2017 Annual Report
Oceaneering at a Glance
Oceaneering is a global provider of engineered services and products, primarily to
the offshore energy industry. Through the use of its applied technology expertise,
Oceaneering also serves the defense, aerospace and commercial theme park
industries. At year end, Oceaneering employed approximately 8,200 people.
Remotely Operated Vehicles
We provide ROVs, which are tethered submersible vehicles
remotely operated from the surface, to customers in
the energy industry for drilling support and vessel-
based services, including subsea hardware installation,
construction, pipeline inspection, survey and facilities
inspection, maintenance and repair. We design and build
our new ROVs at in-house facilities, the largest of which is in
Morgan City, Louisiana.
At the end of 2017, we owned 279 ROVs, and we estimate
that this represented approximately 28% of the industry’s
work class vehicles. We believe we are the industry leader
in providing ROV services for drill support, with an estimated
56% market share at the end of 2017.
Subsea Products
Our Subsea Products segment consists of two business
units: (1) manufactured products; and (2) service and rental.
Manufactured products include production control umbilicals
and specialty subsea hardware. Service and rental includes
tooling, subsea work systems and installation and workover
control systems, which we design and build but operate as
a service. Within this unit we also provide riserless light
well intervention services, which are intended to maximize
production and increase the recovery rate from offshore
oil and gas reservoirs or, alternatively, prepare wells to be
plugged and abandoned.
About The Cover
Highlighting Oceaneering’s investment and growth strategy, pictured clockwise from the top right: new-build Jones Act-
compliant subsea support vessel, Ocean Evolution; automated guided vehicle; Revolution™ Tru-Trackless™ motion-based
ride system; remote piloting and automated control center; asset integrity pipeline inspection, assisted by an ROV; rigless,
riserless light well intervention system; next generation resident hybrid vehicle; and Ecosse SCARJet™ trenching system.
Oceaneering International, Inc.
Subsea Projects
We provide project management, survey, subsea installation
and inspection, maintenance, and repair services, principally
in the U.S. Gulf of Mexico and offshore Angola. We service
deepwater projects with dynamically positioned vessels that have
our ROVs onboard, and shallow water projects with our manned
diving operations, utilizing dive support vessels and saturation
diving systems.
Asset Integrity
We provide asset integrity management, corrosion
management, inspection and nondestructive testing services,
principally to customers in the oil and gas, power generation,
and petrochemical industries. We perform these services on
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 their
prime contractors, and the commercial theme park industry.
We also develop, implement, and maintain innovative, turnkey
logistic solutions based on automated guided vehicle technology.
The U.S. Navy is our largest non-energy customer, for whom we
perform work predominantly on surface ships and submarines.
2017 Annual Report
2017 Letter to
Shareholders
It is my honor and privilege to address you in my
first shareholder letter as CEO of Oceaneering.
Let me begin by thanking my predecessor,
Kevin McEvoy, for his gracious guidance and
support, since I joined the company in May 2012.
All of us are grateful for Kevin’s extraordinary
example of what it means to be an Oceaneer.
My predecessors have built a forward-leaning
company based firmly on our core values,
and I am committed to maintaining this
long-standing culture.
Looking back at 2017, although our income from
operations declined compared to 2016, we were
pleased to report that each of our operating
segments remained profitable. We accomplished
this by winning significant new business and
maintaining market share, executing well for
our customers, and continuing an impressive
safety record. Of at least equal importance, we
generated more than sufficient cash flow from
operating activities to cover our organic capital
expenditures. This allowed us to maintain a
conservative financial strategy as we ended
2017 with more than $430 million in cash and
a $500 million undrawn unsecured revolving
credit facility.
Looking forward, we have no intention of simply
marking time until the markets recover.
We continue to focus on leveraging resources,
including people, processes and technologies,
across Oceaneering to gain efficiencies through
continuous improvement. In addition, we
continue to innovate and deliver value to our
customers, as evidenced by our investments in
our remotely operated vehicle (“ROV”) business,
and rigless, riserless light well intervention
technologies. Our latest ROV advancements
include developing and deploying a resident
battery-powered vehicle capable of being
operated without a surface vessel onsite, and
incorporating remote piloting, machine vision and
Oceaneering International, Inc.
augmented reality capabilities into our existing
ROV fleet. Our achievements and contributions in
integrating robotic and automated technologies
and services enable us to offer our customers
safer and more cost-effective solutions.
On a macro basis, we are encouraged that
offshore energy projects have been reworked,
breakeven points have been lowered, and once-
deferred projects are now moving forward.
We are also encouraged by improvements
in certain long-term industry drivers and
fundamentals in the markets we serve, indicating
that the offshore energy industry appears to be
turning the corner. These include higher oil
prices, stabilization in the contracted floating rig
count, with reported increased tendering activity,
and increased number of sanctioned offshore
projects with an expected further increase in
financial investment decisions. Demand for
offshore production is expected to remain stable
or grow slightly for the foreseeable future.
