating activities:
Depreciation and amortization
Deferred income tax provision
Net loss (gain) on sales of property and equipment
Noncash compensation
Distributions from unconsolidated affiliates greater than earnings
Excluding the effects of acquisitions, increase (decrease) in cash
from:
Accounts receivable
Inventory
Other operating assets
Currency translation effect on working capital, excluding cash
Accounts payable and accrued liabilities
Income taxes payable
Other operating liabilities
Total adjustments to net income
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Business acquisitions, net of cash acquired
Distributions of capital from unconsolidated affiliates
Dispositions of property and equipment and equity investment
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Net proceeds (payments) of bank credit facilities, net of new loan
costs
Excess tax benefits from employee benefit plans
Cash dividends
Purchases of treasury stock
Net Cash Provided by (Used in) Financing Activities
Effect of exchange rates on cash
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents—Beginning of Period
Year Ended December 31,
2014
2013
2012
$
428,329 $
371,500 $
289,017
229,779
70,717
(1,165)
20,034
—
(8,482)
66,327
(11,197)
(21,603)
(43,507)
(15,639)
8,169
293,433
721,762
202,228
51,800
450
19,380
878
(101,912)
(110,508)
(22,380)
(12,114)
128,297
2,435
1,370
159,924
531,424
176,483
20,654
(584)
16,442
6,988
(94,237)
(76,186)
(20,278)
10,224
87,453
23,559
(1,735)
148,783
437,800
(386,883)
(382,531)
(300,598)
(39,788)
4,772
2,427
(11,059)
4,279
11,666
(9,260)
—
3,814
(419,472)
(377,645)
(306,044)
248,429
3,932
(109,742)
(590,384)
45,360
(8,366)
339,284
91,430
(93,739)
4,279
(90,885)
—
(27,045)
2,475
(74,515)
(19,358)
(180,345)
(118,443)
(2,553)
(29,119)
120,549
91,430 $
1,094
14,407
106,142
120,549
Net proceeds of 4.65% Senior Notes, net of issuance costs
493,125
—
—
Cash and Cash Equivalents—End of Period
$
430,714 $
The accompanying Notes are an integral part of these Consolidated Financial Statements.
28OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT29
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Net Income
Other comprehensive income (loss), net of tax:
Foreign currency translation
Pension-related adjustments
Change in fair value of interest rate swap
Other comprehensive income (loss)
Comprehensive Income
Year Ended December 31,
2014
2013
2012
$
428,329 $
371,500 $
289,017
(128,666)
(71,282)
44,775
(1,947)
149
(130,464)
$
297,865 $
859
—
262
—
(70,423)
301,077 $
45,037
334,054
The accompanying Notes are an integral part of these Consolidated Financial Statements.
(in thousands)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income tax provision
Net loss (gain) on sales of property and equipment
Noncash compensation
Distributions from unconsolidated affiliates greater than earnings
Excluding the effects of acquisitions, increase (decrease) in cash
from:
Accounts receivable
Inventory
Other operating assets
Currency translation effect on working capital, excluding cash
Accounts payable and accrued liabilities
Income taxes payable
Other operating liabilities
Total adjustments to net income
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Business acquisitions, net of cash acquired
Distributions of capital from unconsolidated affiliates
Dispositions of property and equipment and equity investment
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Net proceeds of 4.65% Senior Notes, net of issuance costs
Net proceeds (payments) of bank credit facilities, net of new loan
costs
Excess tax benefits from employee benefit plans
Cash dividends
Purchases of treasury stock
Net Cash Provided by (Used in) Financing Activities
Effect of exchange rates on cash
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents—Beginning of Period
Cash and Cash Equivalents—End of Period
Year Ended December 31,
2013
2014
2012
$
428,329 $
371,500 $
289,017
229,779
70,717
(1,165)
20,034
—
(8,482)
66,327
(11,197)
(21,603)
(43,507)
(15,639)
8,169
293,433
721,762
(386,883)
(39,788)
4,772
2,427
(419,472)
202,228
51,800
450
19,380
878
(101,912)
(110,508)
(22,380)
(12,114)
128,297
2,435
1,370
159,924
531,424
(382,531)
(11,059)
4,279
11,666
(377,645)
176,483
20,654
(584)
16,442
6,988
(94,237)
(76,186)
(20,278)
10,224
87,453
23,559
(1,735)
148,783
437,800
(300,598)
(9,260)
—
3,814
(306,044)
493,125
—
—
248,429
3,932
(109,742)
(590,384)
45,360
(8,366)
339,284
91,430
430,714 $
(93,739)
4,279
(90,885)
—
(180,345)
(2,553)
(29,119)
120,549
91,430 $
(27,045)
2,475
(74,515)
(19,358)
(118,443)
1,094
14,407
106,142
120,549
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
28OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT29
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
(in thousands)
Common Stock Issued
Shares
Amount
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Currency
Translation
Adjustments
Fair Value of
Hedging
Instruments
Pension
Total
Balance, December 31, 2011
110,834
$
27,709
$
202,619 $
(71,700) $ 1,426,525 $
(23,637) $
—
$
(3,554)
$ 1,557,962
Accumulated Other
Comprehensive Income (Loss)
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Treasury stock purchases, 400,000 shares
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,985
(1,139)
2,475
—
—
—
—
5,857
1,139
—
—
(19,358)
289,017
—
—
—
—
(74,515)
—
—
44,775
—
—
—
—
—
Balance, December 31, 2012
110,834
27,709
212,940
(84,062)
1,641,027
21,138
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,447
(1,264)
4,279
—
—
—
7,062
1,264
—
—
371,500
—
—
—
—
(90,885)
—
(71,282)
—
—
—
—
Balance, December 31, 2013
110,834
27,709
222,402
(75,736)
1,921,642
(50,144)
—
262
—
—
—
—
—
289,017
45,037
14,842
—
2,475
(74,515)
(19,358)
(3,292)
1,815,460
results could differ from those estimates.
—
859
—
—
—
—
371,500
(70,423)
13,509
—
4,279
(90,885)
(2,433)
2,043,440
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Treasury stock purchases, 8,900,000
shares
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,311
(1,005)
3,932
—
—
—
—
8,198
1,005
—
—
—
—
—
—
(109,742)
(590,384)
—
(128,666)
149
(1,947)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
428,329
—
—
428,329
(130,464)
12,509
—
3,932
(109,742)
(590,384)
Balance, December 31, 2014
110,834 $
27,709 $
229,640 $ (656,917) $ 2,240,229 $
(178,810) $
149 $
(4,380)
$ 1,657,620
other equipment.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering
International, Inc. 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. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally
accepted in the United States ("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 at the date of
the financial statements and the reported amounts of revenue and expense during the reporting period. Actual
Reclassifications. Certain amounts from prior periods have been reclassified to conform with the current year
presentation.
Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and highly liquid investments with
original maturities of three months or less from the date of investment.
Accounts Receivable – Allowances for Doubtful Accounts. We determine the need for allowances for doubtful
accounts using the specific identification method. We do not generally require collateral from our customers.
Inventory. Inventory is valued at lower of cost or market. We determine cost using the weighted-average method.
Property and Equipment and Long-Lived Intangible Assets. We provide for depreciation of property and equipment
on the straight-line method over estimated useful lives of eight years for ROVs, three to 20 years for marine
services equipment (such as vessels and diving equipment), and three to 25 years for buildings, improvements and
Long-lived intangible assets, primarily acquired in connection with business combinations, include trade names,
intellectual property and customer relationships and are being amortized with a weighted average remaining life
of approximately 12 years.
We charge the costs of repair and maintenance of property and equipment to operations as incurred, while we
capitalize the costs of improvements that extend asset lives or functionality.
We capitalize interest on assets where the construction period is anticipated to be more than three months. We
capitalized $0.7 million of interest in 2014. We did not capitalize any interest in 2013 or 2012. We do not
allocate general administrative costs to capital projects. 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.
Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our
property and equipment and long-lived intangible assets, which are held and used by us, to determine whether
any events or changes in circumstances indicate that the carrying amount of the asset 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 benefit 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 the 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
30OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT31
(in thousands)
Shares
Amount
Common Stock Issued
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Currency
Translation
Adjustments
Fair Value of
Hedging
Instruments
Pension
Total
Balance, December 31, 2011
110,834
$
27,709
$
202,619 $
(71,700) $ 1,426,525 $
(23,637) $
—
$
(3,554)
$ 1,557,962
Accumulated Other
Comprehensive Income (Loss)
Balance, December 31, 2012
110,834
27,709
212,940
(84,062)
1,641,027
21,138
(3,292)
1,815,460
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Treasury stock purchases, 400,000 shares
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Treasury stock purchases, 8,900,000
shares
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
289,017
44,775
—
—
—
—
—
—
—
—
—
—
—
8,985
(1,139)
2,475
5,857
1,139
(19,358)
6,447
(1,264)
4,279
7,062
1,264
4,311
(1,005)
3,932
8,198
1,005
(590,384)
—
—
—
—
—
—
—
—
—
—
—
—
(74,515)
371,500
(90,885)
428,329
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(109,742)
(71,282)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
262
—
—
—
—
—
—
859
—
—
—
—
—
—
—
—
—
—
289,017
45,037
14,842
—
2,475
(74,515)
(19,358)
371,500
(70,423)
13,509
—
4,279
(90,885)
428,329
(130,464)
12,509
—
3,932
(109,742)
(590,384)
Balance, December 31, 2013
110,834
27,709
222,402
(75,736)
1,921,642
(50,144)
(2,433)
2,043,440
Balance, December 31, 2014
110,834 $
27,709 $
229,640 $ (656,917) $ 2,240,229 $
(178,810) $
149 $
(4,380)
$ 1,657,620
The accompanying Notes are an integral part of these Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering
International, Inc. 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. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally
accepted in the United States ("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 at the date of
the financial statements and the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Reclassifications. Certain amounts from prior periods have been reclassified to conform with the current year
presentation.
Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and highly liquid investments with
original maturities of three months or less from the date of investment.
(128,666)
149
(1,947)
Accounts Receivable – Allowances for Doubtful Accounts. We determine the need for allowances for doubtful
accounts using the specific identification method. We do not generally require collateral from our customers.
Inventory. Inventory is valued at lower of cost or market. We determine cost using the weighted-average method.
Property and Equipment and Long-Lived Intangible Assets. We provide for depreciation of property and equipment
on the straight-line method over estimated useful lives of eight years for ROVs, three to 20 years for marine
services equipment (such as vessels and diving equipment), and three to 25 years for buildings, improvements and
other equipment.
Long-lived intangible assets, primarily acquired in connection with business combinations, include trade names,
intellectual property and customer relationships and are being amortized with a weighted average remaining life
of approximately 12 years.
We charge the costs of repair and maintenance of property and equipment to operations as incurred, while we
capitalize the costs of improvements that extend asset lives or functionality.