For Oceaneering, we are beginning to witness
some signs of flattening and increased activity
in certain of our services businesses, while our
later cycle manufactured products businesses
are still experiencing the effects of lower backlog.
For these manufactured products businesses,
we do not expect an improvement in throughput
until 2019 or beyond. Overall, 2018 is going to
be another challenging year, as we project our
consolidated revenue to be down slightly, with
decreases in three of our energy segments,
partially offset by increases in Asset Integrity and
Advanced Technologies.
Despite our lower 2018 outlook, we intend to
continue to strengthen our portfolio by investing
in our current and adjacent market niches,
with more focus on our customers’ operating
expenditures in the production phase of the
offshore oilfield life cycle. We are also expanding
into the offshore renewable energy markets.
In early 2018, we announced a three-year
agreement with Van Oord Offshore Wind B.V.
to provide ROV and trenching support services.
In addition, we announced the acquisition of
Ecosse Subsea Limited (“Ecosse”), a provider
of offshore engineering, seabed preparation,
route clearance and trenching services to the
renewable energy and oil and gas industries.
We believe the acquisition of Ecosse offers
Oceaneering the opportunity to expand our
service line capabilities, grow our market position
within the offshore renewable energy market,
and provide our customers with proven tools to
optimize installation projects. Further, we expect
the acquisition to be accretive to our 2018 cash
flow and earnings and plan to include its results
in our Subsea Projects segment.
In addition to the adjacent offshore renewable
energy market, we are targeting four other
growth areas, including riserless well
intervention, robotics and automation, pipeline
solutions, and asset integrity. We believe
each of these areas is complementary to
what Oceaneering does today, and most have
applications beyond the markets we have
traditionally served.
During the first quarter of 2018, we issued $300
million of ten-year senior notes through a public
offering. We used the net proceeds to repay our
$300 million term loan, which was scheduled
to mature in October 2019. We also amended
our unsecured revolving credit agreement, such
that we have $500 million available until October
2021, and thereafter $450 million until January
2023. While liquidity has not been a pressing
concern of ours, the extension of our revolving
credit facility, and the early repayment of the
term loan, increased Oceaneering's liquidity
runway by improving our debt maturity profile.
As a result, our next scheduled debt principal
maturity is in November 2024. With the
enhancement of our debt profile, we are
confident that our liquidity provides us with the
financial flexibility to continue to invest and grow
our company for the future.
We intend to remain focused on strengthening
our portfolio of services and products through
investment and innovation, maintaining or
growing our market share, and becoming more
efficient and controlling our costs, without
sacrificing our superior safety performance
or quality.
Beyond 2018, with stable and improving long-
term oil prices, continued demand in gas
markets, and an increasing and aging number of
subsea wells, we foresee an increase in
offshore oil and gas activity. Considering this,
along with the quest for more renewable energy
sources and the rise of offshore wind energy,
we anticipate improving demand for our energy-
related services and products.
I look forward to leading Oceaneering during
these dynamic times. We will continue our rich
history of solving our customer’s seemingly
unsolvable problems in the most challenging
environments. At the same time, we remain
committed to making Oceaneering a great place
to work for our employees, adapting our business
model as needed to the evolving market, and
creating differentiated value for
our shareholders.
Finally, I want to thank our dedicated
employees and management teams for their
continued hard work and focus during what has
been a challenging last few years. I also want
to thank you, our shareholders, for your
continued support, your confidence and above
all your trust.
Roderick A. Larson
President and Chief Executive Officer
2017 Annual Report
2017 Annual
Report on
Form 10-K
ENOVUS
Next-generation electric
work class ROV
Oceaneering International, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10945
____________________________________________
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
11911 FM 529
Houston, Texas
(Address of principal executive offices)
95-2628227
(I.R.S. Employer
Identification No.)
77041
(Zip Code)
Registrant's telephone number, including area code: (713) 329-4500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.25 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
____________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of
this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting
company)
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes
No
Aggregate market value of the voting stock held by nonaffiliates of the registrant computed by reference to the
closing price of $22.84 of the Common Stock on the New York Stock Exchange as of June 30, 2017, the last
business day of the registrant's most recently completed second quarter: $2.2 billion
Number of shares of Common Stock outstanding at February 23, 2018: 98,460,365.
Documents Incorporated by Reference:
Portions of the proxy statement relating to the registrant's 2018 annual meeting of shareholders, to be filed on
or before May 1, 2018 pursuant to Regulation 14A of the Securities Exchange Act of 1934, are incorporated by
reference to the extent set forth in Part III, Items 10-14 of this report.