We capitalize interest on assets where the construction period is anticipated to be more than three months. We
capitalized $0.7 million of interest in 2014. We did not capitalize any interest in 2013 or 2012. We do not
allocate general administrative costs to capital projects. 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.
Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our
property and equipment and long-lived intangible assets, which are held and used by us, to determine whether
any events or changes in circumstances indicate that the carrying amount of the asset 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 benefit 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 the 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
30OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT31
between the carrying amount and the fair value of the asset. For assets held for sale or disposal, the fair value of
the asset is measured using fair market value less cost 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.
contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine
it. Although we are continually striving to accurately estimate our contract costs and profitability, adjustments to
overall contract costs could be significant in future periods.
Business Acquisitions. We account for business combinations using the acquisition method of accounting, with
the acquisition price being allocated to the assets acquired and liabilities assumed based on their fair values at
the date of acquisition.
We made several smaller acquisitions during the periods presented, none of which were material.
In January 2015, we announced that we have entered into an agreement to acquire C & C Technologies, Inc.
("C&C") for approximately $230 million. We expect we will close the transaction in early April 2015, subject to
customary closing conditions. C&C is a provider of ocean-bottom mapping services in deepwater utilizing
customized autonomous underwater vehicles and provides marine construction surveys for both surface and subsea
assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C
also provides land and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow
water conventional geophysical surveys in the U.S. Gulf of Mexico.
Goodwill. In September 2011, the Financial Accounting Standards Board ("FASB") issued an update regarding
goodwill impairment testing. Under the update, an entity has the option to first assess qualitative factors to
determine whether the existence of events or circumstances leads to a determination that it is more likely than
not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of
events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit
exceeds its carrying amount, performing the two-step impairment test is unnecessary. However, if an entity
concludes otherwise, then it is required to perform the first step of the two-step impairment test. We
qualitatively tested the goodwill attributable to each of our reporting units for impairment as of
December 31, 2014 and 2013 and concluded that there was no impairment. The only changes in our reporting
units' goodwill balances during the periods presented are from business acquisitions, as discussed above, and
currency exchange rate changes. For more information regarding goodwill by business segment, see Note 7.
Revenue Recognition. We recognize our revenue according to the type of contract involved. On a daily basis, we
recognize revenue under contracts that provide for specific time, material and equipment charges, which we bill
periodically, ranging from weekly to monthly.
We account for significant fixed-price contracts, which we enter into mainly in our Subsea Products segment, and
to a lesser extent in our Subsea Projects and Advanced Technologies segments, using the percentage-of-
completion method. In 2014, we accounted for 15% of our revenue using the percentage-of-completion method.
In determining whether a contract should be accounted for using the percentage-of-completion method, we
consider whether:
• the customer provides specifications for the construction of facilities or production of goods or for the
provision of related services;
• we can reasonably estimate our progress towards completion and our costs;
• the contract includes provisions as to the enforceable rights regarding the goods or services to be
provided, consideration to be received and the manner and terms of payment;
• the customer can be expected to satisfy its obligations under the contract; and
• we can be expected to perform our contractual obligations.
Under the percentage-of-completion method, we generally recognize estimated contract revenue based on costs
incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor,
productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors,
including weather or other factors outside of our control, also affect the progress and estimated cost of a project's
completion and, therefore, the timing of income and revenue recognition. We routinely review estimates related
to our contracts and reflect revisions to profitability in earnings immediately. If a current estimate of total
We recognize the remainder of our revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.
Revenue in Excess of Amounts Billed is classified as accounts receivable and relates to recoverable costs and
accrued profits on contracts in progress. Billings in Excess of Revenue Recognized on uncompleted contracts are
classified in accrued liabilities.
Revenue in Excess of Amounts Billed on uncompleted fixed-price contracts accounted for using the percentage-of-
completion method is summarized as follows:
Billings in Excess of Revenue Recognized on uncompleted fixed-price contracts accounted for using the
percentage-of-completion method are summarized as follows:
(in thousands)
Revenue recognized
Less: Billings to customers
Revenue in excess of amounts billed
(in thousands)
Amounts billed to customers
Less: Revenue recognized
Billings in excess of revenue recognized
December 31,
2014
368,888 $
(312,968)
55,920 $
2013
199,654
(168,215)
31,439
December 31,
2014
2013
196,501 $
(109,547)
86,954 $
200,909
(86,264)
114,645
$
$
$
$
Stock-Based Compensation. We recognize all share-based payments to directors, officers and employees over their
vesting periods in the income statement based on their estimated fair values. For more information on our
employee benefit plans, see Note 8.
Income Taxes. We provide income taxes at appropriate tax rates in accordance with our interpretation of the
respective tax laws and regulations after review and consultation with our internal tax department, tax advisors
and, in some cases, legal counsel in various jurisdictions. We provide for deferred income taxes for differences
between carrying amounts of assets and liabilities for financial and tax reporting purposes. We provide for
deferred U.S. income taxes on foreign income only to the extent such income is not indefinitely reinvested in
foreign entities. We provide a valuation allowance against deferred tax assets when it is more likely than not that
the asset will not be realized.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that we believe is greater than 50 percent likely of being realized upon ultimate settlement. We
account for any applicable interest and penalties on uncertain tax positions as a component of our provision for
income taxes on our financial statements.
Foreign Currency Translation. The functional currency for several 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 at the balance sheet date, and the
resulting translation adjustments are recognized in accumulated other comprehensive income as a component of
shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the
Consolidated Statements of Income. We recorded $(0.5) million, $0.1 million and $(5.4) million of foreign
32OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT33
between the carrying amount and the fair value of the asset. For assets held for sale or disposal, the fair value of
the asset is measured using fair market value less cost 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.
contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine
it. Although we are continually striving to accurately estimate our contract costs and profitability, adjustments to
overall contract costs could be significant in future periods.
Business Acquisitions. We account for business combinations using the acquisition method of accounting, with
the acquisition price being allocated to the assets acquired and liabilities assumed based on their fair values at
We recognize the remainder of our revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.
the date of acquisition.
We made several smaller acquisitions during the periods presented, none of which were material.
In January 2015, we announced that we have entered into an agreement to acquire C & C Technologies, Inc.
("C&C") for approximately $230 million. We expect we will close the transaction in early April 2015, subject to
customary closing conditions. C&C is a provider of ocean-bottom mapping services in deepwater utilizing
customized autonomous underwater vehicles and provides marine construction surveys for both surface and subsea
assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C
also provides land and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow
water conventional geophysical surveys in the U.S. Gulf of Mexico.
Goodwill. In September 2011, the Financial Accounting Standards Board ("FASB") issued an update regarding
goodwill impairment testing. Under the update, an entity has the option to first assess qualitative factors to
determine whether the existence of events or circumstances leads to a determination that it is more likely than
not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of
events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit
exceeds its carrying amount, performing the two-step impairment test is unnecessary. However, if an entity
concludes otherwise, then it is required to perform the first step of the two-step impairment test. We
qualitatively tested the goodwill attributable to each of our reporting units for impairment as of
December 31, 2014 and 2013 and concluded that there was no impairment. The only changes in our reporting
units' goodwill balances during the periods presented are from business acquisitions, as discussed above, and
currency exchange rate changes. For more information regarding goodwill by business segment, see Note 7.
Revenue Recognition. We recognize our revenue according to the type of contract involved. On a daily basis, we
recognize revenue under contracts that provide for specific time, material and equipment charges, which we bill
periodically, ranging from weekly to monthly.
We account for significant fixed-price contracts, which we enter into mainly in our Subsea Products segment, and
to a lesser extent in our Subsea Projects and Advanced Technologies segments, using the percentage-of-
completion method. In 2014, we accounted for 15% of our revenue using the percentage-of-completion method.
In determining whether a contract should be accounted for using the percentage-of-completion method, we
consider whether:
• the customer provides specifications for the construction of facilities or production of goods or for the
provision of related services;
• we can reasonably estimate our progress towards completion and our costs;
• the contract includes provisions as to the enforceable rights regarding the goods or services to be
provided, consideration to be received and the manner and terms of payment;
• the customer can be expected to satisfy its obligations under the contract; and
• we can be expected to perform our contractual obligations.
Under the percentage-of-completion method, we generally recognize estimated contract revenue based on costs
incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor,
productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors,
including weather or other factors outside of our control, also affect the progress and estimated cost of a project's
completion and, therefore, the timing of income and revenue recognition. We routinely review estimates related
to our contracts and reflect revisions to profitability in earnings immediately. If a current estimate of total
Revenue in Excess of Amounts Billed is classified as accounts receivable and relates to recoverable costs and
accrued profits on contracts in progress. Billings in Excess of Revenue Recognized on uncompleted contracts are
classified in accrued liabilities.
Revenue in Excess of Amounts Billed on uncompleted fixed-price contracts accounted for using the percentage-of-
completion method is summarized as follows:
(in thousands)
Revenue recognized
Less: Billings to customers
Revenue in excess of amounts billed
December 31,
2014
368,888 $
(312,968)
55,920 $
2013
199,654
(168,215)
31,439
$
$
Billings in Excess of Revenue Recognized on uncompleted fixed-price contracts accounted for using the
percentage-of-completion method are summarized as follows:
(in thousands)
Amounts billed to customers
Less: Revenue recognized
Billings in excess of revenue recognized
December 31,
2014
196,501 $
(109,547)
86,954 $
2013
200,909
(86,264)
114,645
$
$
Stock-Based Compensation. We recognize all share-based payments to directors, officers and employees over their
vesting periods in the income statement based on their estimated fair values. For more information on our
employee benefit plans, see Note 8.
Income Taxes. We provide income taxes at appropriate tax rates in accordance with our interpretation of the
respective tax laws and regulations after review and consultation with our internal tax department, tax advisors
and, in some cases, legal counsel in various jurisdictions. We provide for deferred income taxes for differences
between carrying amounts of assets and liabilities for financial and tax reporting purposes. We provide for
deferred U.S. income taxes on foreign income only to the extent such income is not indefinitely reinvested in
foreign entities. We provide a valuation allowance against deferred tax assets when it is more likely than not that
the asset will not be realized.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that we believe is greater than 50 percent likely of being realized upon ultimate settlement. We
account for any applicable interest and penalties on uncertain tax positions as a component of our provision for
income taxes on our financial statements.
Foreign Currency Translation. The functional currency for several 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 at the balance sheet date, and the
resulting translation adjustments are recognized in accumulated other comprehensive income as a component of
shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the
Consolidated Statements of Income. We recorded $(0.5) million, $0.1 million and $(5.4) million of foreign
32OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT33
currency transaction gains (losses) in 2014, 2013 and 2012, respectively, and those amounts are included as a
component of Other income (expense), net.
2. SELECTED BALANCE SHEET INFORMATION
The following is information regarding selected balance sheet accounts:
Earnings Per Share. For each year presented, the only difference between our annual calculated weighted average
basic and diluted number of shares outstanding is the effect of outstanding restricted stock units.
Repurchase Plans. In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares
of our common stock. In 2014, we completed the purchase of the shares authorized under this plan by
repurchasing the remaining 8.9 million shares for $590 million. The total cost for the repurchase of the
12 million shares of our common stock was $677 million.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Financial Instruments. We recognize all derivative instruments as either assets or liabilities in the balance sheet
and measure those instruments at fair value. Subsequent changes in fair value are reflected in current earnings or
other comprehensive income, depending on whether a derivative instrument is designated as part of a hedge
relationship and, if it is, the type of hedge relationship. See Note 6 for information relative to the interest rate
swap we had in effect at December 31, 2014. During the two-year period ended December 31, 2013, we had no
derivative instruments in effect.
New Accounting Standard. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09
completes the joint effort by the FASB and International Accounting Standards Board to improve financial
reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting
Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or
services. ASU 2014-09 is effective for us for interim and annual reporting periods beginning after
December 15, 2016. Early application is not permitted and we have the choice to apply ASU 2014-09 either
retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-
09 at the date of initial application (January 1, 2017) and not adjusting comparative information. We are
currently evaluating the requirements of ASU 2014-09 and have not yet determined its impact on our consolidated
financial statements.
(in thousands)
Inventory:
Remotely operated vehicle parts and components
Other inventory, primarily raw materials
Other Current Assets:
Deferred income taxes
Prepaid expenses
Other Non-Current Assets:
Intangible assets, net
Cash surrender value of life insurance policies
Investments in unconsolidated affiliates:
Medusa Spar LLC
Accrued Liabilities:
Payroll and related costs
Accrued job costs
Deferred revenue
Other Long-Term Liabilities:
Deferred income taxes
Supplemental Executive Retirement Plan
Long-Term Incentive Plan
Accrued post-employment benefit obligations
Total
Total
Other
Total
Other
Total
Other
Total
Other
Total
December 31,
2014
2013
$ 207,885 $ 190,403
167,703
251,386
$ 375,588 $ 441,789
$
49,809 $
79,067
61,589
69,625
$ 128,876 $ 131,214
$
60,895 $
53,653
13,683
68,522
52,862
3,262
$ 128,231 $ 124,646
$
32,553 $
37,376
71
86
$
32,624 $
37,462
$ 209,481 $ 218,766
79,894
116,936
83,949
72,117
150,246
75,499
$ 490,260 $ 516,628
$ 322,758 $ 260,807
45,423
29,482
11,349
15,932
45,144
26,700
10,528
14,793
$ 424,944 $ 357,972
In 2003, we purchased a 50% equity interest in Medusa Spar LLC for $43.7 million. Medusa Spar LLC owns a 75%
interest in a production spar platform in the U.S. Gulf of Mexico. Medusa Spar LLC's revenue is derived from
processing oil and gas production for a fee based on the volumes processed through the platform (throughput).
We account for our investment in Medusa Spar LLC under the equity method of accounting. Our 50% share of the
underlying equity of the net assets of Medusa Spar LLC is equal to its carrying value.
34OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT35
currency transaction gains (losses) in 2014, 2013 and 2012, respectively, and those amounts are included as a
component of Other income (expense), net.
2. SELECTED BALANCE SHEET INFORMATION
The following is information regarding selected balance sheet accounts:
Earnings Per Share. For each year presented, the only difference between our annual calculated weighted average
basic and diluted number of shares outstanding is the effect of outstanding restricted stock units.
Repurchase Plans. In February 2010, our Board of Directors approved a plan to repurchase up to 12 million shares
of our common stock. In 2014, we completed the purchase of the shares authorized under this plan by
repurchasing the remaining 8.9 million shares for $590 million. The total cost for the repurchase of the
12 million shares of our common stock was $677 million.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new
share repurchase program under which we may repurchase up to 10 million shares of our common stock on a
discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in
privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations,
including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business
conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and
other relevant factors. The timing and amount of any repurchases will be determined by management based on its
evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury
stock for future use. The new program does not obligate us to repurchase any particular number of shares. We did
not repurchase any shares under this program in 2014.
Financial Instruments. We recognize all derivative instruments as either assets or liabilities in the balance sheet
and measure those instruments at fair value. Subsequent changes in fair value are reflected in current earnings or
other comprehensive income, depending on whether a derivative instrument is designated as part of a hedge
relationship and, if it is, the type of hedge relationship. See Note 6 for information relative to the interest rate
swap we had in effect at December 31, 2014. During the two-year period ended December 31, 2013, we had no
derivative instruments in effect.
New Accounting Standard. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09
completes the joint effort by the FASB and International Accounting Standards Board to improve financial
reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting
Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or
services. ASU 2014-09 is effective for us for interim and annual reporting periods beginning after
December 15, 2016. Early application is not permitted and we have the choice to apply ASU 2014-09 either
retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-
09 at the date of initial application (January 1, 2017) and not adjusting comparative information. We are
currently evaluating the requirements of ASU 2014-09 and have not yet determined its impact on our consolidated
financial statements.
(in thousands)
Inventory:
Remotely operated vehicle parts and components
Other inventory, primarily raw materials
Total
Other Current Assets:
Deferred income taxes
Prepaid expenses
Total
Other Non-Current Assets:
Intangible assets, net
Cash surrender value of life insurance policies
Other
Total
Investments in unconsolidated affiliates:
Medusa Spar LLC
Other
Total
Accrued Liabilities:
Payroll and related costs
Accrued job costs
Deferred revenue
Other
Total
Other Long-Term Liabilities:
Deferred income taxes
Supplemental Executive Retirement Plan
Long-Term Incentive Plan
Accrued post-employment benefit obligations
Other
Total
December 31,
2014
2013
$ 207,885 $ 190,403
251,386
$ 375,588 $ 441,789
167,703
$
49,809 $
79,067
61,589
69,625
$ 128,876 $ 131,214
$
60,895 $
53,653
13,683
68,522
52,862
3,262
$ 128,231 $ 124,646
$
$
32,553 $
71
32,624 $
37,376
86
37,462
$ 209,481 $ 218,766
72,117
150,246
75,499
$ 490,260 $ 516,628
79,894
116,936
83,949
$ 322,758 $ 260,807
45,144
26,700
10,528
14,793
$ 424,944 $ 357,972
45,423
29,482
11,349
15,932
In 2003, we purchased a 50% equity interest in Medusa Spar LLC for $43.7 million. Medusa Spar LLC owns a 75%
interest in a production spar platform in the U.S. Gulf of Mexico. Medusa Spar LLC's revenue is derived from
processing oil and gas production for a fee based on the volumes processed through the platform (throughput).
We account for our investment in Medusa Spar LLC under the equity method of accounting. Our 50% share of the
underlying equity of the net assets of Medusa Spar LLC is equal to its carrying value.
34OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT35
3. INCOME TAXES
Our provisions for income taxes and our cash taxes paid are as follows:
(in thousands)
Current:
Domestic
Foreign
Total current
Deferred:
Domestic
Foreign
Total deferred
Total provision for income taxes
Cash taxes paid
The components of income before income taxes are as follows:
(in thousands)
Domestic
Foreign
Income before income taxes
$
$
$
$
Year Ended December 31,
2013
2014
2012
$
17,856 $
106,575
124,431
73,520
(2,803)
70,717
195,148 $
139,724 $
45,468 $
73,568
119,036
56,115
(4,315)
51,800
170,836 $
113,760 $
4,039
108,212
112,251
26,170
(5,516)
20,654
132,905
92,422
Year Ended December 31,
2013
2014
110,800 $
512,677
623,477 $
68,066 $
474,270
542,336 $
United States statutory rate
State and local taxes
Foreign tax rate differential
Other items, net
Total effective tax rate
2012
53,240
368,682
421,922
As of December 31, 2014 and 2013, our worldwide deferred tax assets, liabilities and net deferred tax liabilities
were as follows:
(in thousands)
Deferred tax assets:
Deferred compensation
Deferred income
Accrued expenses
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Unremitted foreign earnings not considered indefinitely reinvested
Basis difference in equity investments
Other
Total deferred tax liabilities
Net deferred income tax liability
December 31,
2014
2013
$
$
$
$
$
50,829 $
16,305
9,235
27,808
104,177
—
104,177 $
128,958 $
238,133
8,947
1,088
377,126 $
272,949 $
48,401
30,101
8,441
11,921
98,864
—
98,864
129,441
157,091
10,843
707
298,082
199,218
Our net deferred tax liability is reflected within our balance sheet as follows:
(in thousands)
Deferred tax liabilities
Current deferred tax assets
Net deferred income tax liability
December 31,
2014
2013
$
$
322,758 $
(49,809)
272,949 $
260,807
(61,589)
199,218
At December 31, 2014, we had approximately $28 million of foreign tax credits available to reduce future
payments of U.S. federal income taxes. The tax credits expire commencing in 2024. We believe it is more likely
than not that all our deferred tax assets are realizable. Reconciliations between the actual provision for income
taxes on continuing operations and that computed by applying the United States statutory rate to income before
income taxes were as follows:
Year Ended December 31,
2014
2013
2012
35.0%
0.1
(2.6)
(1.2)
31.3%
35.0%
0.2
(3.7)
—
31.5%
35.0%
0.1
(2.9)
(0.7)
31.5%
We consider $573 million of unremitted earnings of our foreign subsidiaries is indefinitely reinvested. It is not
practical for us to compute the amount of additional U.S. tax that would be due on this amount. We have
provided deferred income taxes on the foreign earnings not considered indefinitely reinvested.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.
We account for any applicable interest and penalties on uncertain tax positions as a component of our provision
for income taxes on our financial statements. We increased/(decreased) income tax expense by $(0.4) million,
$1.7 million and $(2.7) million in 2014, 2013 and 2012, respectively, for penalties and interest on uncertain tax
positions, which brought our total liabilities for penalties and interest on uncertain tax positions to $2.9 million
and $3.3 million on our balance sheets at December 31, 2014 and 2013, respectively. All additions or reductions
to those liabilities would affect our effective income tax rate in the periods of change.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, not including associated
foreign tax credits and penalties and interest, is as follows:
(in thousands)
Beginning of year
Additions based on tax positions related to the current year
Reductions for expiration of statutes of limitations
Additions based on tax positions related to prior years
Reductions based on tax positions related to prior years
Settlements
Balance at end of year
Year Ended December 31,
2014
2013
2012
$
7,168 $
5,140 $
432
(1,572)
254
(707)
—
100
(1,225)
3,490
(337)
—
$
5,575 $
7,168 $
10,104
244
(225)
3,335
(8,193)
(125)
5,140
36OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT37
3. INCOME TAXES
(in thousands)
Current:
Domestic
Foreign
Total current
Deferred:
Domestic
Foreign
Total deferred
(in thousands)
Domestic
Foreign
Income before income taxes
were as follows:
(in thousands)
Deferred tax assets:
Deferred compensation
Deferred income
Accrued expenses
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Total provision for income taxes
Cash taxes paid
The components of income before income taxes are as follows:
As of December 31, 2014 and 2013, our worldwide deferred tax assets, liabilities and net deferred tax liabilities
Year Ended December 31,
2014
2013
2012
$
17,856 $
45,468 $
106,575
124,431
73,520
(2,803)
70,717
73,568
119,036
56,115
(4,315)
51,800
195,148 $
139,724 $
170,836 $
113,760 $
4,039
108,212
112,251
26,170
(5,516)
20,654
132,905
92,422
Year Ended December 31,
2014
2013
2012
110,800 $
512,677
623,477 $
68,066 $
474,270
542,336 $
53,240
368,682
421,922
$
$
$
$
December 31,
2014
2013
$
50,829 $
16,305
9,235
27,808
104,177
—
104,177 $
128,958 $
238,133
8,947
1,088
377,126 $
272,949 $
$
$
$
$
48,401
30,101
8,441
11,921
98,864
—
98,864
129,441
157,091
10,843
707
298,082
199,218
Unremitted foreign earnings not considered indefinitely reinvested
Basis difference in equity investments
Other
Total deferred tax liabilities
Net deferred income tax liability
Our provisions for income taxes and our cash taxes paid are as follows:
Our net deferred tax liability is reflected within our balance sheet as follows:
(in thousands)
Deferred tax liabilities
Current deferred tax assets
Net deferred income tax liability
December 31,
2014
322,758 $
(49,809)
272,949 $
2013
260,807
(61,589)
199,218
$
$
At December 31, 2014, we had approximately $28 million of foreign tax credits available to reduce future
payments of U.S. federal income taxes. The tax credits expire commencing in 2024. We believe it is more likely
than not that all our deferred tax assets are realizable. Reconciliations between the actual provision for income
taxes on continuing operations and that computed by applying the United States statutory rate to income before
income taxes were as follows:
Year Ended December 31,
2013
2012
2014
United States statutory rate
State and local taxes
Foreign tax rate differential
Other items, net
Total effective tax rate
35.0%
0.1
(2.6)
(1.2)
31.3%
35.0%
0.2
(3.7)
—
31.5%
35.0%
0.1
(2.9)
(0.7)
31.5%
We consider $573 million of unremitted earnings of our foreign subsidiaries is indefinitely reinvested. It is not
practical for us to compute the amount of additional U.S. tax that would be due on this amount. We have
provided deferred income taxes on the foreign earnings not considered indefinitely reinvested.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by
the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the
largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.
We account for any applicable interest and penalties on uncertain tax positions as a component of our provision
for income taxes on our financial statements. We increased/(decreased) income tax expense by $(0.4) million,
$1.7 million and $(2.7) million in 2014, 2013 and 2012, respectively, for penalties and interest on uncertain tax
positions, which brought our total liabilities for penalties and interest on uncertain tax positions to $2.9 million
and $3.3 million on our balance sheets at December 31, 2014 and 2013, respectively. All additions or reductions
to those liabilities would affect our effective income tax rate in the periods of change.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, not including associated
foreign tax credits and penalties and interest, is as follows:
(in thousands)
Beginning of year
Additions based on tax positions related to the current year
Reductions for expiration of statutes of limitations
Additions based on tax positions related to prior years
Reductions based on tax positions related to prior years
Settlements
Balance at end of year
Year Ended December 31,
2013
2014
2012
$
$
7,168 $
432
(1,572)
254
(707)
—
5,575 $
5,140 $
100
(1,225)
3,490
(337)
—
7,168 $
10,104
244
(225)
3,335
(8,193)
(125)
5,140
36OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT37
We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12
months.
5. DEBT
We file a consolidated U.S. federal income tax return for Oceaneering International, Inc. and our domestic
subsidiaries. We conduct our international operations in a number of locations that have varying laws and
regulations with regard to income and other taxes, some of which are subject to interpretation. Our management
believes that adequate provisions have been made for all taxes that will ultimately be payable, although final
determination of tax liabilities may differ from our estimates.
Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years
to complete and settle. The following lists the earliest tax years open to examination by tax authorities where we
have significant operations:
Long-term Debt consisted of the following:
(in thousands)
4.650% Senior Notes due 2024
Term Loan Facility
Revolving Credit Facility
Long-term Debt
December 31,
2014
2013
$
$
500,000 $
250,000
—
750,000 $
—
—
—
—
Jurisdiction
United States
United Kingdom
Norway
Angola
Brazil
Australia
Periods
2011
2011
2004
2009
2009
2010
4. SELECTED INCOME STATEMENT INFORMATION
The following schedule shows our revenue, costs and gross margins by services and products:
(in thousands)
Revenue:
Services
Products
Total revenue
Cost of Services and Products:
Services
Products
Unallocated expenses
Total cost of services and products
Gross margin:
Services
Products
Unallocated expenses
Total gross margin
Year Ended December 31,
2013
2014
2012
$ 2,336,304 $ 2,174,739 $ 1,887,957
894,647
2,782,604
1,112,280
3,287,019
1,323,320
3,659,624
1,742,411
946,923
111,089
2,800,423
1,624,483
788,109
108,891
2,521,483
1,418,511
642,199
94,036
2,154,746
593,893
376,397
(111,089)
859,201 $
550,256
324,171
(108,891)
765,536 $
$
469,446
252,448
(94,036)
627,858
In October 2014, we entered into a new credit agreement (the "Credit Agreement") with a group of banks. The
Credit Agreement provides for a $300 million three-year delayed-draw term loan (the "Term Loan Facility") and a
$500 million five-year revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement replaces a
prior credit agreement that was scheduled to mature on January 6, 2017. 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
and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of the
Credit Agreement and pursuant to its terms, we repaid all amounts outstanding under, and terminated, the prior
credit agreement.
The Term Loan Facility is scheduled to mature on October 27, 2017. The Revolving Credit Facility is scheduled to
mature on October 25, 2019, and the delayed-draw feature of the Term Loan Facility expires in April 2015.
Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as
defined in the Credit Agreement), at our option, plus an applicable margin to be initially 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 both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, thereafter to be based on such
debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the Adjusted Base
Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for
borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest at the Eurodollar Rate,
from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for
borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the per annum rate
established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) daily one-
month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portions of the
Revolving Credit Facility and the Term Loan 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, enter into
transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum
Leverage Ratio of 4.00 to 1.00. The Credit Agreement includes customary events of default and associated
remedies. As of December 31, 2014, 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 4.650%
Senior Notes due 2024 (the "Senior Notes"). We will pay interest on the Senior Notes on May 15 and
November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the Senior Notes at specified redemption prices. We are using
the net proceeds from the offering for general corporate purposes, which may include funding acquisitions and
other capital expenditures and repurchases of outstanding shares of our common stock.
38OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT39
We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12
months.
We file a consolidated U.S. federal income tax return for Oceaneering International, Inc. and our domestic
subsidiaries. We conduct our international operations in a number of locations that have varying laws and
regulations with regard to income and other taxes, some of which are subject to interpretation. Our management
believes that adequate provisions have been made for all taxes that will ultimately be payable, although final
determination of tax liabilities may differ from our estimates.
Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years
to complete and settle. The following lists the earliest tax years open to examination by tax authorities where we
have significant operations:
5. DEBT
Long-term Debt consisted of the following:
(in thousands)
4.650% Senior Notes due 2024
Term Loan Facility
Revolving Credit Facility
Long-term Debt
December 31,
2014
500,000 $
250,000
—
750,000 $
$
$
2013
—
—
—
—
Jurisdiction
United States
United Kingdom
Norway
Angola
Brazil
Australia
Periods
2011
2011
2004
2009
2009
2010
4. SELECTED INCOME STATEMENT INFORMATION
The following schedule shows our revenue, costs and gross margins by services and products:
(in thousands)
Revenue:
Services
Products
Total revenue
Services
Products
Cost of Services and Products:
Unallocated expenses
Total cost of services and products
Gross margin:
Services
Products
Unallocated expenses
Total gross margin
Year Ended December 31,
2014
2013
2012
$ 2,336,304 $ 2,174,739 $ 1,887,957
1,323,320
3,659,624
1,112,280
3,287,019
894,647
2,782,604
1,742,411
1,624,483
1,418,511
946,923
111,089
788,109
108,891
642,199
94,036
2,800,423
2,521,483
2,154,746
593,893
376,397
(111,089)
550,256
324,171
(108,891)
$
859,201 $
765,536 $
469,446
252,448
(94,036)
627,858
In October 2014, we entered into a new credit agreement (the "Credit Agreement") with a group of banks. The
Credit Agreement provides for a $300 million three-year delayed-draw term loan (the "Term Loan Facility") and a
$500 million five-year revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement replaces a
prior credit agreement that was scheduled to mature on January 6, 2017. 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
and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of the
Credit Agreement and pursuant to its terms, we repaid all amounts outstanding under, and terminated, the prior
credit agreement.
The Term Loan Facility is scheduled to mature on October 27, 2017. The Revolving Credit Facility is scheduled to
mature on October 25, 2019, and the delayed-draw feature of the Term Loan Facility expires in April 2015.
Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as
defined in the Credit Agreement), at our option, plus an applicable margin to be initially 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 both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, thereafter to be based on such
debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the Adjusted Base
Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for
borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest at the Eurodollar Rate,
from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for
borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the per annum rate
established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) daily one-
month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portions of the
Revolving Credit Facility and the Term Loan 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, enter into
transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum
Leverage Ratio of 4.00 to 1.00. The Credit Agreement includes customary events of default and associated
remedies. As of December 31, 2014, 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 4.650%
Senior Notes due 2024 (the "Senior Notes"). We will pay interest on the Senior Notes on May 15 and
November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the Senior Notes at specified redemption prices. We are using
the net proceeds from the offering for general corporate purposes, which may include funding acquisitions and
other capital expenditures and repurchases of outstanding shares of our common stock.
38OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT39
We incurred $6.9 million of issuance costs related to the Senior Notes and $1.6 million of new loan costs related
to the Revolving Credit Facility and the Term Loan Facility. We are amortizing these costs, which are included on
our balance sheet as other non-current assets, to interest expense over ten years for the Senior Notes and over
five years for the Revolving Credit Facility and the Term Loan Facility.
We made cash interest payments of $3.7 million, $2.1 million and $4.3 million in 2014, 2013 and 2012,
respectively.
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At December 31, 2014, we occupied several facilities under noncancellable operating leases expiring at various
dates through 2025. Future minimum rentals under all of our operating leases, including vessel rentals, are as
follows:
(in thousands)
2015
2016
2017
2018
2019
Thereafter
Total Lease Commitments
$
$
127,390
117,793
67,282
51,842
30,005
78,062
472,374
Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately
$257 million, $191 million and $107 million in 2014, 2013 and 2012, respectively.
Insurance
We self-insure for workers' compensation, maritime employer's liability and comprehensive general liability claims
to levels we consider financially prudent, and beyond the self-insurance level of exposure, we carry insurance,
which can be by occurrence or in the aggregate. We determine the level of accruals for claims exposure by
reviewing our historical experience and current year claim activity. We do not record accruals on a present-value
basis. We review larger claims with insurance adjusters and establish specific reserves for known liabilities. We
establish an additional reserve for incidents incurred but not reported to us for each year using our estimates and
based on prior experience. We believe we have established adequate accruals for uninsured expected liabilities
arising from those obligations. However, it is possible that future earnings could be affected by changes in our
estimates relating to these matters.
Litigation
On June 17, 2014, a purported shareholder filed a derivative complaint against all of the then-current members of
our board of directors and one of our former directors, as defendants, and our company, as nominal defendant, in
the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our
company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of
our board of directors relating to nonexecutive director compensation. The plaintiff is seeking relief including
disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’
fees and other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief on
September 5, 2014, asserting that the complaint failed to state a claim on which relief could be granted, and
further that the plaintiff did not comply with procedural requirements necessary to allow him to commence
litigation against certain directors on our behalf. We are awaiting a ruling on that motion. In any event, our
company is only a nominal defendant in this litigation, and we do not expect the resolution of this matter to
have a material adverse effect on our results of operations, cash flows or financial position.
Various other actions and claims are pending against us, most of which are covered by insurance. Although we
cannot predict the ultimate outcome of these matters, we believe the ultimate liability, if any, that may result
from these other actions and claims will not materially affect our results of operations, cash flows or financial
position.
Letters of Credit
We had $70 million and $45 million in letters of credit outstanding as of December 31, 2014 and 2013,
respectively, as guarantees in force for self-insurance requirements and various bid and performance bonds, which
are usually for the duration of the applicable contract.
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 there is 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 value of cash and cash equivalents approximates its fair
value due to the short maturity of those 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 value. The
carrying values of borrowings under the Credit Agreement approximate their fair value because the short-term
durations of the associated interest rate periods reflect market changes to interest rates. Our borrowings under
the Credit Agreement are classified as Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than
quoted prices in active markets for similar assets and liabilities that are observable or can be corroborated by
observable market data for substantially the full term for the assets or liabilities).
We estimated the fair market value of the Senior Notes to be $494 million at December 31, 2014. We arrived at
this estimate by computing the net present value of the future principal and interest payments using a yield to
maturity interest rate for securities of similar credit quality and term. The Senior Notes are classified as Level 2 in
the fair value hierarchy under U.S. GAAP.
We have an interest rate swap in place on $100 million of the Senior Notes for the period from November 2014 to
November 2024. The agreement swaps the fixed interest rate of 4.650% on $100 million of the Senior Notes to
the floating rate of one month LIBOR plus 2.426%. We estimate the fair value of the interest rate swap to be an
asset of $0.2 million at December 31, 2014. This asset value was arrived at using a discounted cash flow model
using Level 2 inputs.
In 2013, we experienced delays in payment from OGX Petróleo e Gás S.A. ("OGX"), which is a customer in Brazil.
The parent company of OGX missed making an interest payment on its bonds and, on October 30, 2013, OGX and
its parent filed for a restructuring process under Brazilian bankruptcy law, which grants the filer judicial
protection from creditors while a restructuring plan is developed for approval. As of December 31, 2014, we had
accounts receivable due from OGX of approximately $4.1 million, and in the fourth quarter of 2013 we recorded an
allowance for doubtful accounts of $3.3 million, which was charged as a selling, general and administrative
expense in our ROV segment. As of December 31, 2014, OGX had reorganized and we received shares of stock in
the reorganized company. We have written off the receivables and allowance for doubtful accounts and assigned
no value to the shares we received.
40OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT41
We incurred $6.9 million of issuance costs related to the Senior Notes and $1.6 million of new loan costs related
to the Revolving Credit Facility and the Term Loan Facility. We are amortizing these costs, which are included on
our balance sheet as other non-current assets, to interest expense over ten years for the Senior Notes and over
five years for the Revolving Credit Facility and the Term Loan Facility.
Various other actions and claims are pending against us, most of which are covered by insurance. Although we
cannot predict the ultimate outcome of these matters, we believe the ultimate liability, if any, that may result
from these other actions and claims will not materially affect our results of operations, cash flows or financial
position.
We made cash interest payments of $3.7 million, $2.1 million and $4.3 million in 2014, 2013 and 2012,
Letters of Credit
respectively.
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At December 31, 2014, we occupied several facilities under noncancellable operating leases expiring at various
dates through 2025. Future minimum rentals under all of our operating leases, including vessel rentals, are as
follows:
(in thousands)
2015
2016
2017
2018
2019
Thereafter
Insurance
$
127,390
117,793
67,282
51,842
30,005
78,062
Total Lease Commitments
$
472,374
Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately
$257 million, $191 million and $107 million in 2014, 2013 and 2012, respectively.
We self-insure for workers' compensation, maritime employer's liability and comprehensive general liability claims
to levels we consider financially prudent, and beyond the self-insurance level of exposure, we carry insurance,
which can be by occurrence or in the aggregate. We determine the level of accruals for claims exposure by
reviewing our historical experience and current year claim activity. We do not record accruals on a present-value
basis. We review larger claims with insurance adjusters and establish specific reserves for known liabilities. We
establish an additional reserve for incidents incurred but not reported to us for each year using our estimates and
based on prior experience. We believe we have established adequate accruals for uninsured expected liabilities
arising from those obligations. However, it is possible that future earnings could be affected by changes in our
estimates relating to these matters.
Litigation
On June 17, 2014, a purported shareholder filed a derivative complaint against all of the then-current members of
our board of directors and one of our former directors, as defendants, and our company, as nominal defendant, in
the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our
company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of
our board of directors relating to nonexecutive director compensation. The plaintiff is seeking relief including
disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’
fees and other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief on
September 5, 2014, asserting that the complaint failed to state a claim on which relief could be granted, and
further that the plaintiff did not comply with procedural requirements necessary to allow him to commence
litigation against certain directors on our behalf. We are awaiting a ruling on that motion. In any event, our
company is only a nominal defendant in this litigation, and we do not expect the resolution of this matter to
have a material adverse effect on our results of operations, cash flows or financial position.
We had $70 million and $45 million in letters of credit outstanding as of December 31, 2014 and 2013,
respectively, as guarantees in force for self-insurance requirements and various bid and performance bonds, which
are usually for the duration of the applicable contract.
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 there is 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 value of cash and cash equivalents approximates its fair
value due to the short maturity of those 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 value. The
carrying values of borrowings under the Credit Agreement approximate their fair value because the short-term
durations of the associated interest rate periods reflect market changes to interest rates. Our borrowings under
the Credit Agreement are classified as Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than
quoted prices in active markets for similar assets and liabilities that are observable or can be corroborated by
observable market data for substantially the full term for the assets or liabilities).
We estimated the fair market value of the Senior Notes to be $494 million at December 31, 2014. We arrived at
this estimate by computing the net present value of the future principal and interest payments using a yield to
maturity interest rate for securities of similar credit quality and term. The Senior Notes are classified as Level 2 in
the fair value hierarchy under U.S. GAAP.
We have an interest rate swap in place on $100 million of the Senior Notes for the period from November 2014 to
November 2024. The agreement swaps the fixed interest rate of 4.650% on $100 million of the Senior Notes to
the floating rate of one month LIBOR plus 2.426%. We estimate the fair value of the interest rate swap to be an
asset of $0.2 million at December 31, 2014. This asset value was arrived at using a discounted cash flow model
using Level 2 inputs.
In 2013, we experienced delays in payment from OGX Petróleo e Gás S.A. ("OGX"), which is a customer in Brazil.
The parent company of OGX missed making an interest payment on its bonds and, on October 30, 2013, OGX and
its parent filed for a restructuring process under Brazilian bankruptcy law, which grants the filer judicial
protection from creditors while a restructuring plan is developed for approval. As of December 31, 2014, we had
accounts receivable due from OGX of approximately $4.1 million, and in the fourth quarter of 2013 we recorded an
allowance for doubtful accounts of $3.3 million, which was charged as a selling, general and administrative
expense in our ROV segment. As of December 31, 2014, OGX had reorganized and we received shares of stock in
the reorganized company. We have written off the receivables and allowance for doubtful accounts and assigned
no value to the shares we received.
40OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT41
7. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information
We are a global oilfield provider of engineered services and products, primarily to the offshore oil and gas
industry, with a focus on deepwater applications. Through the use of our applied technology expertise, we also
serve the defense, aerospace and commercial theme park industries. Our Oilfield business consists of Remotely
Operated Vehicles ("ROVs"), Subsea Products, Subsea Projects and Asset Integrity. Our ROV segment provides
submersible vehicles operated from the surface to support offshore oil and gas exploration, development and
production activities. Our Subsea Products segment supplies a variety of specialty subsea hardware. Our Subsea
Projects segment provides multiservice vessels, oilfield diving and support vessel operations, which are used
principally in inspection, maintenance and repair and installation activities, and a mobile offshore production
system, through a 50% interest in an entity that holds a 75% interest in the system. With the acquisition we
made in December 2011, we also operate and maintain offshore and onshore oil and gas production facilities,
provide subsea engineering services, and operate an offshore logistics supply base in Australia. Our Asset
Integrity segment provides asset integrity management and assessment services and nondestructive testing and
inspection. Our Advanced Technologies business provides project management, engineering services and
equipment for applications in non-oilfield markets. 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 in
the year ended December 31, 2014 from those used in our consolidated financial statements for the years ended
December 31, 2013 and 2012.
The table that follows presents Revenue, Income from Operations, Depreciation and Amortization Expense and
Equity Earnings of Unconsolidated Affiliates by business segment:
Remotely Operated Vehicles
$ 1,069,022 $
(in thousands)
Revenue
Oilfield
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Income from Operations
Total
Oilfield
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
Oilfield
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
Total
Year Ended December 31,
2014
2013
2012
1,238,746
588,572
500,237
3,396,577
263,047
981,728 $
1,027,792
509,440
481,919
3,000,879
286,140
853,520
829,034
379,571
435,381
2,497,506
285,098
$ 3,659,624 $ 3,287,019 $ 2,782,604
281,973 $
231,050
93,865
55,243
662,131
24,954
248,972
170,959
63,461
45,196
528,588
21,182
(150,010)
(141,969)
(121,173)
628,330 $
545,116 $
428,597
39,964
15,331
12,401
196,006
2,682
3,540
36,638
13,340
11,808
170,719
2,677
3,087
229,779 $
202,228 $
176,483
(51) $
(51) $
133 $
133 $
1,673
1,673
281,239
107,852
55,469
765,110
13,230
46,085
18,561
12,775
223,112
2,574
4,093
$
$
$
$
$
Remotely Operated Vehicles
$
320,550 $
Depreciation and Amortization Expense
Remotely Operated Vehicles
145,691 $
128,310 $
108,933
Equity Earnings of Unconsolidated Affiliates
Subsea Projects
We determine income 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.
During 2014, 2013 and 2012, revenue from one customer, BP plc and subsidiaries in our oilfield business
segments, accounted for 18%, 18% and 13% of our total consolidated revenue, respectively.
42OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT43
7. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information
We are a global oilfield provider of engineered services and products, primarily to the offshore oil and gas
industry, with a focus on deepwater applications. Through the use of our applied technology expertise, we also
serve the defense, aerospace and commercial theme park industries. Our Oilfield business consists of Remotely
Operated Vehicles ("ROVs"), Subsea Products, Subsea Projects and Asset Integrity. Our ROV segment provides
submersible vehicles operated from the surface to support offshore oil and gas exploration, development and
production activities. Our Subsea Products segment supplies a variety of specialty subsea hardware. Our Subsea
Projects segment provides multiservice vessels, oilfield diving and support vessel operations, which are used
principally in inspection, maintenance and repair and installation activities, and a mobile offshore production
system, through a 50% interest in an entity that holds a 75% interest in the system. With the acquisition we
made in December 2011, we also operate and maintain offshore and onshore oil and gas production facilities,
provide subsea engineering services, and operate an offshore logistics supply base in Australia. Our Asset
Integrity segment provides asset integrity management and assessment services and nondestructive testing and
inspection. Our Advanced Technologies business provides project management, engineering services and
equipment for applications in non-oilfield markets. 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 in
the year ended December 31, 2014 from those used in our consolidated financial statements for the years ended
December 31, 2013 and 2012.
The table that follows presents Revenue, Income from Operations, Depreciation and Amortization Expense and
Equity Earnings of Unconsolidated Affiliates by business segment:
(in thousands)
Revenue
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
Income from Operations
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
Depreciation and Amortization Expense
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
Equity Earnings of Unconsolidated Affiliates
Subsea Projects
Total
Year Ended December 31,
2013
2014
2012
981,728 $
$ 1,069,022 $
1,238,746
588,572
500,237
3,396,577
263,047
853,520
829,034
379,571
435,381
2,497,506
285,098
$ 3,659,624 $ 3,287,019 $ 2,782,604
1,027,792
509,440
481,919
3,000,879
286,140
$
$
$
$
$
$
320,550 $
281,239
107,852
55,469
765,110
13,230
(150,010)
628,330 $
281,973 $
231,050
93,865
55,243
662,131
24,954
(141,969)
545,116 $
248,972
170,959
63,461
45,196
528,588
21,182
(121,173)
428,597
145,691 $
46,085
18,561
12,775
223,112
2,574
4,093
229,779 $
128,310 $
39,964
15,331
12,401
196,006
2,682
3,540
202,228 $
(51) $
(51) $
133 $
133 $
108,933
36,638
13,340
11,808
170,719
2,677
3,087
176,483
1,673
1,673
We determine income 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.
During 2014, 2013 and 2012, revenue from one customer, BP plc and subsidiaries in our oilfield business
segments, accounted for 18%, 18% and 13% of our total consolidated revenue, respectively.
42OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT43
The following table presents Assets, Property and Equipment and Goodwill by business segment as of the dates
indicated:
The following table presents Capital Expenditures, including business acquisitions, by business segment for the
(in thousands)
Assets
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
Property and Equipment, net
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
Goodwill
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
December 31,
2014
2013
$ 1,148,680 $ 1,117,920
942,607
382,782
381,392
2,824,701
67,328
236,471
$ 3,511,701 $ 3,128,500
904,935
448,378
347,411
2,849,404
86,203
576,094
$
693,240 $
336,125
214,478
41,624
1,285,467
8,780
11,575
681,027
289,015
163,210
34,223
1,167,475
12,332
9,292
$ 1,305,822 $ 1,189,099
$
$
25,458 $
99,656
19,712
164,806
309,632
21,842
331,474 $
26,761
113,066
—
183,777
323,604
20,414
344,018
All assets specifically identified with a particular business segment have been segregated. Cash and cash
equivalents, certain other current assets, certain investments and certain other assets have not been allocated to
particular business segments and are included in Corporate and Other.
Remotely Operated Vehicles
$
188,848 $
Geographic Operating Areas
The following table summarizes certain financial data by geographic area:
periods indicated:
(in thousands)
Capital Expenditures
Oilfield
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
(in thousands)
Revenue
Foreign:
Africa
Norway
United Kingdom
Asia and Australia
Brazil
Other
Total Foreign
United States
Total
Long-Lived Assets
Foreign:
Norway
Africa
Brazil
Other
Total Foreign
United States
Total
United Kingdom
Asia and Australia
Year Ended December 31,
2014
2013
2012
112,851
91,918
27,027
420,644
2,352
3,675
225,885 $
102,653
40,833
8,327
377,698
13,175
2,717
198,323
68,052
15,890
18,560
300,825
2,953
6,080
$
426,671 $
393,590 $
309,858
Year Ended December 31,
2014
2013
2012
$
795,229 $
696,202 $
488,789
456,804
317,277
185,299
98,881
461,915
383,397
335,129
213,282
90,456
505,541
461,863
334,319
290,821
164,660
70,172
2,342,279
1,317,345
2,180,381
1,106,638
1,827,376
955,228
$ 3,659,624 $ 3,287,019 $ 2,782,604
$
332,503 $
215,122
113,191
90,061
99,269
56,079
906,225
838,273
429,603 $
186,865
99,250
83,885
112,840
38,516
950,959
691,404
474,408
141,927
85,434
65,012
113,829
34,105
914,715
607,572
$ 1,744,498 $ 1,642,363 $ 1,522,287
Revenue is based on location where services are performed and products are manufactured.
44OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT45
indicated:
(in thousands)
Assets
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Property and Equipment, net
Total
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
Goodwill
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
December 31,
2014
2013
$ 1,148,680 $ 1,117,920
904,935
448,378
347,411
942,607
382,782
381,392
2,849,404
2,824,701
86,203
576,094
67,328
236,471
$ 3,511,701 $ 3,128,500
$
693,240 $
336,125
214,478
41,624
681,027
289,015
163,210
34,223
1,285,467
1,167,475
8,780
11,575
12,332
9,292
$ 1,305,822 $ 1,189,099
$
25,458 $
99,656
19,712
164,806
309,632
21,842
$
331,474 $
26,761
113,066
—
183,777
323,604
20,414
344,018
All assets specifically identified with a particular business segment have been segregated. Cash and cash
equivalents, certain other current assets, certain investments and certain other assets have not been allocated to
particular business segments and are included in Corporate and Other.
The following table presents Assets, Property and Equipment and Goodwill by business segment as of the dates
The following table presents Capital Expenditures, including business acquisitions, by business segment for the
periods indicated:
(in thousands)
Capital Expenditures
Oilfield
Remotely Operated Vehicles
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
Year Ended December 31,
2013
2014
2012
$
$
188,848 $
112,851
91,918
27,027
420,644
2,352
3,675
426,671 $
225,885 $
102,653
40,833
8,327
377,698
13,175
2,717
393,590 $
198,323
68,052
15,890
18,560
300,825
2,953
6,080
309,858
Geographic Operating Areas
The following table summarizes certain financial data by geographic area:
(in thousands)
Revenue
Foreign:
Africa
Norway
United Kingdom
Asia and Australia
Brazil
Other
Total Foreign
United States
Total
Long-Lived Assets
Foreign:
Norway
Africa
United Kingdom
Asia and Australia
Brazil
Other
Total Foreign
United States
Total
Year Ended December 31,
2013
2014
2012
$
795,229 $
488,789
456,804
317,277
185,299
98,881
2,342,279
1,317,345
505,541
461,863
334,319
290,821
164,660
70,172
1,827,376
955,228
$ 3,659,624 $ 3,287,019 $ 2,782,604
696,202 $
461,915
383,397
335,129
213,282
90,456
2,180,381
1,106,638
$
332,503 $
215,122
113,191
90,061
99,269
56,079
906,225
838,273
474,408
141,927
85,434
65,012
113,829
34,105
914,715
607,572
$ 1,744,498 $ 1,642,363 $ 1,522,287
429,603 $
186,865
99,250
83,885
112,840
38,516
950,959
691,404
Revenue is based on location where services are performed and products are manufactured.
44OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT45
8. EMPLOYEE BENEFIT PLANS
Retirement Investment Plans
We have several employee retirement investment plans that, taken together, cover most of our full time
employees. The Oceaneering Retirement Investment Plan is a 401(k) plan in which U.S. employees may
participate by deferring a portion of their gross monthly salary and directing us to contribute the deferred amount
to the plan. We match a portion of the employees' deferred compensation. Our contributions to the 401(k) plan
were $21.3 million, $18.4 million and $16.0 million for the plan years ended December 31, 2014, 2013 and 2012,
respectively. In 2013, we amended the plan to give plan participants the option to be paid directly, or through
the plan within 90 days of the close of the plan year, for dividends of Oceaneering International, Inc. stock that
the plan participants held within the plan. This change allowed us to realize a tax benefit from tax deductions in
excess of financial statement expense of $0.8 million and $0.9 million in 2014 and 2013, respectively.
We also make matching contributions to other foreign employee savings plans similar in nature to a 401(k) plan.
In 2014, 2013 and 2012, these contributions, principally related to plans associated with U.K. and Norwegian
subsidiaries, were $18.7 million, $17.4 million and $11.6 million, respectively.
The Oceaneering International, Inc. Supplemental Executive Retirement Plan covers selected key management
employees and executives, as approved by the Compensation Committee of our Board of Directors (the
"Compensation Committee"). Under this plan, we accrue an amount determined as a percentage of the
participant's gross monthly salary and the amounts accrued are treated as if they are invested in one or more
investment vehicles pursuant to this plan. Expenses related to this plan during 2014, 2013 and 2012 were
$3.3 million, $3.4 million and $2.8 million, respectively.
We have defined benefit plans covering some of our employees in the U.K. and Norway. There are no further
benefits accruing under the U.K. plan, and the Norway plan is closed to new participants. The projected benefit
obligations for both plans were $32 million and $30 million, at December 31, 2014 and 2013, respectively, and
the fair values of the plan assets (using Level 2 inputs) for both plans were $27 million and $26 million at
December 31, 2014 and 2013, respectively.
Incentive Plans
Under our 2010 Incentive Plan (the "Incentive Plan"), shares of our common stock are made available for awards
to employees and nonemployee members of our Board of Directors.
The Incentive Plan is administered by the Compensation Committee; however, the full Board of Directors makes
determinations regarding awards to nonemployee directors under the Incentive Plan. The Compensation
Committee or our Board of Directors, as applicable, determines the type or types of award(s) to be made to each
participant and sets forth in the related award agreement the terms, conditions and limitations applicable to each
award. Stock options, stock appreciation rights and stock and cash awards may be made under the Incentive Plan.
There are no options outstanding under the Incentive Plan. We have not granted any stock options since 2005
and the Compensation Committee has expressed its intention to refrain from using stock options as a component
of employee compensation for our executive officers and other employees for the foreseeable future. Additionally,
the Board of Directors has expressed its intention to refrain from using stock options as a component of
nonemployee director compensation for the foreseeable future.
In 2014, 2013 and 2012, the Compensation Committee granted awards of performance units under the Incentive
Plan to certain of our key executives and employees, and our Board of Directors granted performance units under
the Incentive Plan and a prior plan to our Chairman of the Board of Directors (our "Chairman"). The performance
units awarded are scheduled to vest in full on the third anniversary of the award date, or pro rata over three years
if the participant meets certain age and years of service requirements. The Compensation Committee and the
Board of Directors have approved specific financial goals and measures (as defined in the Performance Award
Goals and Measures), based on our cumulative cash flow from operations and a comparison of return on invested
capital and cost of capital for each of the three-year periods ending December 31, 2016, 2015 and 2014 to be
used as the basis for the final value of the performance units. The final value of each performance unit granted in
2014, 2013 and 2012 may range from $0 to $150. Upon vesting and determination of value, the value of the
performance units will be payable in cash. Compensation expense related to the performance units was
$22.8 million, $22.9 million and $19.9 million in 2014, 2013 and 2012, respectively. As of December 31, 2014,
there were 442,392 performance units outstanding.
There has been no stock option activity after December 31, 2011.
During 2014, 2013 and 2012, the Compensation Committee granted restricted units of our common stock to
certain of our key executives and employees. During 2014, 2013 and 2012, our Board of Directors granted
restricted units of our common stock to our Chairman and restricted common stock to our other nonemployee
directors. Over 60%, 60%, and 50% of the grants made to our employees in 2014, 2013 and 2012, respectively,
vest in full on the third anniversary of the award date, conditional upon continued employment. The remainder of
the grants made to employees and all the grants made to our Chairman vest pro rata over three years, as these
participants meet certain age and years-of-service requirements. For the grants to each of the participant
employees and the Chairman, the participant will be issued a share of our common stock for the participant's
vested restricted stock units at the earlier of three years or, if the participant vested earlier after meeting the age
and service requirements, following termination of employment or service. The grants to our nonemployee
directors vest in full on the first anniversary of the award date conditional upon continued service as a director,
with one exception. In February 2013, we granted shares of restricted common stock to a director who had given
written notice of his intention to retire from our board of directors. Those shares were to vest if his service
continued until the election of directors at our annual meeting of shareholders in April 2013. The director
fulfilled that requirement by resigning concurrent with that election and the shares of restricted stock became
vested. In April 2009, the Compensation Committee adopted a policy that Oceaneering will not provide U.S.
federal income tax gross-up payments to any of its directors or executive officers in connection with future awards
of restricted stock or stock units. This policy had no effect on existing change-in-control agreements with two of
our executive officers or the existing service agreement with our Chairman, which provide for tax gross-up
payments that could become applicable to such future awards in limited circumstances, such as following a
change in control of Oceaneering. Since August 2010, there have been no outstanding awards that provide for tax
gross-up payments. The tax benefit realized from tax deductions in excess of the financial statement expense of
our restricted stock grants was $3.1 million, $3.4 million and 2.5 million in 2014, 2013 and 2012, respectively.
The following is a summary of our restricted stock and restricted stock unit activity for 2014, 2013 and 2012:
Balance at December 31, 2011
Granted
Issued
Forfeited
Granted
Issued
Forfeited
Granted
Issued
Forfeited
Balance at December 31, 2012
Balance at December 31, 2013
Balance at December 31, 2014
Weighted
Average
Fair Value
Aggregate
Intrinsic
Value
20.03 $ 20,325,000
30.49
55.98
42.02
42.27
62.55
52.72
52.53
70.63
62.66
63.30
33.18 $ 23,904,000
43.57 $ 29,043,000
Number
1,090,850 $
337,575
(369,050)
(27,803)
1,031,572
330,705
(376,078)
(25,909)
960,290
299,274
(411,800)
(33,364)
814,400 $
46OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT47
8. EMPLOYEE BENEFIT PLANS
Retirement Investment Plans
We have several employee retirement investment plans that, taken together, cover most of our full time
employees. The Oceaneering Retirement Investment Plan is a 401(k) plan in which U.S. employees may
participate by deferring a portion of their gross monthly salary and directing us to contribute the deferred amount
to the plan. We match a portion of the employees' deferred compensation. Our contributions to the 401(k) plan
were $21.3 million, $18.4 million and $16.0 million for the plan years ended December 31, 2014, 2013 and 2012,
respectively. In 2013, we amended the plan to give plan participants the option to be paid directly, or through
the plan within 90 days of the close of the plan year, for dividends of Oceaneering International, Inc. stock that
the plan participants held within the plan. This change allowed us to realize a tax benefit from tax deductions in
excess of financial statement expense of $0.8 million and $0.9 million in 2014 and 2013, respectively.
We also make matching contributions to other foreign employee savings plans similar in nature to a 401(k) plan.
In 2014, 2013 and 2012, these contributions, principally related to plans associated with U.K. and Norwegian
subsidiaries, were $18.7 million, $17.4 million and $11.6 million, respectively.
The Oceaneering International, Inc. Supplemental Executive Retirement Plan covers selected key management
employees and executives, as approved by the Compensation Committee of our Board of Directors (the
"Compensation Committee"). Under this plan, we accrue an amount determined as a percentage of the
participant's gross monthly salary and the amounts accrued are treated as if they are invested in one or more
investment vehicles pursuant to this plan. Expenses related to this plan during 2014, 2013 and 2012 were
$3.3 million, $3.4 million and $2.8 million, respectively.
We have defined benefit plans covering some of our employees in the U.K. and Norway. There are no further
benefits accruing under the U.K. plan, and the Norway plan is closed to new participants. The projected benefit
obligations for both plans were $32 million and $30 million, at December 31, 2014 and 2013, respectively, and
the fair values of the plan assets (using Level 2 inputs) for both plans were $27 million and $26 million at
December 31, 2014 and 2013, respectively.
Incentive Plans
Under our 2010 Incentive Plan (the "Incentive Plan"), shares of our common stock are made available for awards
to employees and nonemployee members of our Board of Directors.
The Incentive Plan is administered by the Compensation Committee; however, the full Board of Directors makes
determinations regarding awards to nonemployee directors under the Incentive Plan. The Compensation
Committee or our Board of Directors, as applicable, determines the type or types of award(s) to be made to each
participant and sets forth in the related award agreement the terms, conditions and limitations applicable to each
award. Stock options, stock appreciation rights and stock and cash awards may be made under the Incentive Plan.
There are no options outstanding under the Incentive Plan. We have not granted any stock options since 2005
and the Compensation Committee has expressed its intention to refrain from using stock options as a component
of employee compensation for our executive officers and other employees for the foreseeable future. Additionally,
the Board of Directors has expressed its intention to refrain from using stock options as a component of
nonemployee director compensation for the foreseeable future.
In 2014, 2013 and 2012, the Compensation Committee granted awards of performance units under the Incentive
Plan to certain of our key executives and employees, and our Board of Directors granted performance units under
the Incentive Plan and a prior plan to our Chairman of the Board of Directors (our "Chairman"). The performance
units awarded are scheduled to vest in full on the third anniversary of the award date, or pro rata over three years
if the participant meets certain age and years of service requirements. The Compensation Committee and the
Board of Directors have approved specific financial goals and measures (as defined in the Performance Award
Goals and Measures), based on our cumulative cash flow from operations and a comparison of return on invested
capital and cost of capital for each of the three-year periods ending December 31, 2016, 2015 and 2014 to be
used as the basis for the final value of the performance units. The final value of each performance unit granted in
2014, 2013 and 2012 may range from $0 to $150. Upon vesting and determination of value, the value of the
performance units will be payable in cash. Compensation expense related to the performance units was
$22.8 million, $22.9 million and $19.9 million in 2014, 2013 and 2012, respectively. As of December 31, 2014,
there were 442,392 performance units outstanding.
There has been no stock option activity after December 31, 2011.
During 2014, 2013 and 2012, the Compensation Committee granted restricted units of our common stock to
certain of our key executives and employees. During 2014, 2013 and 2012, our Board of Directors granted
restricted units of our common stock to our Chairman and restricted common stock to our other nonemployee
directors. Over 60%, 60%, and 50% of the grants made to our employees in 2014, 2013 and 2012, respectively,
vest in full on the third anniversary of the award date, conditional upon continued employment. The remainder of
the grants made to employees and all the grants made to our Chairman vest pro rata over three years, as these
participants meet certain age and years-of-service requirements. For the grants to each of the participant
employees and the Chairman, the participant will be issued a share of our common stock for the participant's
vested restricted stock units at the earlier of three years or, if the participant vested earlier after meeting the age
and service requirements, following termination of employment or service. The grants to our nonemployee
directors vest in full on the first anniversary of the award date conditional upon continued service as a director,
with one exception. In February 2013, we granted shares of restricted common stock to a director who had given
written notice of his intention to retire from our board of directors. Those shares were to vest if his service
continued until the election of directors at our annual meeting of shareholders in April 2013. The director
fulfilled that requirement by resigning concurrent with that election and the shares of restricted stock became
vested. In April 2009, the Compensation Committee adopted a policy that Oceaneering will not provide U.S.
federal income tax gross-up payments to any of its directors or executive officers in connection with future awards
of restricted stock or stock units. This policy had no effect on existing change-in-control agreements with two of
our executive officers or the existing service agreement with our Chairman, which provide for tax gross-up
payments that could become applicable to such future awards in limited circumstances, such as following a
change in control of Oceaneering. Since August 2010, there have been no outstanding awards that provide for tax
gross-up payments. The tax benefit realized from tax deductions in excess of the financial statement expense of
our restricted stock grants was $3.1 million, $3.4 million and 2.5 million in 2014, 2013 and 2012, respectively.
The following is a summary of our restricted stock and restricted stock unit activity for 2014, 2013 and 2012:
Balance at December 31, 2011
Granted
Issued
Forfeited
Balance at December 31, 2012
Granted
Issued
Forfeited
Balance at December 31, 2013
Granted
Issued
Forfeited
Balance at December 31, 2014
Weighted
Average
Fair Value
Aggregate
Intrinsic
Value
30.49
55.98
20.03 $ 20,325,000
42.02
42.27
62.55
33.18 $ 23,904,000
52.72
52.53
70.63
43.57 $ 29,043,000
62.66
63.30
Number
1,090,850 $
337,575
(369,050)
(27,803)
1,031,572
330,705
(376,078)
(25,909)
960,290
299,274
(411,800)
(33,364)
814,400 $
46OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT47
The restricted stock units granted in 2014, 2013 and 2012 carry no voting rights and no dividend rights. Each
grantee of shares of restricted common 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.
Effective January 1, 2006, the unvested portions of our grants of restricted stock units were valued at their
estimated fair values as of their respective grant dates. The grants in 2014, 2013 and 2012 were subject only to
vesting conditioned on continued employment or service as a nonemployee director; therefore, these grants were
valued at the grant date fair market value using the closing price of our stock on the New York Stock Exchange.
Compensation expense under the restricted stock plans was $17.2 million, $16.7 million and $14.6 million for
2014, 2013 and 2012, respectively. As of December 31, 2014, we had $14.8 million of future expense to be
recognized related to our restricted stock unit plans over a weighted average remaining life of 1.7 years.
Post-Employment Benefit
In 2001, we entered into an agreement with our Chairman who was also then our Chief Executive Officer. That
agreement was amended in 2006 and in 2008. Pursuant to the amended agreement, the Chairman relinquished
his position as Chief Executive Officer in May 2006 and began his post-employment service period on
December 31, 2006, which continued through August 15, 2011, during which service period the Chairman, acting
as an independent contractor, agreed to serve as nonexecutive Chairman of our Board of Directors. The agreement
provides the Chairman with post-employment benefits for ten years following August 15, 2011. The agreement
also provides for medical coverage on an after-tax basis to the Chairman, his spouse and children for their lives.
We recognized the net present value of the post-employment benefits over the expected service period. Our total
accrued liabilities, current and long-term, under this post-employment benefit were $5.7 million and $6.3 million
at December 31, 2014 and 2013, respectively.
As part of the arrangements relating to the Chairman's post-employment benefits, we established an irrevocable
grantor trust, commonly known as a "rabbi trust," to provide the Chairman greater assurance that we will set
aside an adequate source of funds to fund payment of the post-retirement benefits under this agreement,
including the medical coverage benefits payable to the Chairman, his spouse and their children for their lives. In
connection with establishment of the rabbi trust, we contributed to the trust a life insurance policy on the life of
the Chairman, which we had previously obtained, and we agreed to continue to pay the premiums due on that
policy. When the life insurance policy matures, the proceeds of the policy will become assets of the trust. If the
value of the trust exceeds $4 million, as adjusted by the consumer price index, at any time after January 1, 2012,
the excess may be paid to us. However, because the trust is irrevocable, the assets of the trust are generally not
available to fund our future operations until the trust terminates, which is not expected to be during the lives of
the Chairman, his spouse or their children. Furthermore, no tax deduction will be available for our contributions
to the trust; however, we may benefit from future tax deductions for benefits actually paid from the trust
(although benefit payments from the trust are not expected to occur in the near term, because we expect to make
direct payments of those benefits for the foreseeable future).
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
Quarter Ended
Revenue
Gross profit
Income from operations
Net income
Diluted earnings per share
Weighted average number of diluted
shares outstanding
Year Ended December 31, 2014
March 31
June 30
Sept. 30
Dec. 31
Total
$
840,201 $
927,407 $
973,089 $
918,927 $ 3,659,624
189,491
132,862
91,225
218,215
161,311
110,295
241,855
181,918
124,338
$
0.84 $
1.02 $
1.16 $
209,640
152,239
102,471
0.99 $
859,201
628,330
428,329
4.00
108,724
108,421
107,407
103,851
107,091
Quarter Ended
Revenue
Gross profit
Income from operations
Net income
Diluted earnings per share
Weighted average number of diluted
shares outstanding
Year Ended December 31, 2013
March 31
June 30
Sept. 30
Dec. 31
Total
$
718,552 $
820,372 $
853,297 $
894,798 $ 3,287,019
160,375
108,290
74,849
201,864
146,337
98,811
205,492
153,736
104,407
$
0.69 $
0.91 $
0.96 $
197,805
136,753
93,433
0.86 $
765,536
545,116
371,500
3.42
108,612
108,713
108,783
108,840
108,731
48OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT49
The restricted stock units granted in 2014, 2013 and 2012 carry no voting rights and no dividend rights. Each
grantee of shares of restricted common 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.
Effective January 1, 2006, the unvested portions of our grants of restricted stock units were valued at their
estimated fair values as of their respective grant dates. The grants in 2014, 2013 and 2012 were subject only to
vesting conditioned on continued employment or service as a nonemployee director; therefore, these grants were
valued at the grant date fair market value using the closing price of our stock on the New York Stock Exchange.
Compensation expense under the restricted stock plans was $17.2 million, $16.7 million and $14.6 million for
2014, 2013 and 2012, respectively. As of December 31, 2014, we had $14.8 million of future expense to be
recognized related to our restricted stock unit plans over a weighted average remaining life of 1.7 years.
Post-Employment Benefit
In 2001, we entered into an agreement with our Chairman who was also then our Chief Executive Officer. That
agreement was amended in 2006 and in 2008. Pursuant to the amended agreement, the Chairman relinquished
his position as Chief Executive Officer in May 2006 and began his post-employment service period on
December 31, 2006, which continued through August 15, 2011, during which service period the Chairman, acting
as an independent contractor, agreed to serve as nonexecutive Chairman of our Board of Directors. The agreement
provides the Chairman with post-employment benefits for ten years following August 15, 2011. The agreement
also provides for medical coverage on an after-tax basis to the Chairman, his spouse and children for their lives.
We recognized the net present value of the post-employment benefits over the expected service period. Our total
accrued liabilities, current and long-term, under this post-employment benefit were $5.7 million and $6.3 million
at December 31, 2014 and 2013, respectively.
As part of the arrangements relating to the Chairman's post-employment benefits, we established an irrevocable
grantor trust, commonly known as a "rabbi trust," to provide the Chairman greater assurance that we will set
aside an adequate source of funds to fund payment of the post-retirement benefits under this agreement,
including the medical coverage benefits payable to the Chairman, his spouse and their children for their lives. In
connection with establishment of the rabbi trust, we contributed to the trust a life insurance policy on the life of
the Chairman, which we had previously obtained, and we agreed to continue to pay the premiums due on that
policy. When the life insurance policy matures, the proceeds of the policy will become assets of the trust. If the
value of the trust exceeds $4 million, as adjusted by the consumer price index, at any time after January 1, 2012,
the excess may be paid to us. However, because the trust is irrevocable, the assets of the trust are generally not
available to fund our future operations until the trust terminates, which is not expected to be during the lives of
the Chairman, his spouse or their children. Furthermore, no tax deduction will be available for our contributions
to the trust; however, we may benefit from future tax deductions for benefits actually paid from the trust
(although benefit payments from the trust are not expected to occur in the near term, because we expect to make
direct payments of those benefits for the foreseeable future).
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
Quarter Ended
Revenue
Gross profit
Income from operations
Net income
Diluted earnings per share
Weighted average number of diluted
shares outstanding
Quarter Ended
Revenue
Gross profit
Income from operations
Net income
Diluted earnings per share
Weighted average number of diluted
shares outstanding
March 31
$
840,201 $
189,491
132,862
91,225
$
0.84 $
Year Ended December 31, 2014
Sept. 30
Dec. 31
June 30
Total
927,407 $
218,215
161,311
110,295
1.02 $
973,089 $
241,855
181,918
124,338
1.16 $
918,927 $ 3,659,624
209,640
859,201
152,239
628,330
102,471
428,329
4.00
0.99 $
108,724
108,421
107,407
103,851
107,091
March 31
$
718,552 $
160,375
108,290
74,849
$
0.69 $
Year Ended December 31, 2013
Sept. 30
Dec. 31
June 30
Total
820,372 $
201,864
146,337
98,811
0.91 $
853,297 $
205,492
153,736
104,407
0.96 $
894,798 $ 3,287,019
197,805
765,536
136,753
545,116
93,433
371,500
3.42
0.86 $
108,612
108,713
108,783
108,840
108,731
48OCEANEERING INTERNATIONAL, INC. 2014 ANNUAL REPORT49
Form 10-K
The entire Form 10-K, as filed with the Securities and Exchange Commission, is incorporated
herein by reference and may be accessed through the Oceaneering website, www.oceaneering.com
by selecting "Investor Relations," then "SEC Financial Reports," then selecting the desired report,
or may be obtained by writing to:
Oceaneering International, Inc.
11911 FM 529
Houston, TX 77041-3000
Attention: David K. Lawrence, Secretary
Forward-Looking Statements
All statements in this report that express a belief, expectation, or intention are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on current information at the
time this report was written and expectations that involve a number of risks, uncertainties, and
assumptions. Among the factors that could cause the actual results to differ materially from
those indicated in the forward-looking statements are: general economic and industry conditions;
worldwide demand for and prices of crude oil and natural gas; Oceaneering’s ability to obtain and
the timing of new projects and acquisitions; operating risks; weather events; changes in laws and
government regulations; outcomes of legal or regulatory proceedings; business acquisition
integration; technological changes; and changes in competitive factors. Should one or more of
these risks or uncertainties materialize, or should the assumptions underlying the forward-looking
statements prove incorrect, actual outcomes could vary materially from those indicated. These
and other risks are fully described in Oceaneering’s annual report on Form 10 K for the year
ended December 31, 2014 and other periodic filings with the Securities and Exchange Commis
-
sion.
The use in this report of such terms as Oceaneering, company, group, organization, we, us, our, and its,
or references to specific entities, is not intended to be a precise description of corporate relationships.
50
General Information
Corporate Office
Annual Shareholders’ Meeting
Date: May 8, 2015
Time: 8:30 a.m. CDT
Location:
Oceaneering International, Inc.
11911 FM 529
Houston, TX 77041
Independent Registered Public
Accounting Firm
Ernst & Young LLP
5 Houston Center
1401 McKinney
Houston, TX 77010-4034
Counsel
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, TX 77002-4995
Oceaneering International, Inc.
11911 FM 529
Houston, TX 77041-3000
Telephone: (713) 329-4500
www.oceaneering.com
Stock Symbol: OII
Stock traded on NYSE
CUSIP Number: 675232102
Please direct communications concerning
stock transfer requirements or lost
certificates to our transfer agent.
Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
Overnight Deliveries:
211 Quality Circle
Suite 210
College Station, TX 77845
OII Account Information
www.computershare.com/investor
Telephone: (781) 575-2879 or (877) 373-6374
Fax: (781) 575-3605
Hearing Impaired/TDD: (800) 952-9245
Courtesy of ROV Global Explorer with Schmidt Ocean Institute
Oceaneering International, Inc.
11911 FM 529
Houston, Texas 77041-3000
(713) 329-4500
www.oceaneering.com