Oceaneering International, Inc.
Form 10-K
Table of Contents
Business
Cautionary Statement Concerning Forward-Looking Statements(cid:3)
Executive Officers of the Registrant
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence(cid:3)
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Part I
Item 1.
Item 1A(cid:17)
(cid:44)tem 1B(cid:17)
(cid:44)tem 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A(cid:17)
Item 8.
Item 9.
Item 9A(cid:17)
Item 9B(cid:17)
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Signatures
Index to Financial Statements and Schedules
Report of Independent Registered Public Accounting Firm(cid:3)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income(cid:3)
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data (unaudited)
1
Item 1. Business.
GENERAL DEVELOPMENT OF BUSINESS
PART I
Oceaneering International, Inc. is a global oilfield provider of engineered services and products,
primarily to the offshore oil and gas industry. Oceaneering also serves the defense, aerospace and
commercial theme park industries. Oceaneering was organized as a Delaware corporation in 1969
out of the combination of three diving service companies founded in the early 1960s. Since our
establishment, we have concentrated on the development and marketing of underwater services and
products to meet customer needs requiring the use of advanced technology. We believe we are one
of the world's largest underwater services contractors. The services and products we provide to the
energy industry include remotely operated vehicles, specialty subsea hardware, engineering and
project management, subsea intervention services, including manned diving, survey and positioning
services and asset integrity and nondestructive testing services. Our foreign operations, principally
in the North Sea, Africa, Brazil, Australia and Asia, accounted for approximately 51% of our revenue,
or $1.0 billion, for the year ended December 31, 2017.
Our business segments are contained within two businesses – services and products provided
primarily to the oil and gas industry ("Oilfield") and services and products provided to non-energy
industries ("Advanced Technologies"). Our four business segments within the Oilfield business are
Remotely Operated Vehicles ("ROVs"), Subsea Products, Subsea Projects and Asset Integrity. We
report our Advanced Technologies business as one segment. Unallocated Expenses are expenses 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.
Oilfield. The primary focus of our Oilfield business over the last several years has been toward
increasing our asset base and capabilities for providing services and products for offshore operations
and subsea completions. In recent years, we have focused on increasing our service and product
offerings toward our oil and gas customers' operating expenses and the offshore renewable energy
market.
During the past ten years, we have acquired businesses to expand and complement our service and
product offerings. These include:
•
•
•
•
•
•
•
•
•
a Canadian manufacturer of clamp connectors, check valves and universal ball joints;
a Norwegian-based provider of inspection, maintenance, subsea engineering and field
operations services, principally to the oil and gas industry;
a Norwegian rental provider of specialized subsea dredging equipment, including ROV-
deployed units, to the offshore oil and gas industry;
a Norwegian oilfield technology company specializing in providing subsea tooling services and
plugging, abandonment and decommissioning of offshore oil and gas production platforms
and subsea wellheads;
a Norwegian design and fabrication company specializing in subsea tools for the offshore oil
and gas industry;
a U.S.-based international provider of survey and positioning services;
a business that uses ROVs to perform surveys on mobile offshore drilling units and floating
production systems that satisfy the underwater inspection in lieu of drydocking (UWILD)
requirements of all major classification societies;
the assets of a provider of riserless light well intervention services; and
a majority interest in an Azerbaijani company that supports the provision of ROV and diving
services in the Caspian Sea region.
ROVs. We provide ROVs, which are tethered submersible vehicles remotely operated from the
surface, to customers in the oil and gas industry for drilling support and vessel-based services,
including subsea hardware installation, construction, pipeline inspection, survey and facilities
inspection, maintenance and repair. We design and build our new ROVs at in-house facilities, the
largest of which is in Morgan City, LA. In 2017, we manufactured and added seven ROVs to our fleet
and retired eight. Our work-class ROV fleet size was 279 at December 31, 2017, 280 at
2
December 31, 2016 and 315 at December 31, 2015. We have decreased our ROV fleet size over the
last three years as a result of lower market demand.
Subsea Products. Our Subsea Products segment consists of two business units: (1) manufactured
products; and (2) service and rental. Manufactured products include production control umbilicals
and specialty subsea hardware. Service and rental includes tooling, subsea work systems and
installation and workover control systems, which we design and build but operate as a service.
We provide various types of subsea umbilicals through our Umbilical Solutions division from plants in
the United States, Scotland and Brazil. Offshore operators use umbilicals to control subsea wellhead
hydrocarbon flow rates, monitor downhole and wellhead conditions and perform chemical injection.
Subsea umbilicals are also used to provide power and fluids to other subsea processing hardware,
including pumps and gas separation equipment.
In 2016, we acquired the assets of Blue Ocean Technologies, LLC, a privately held provider of
riserless light well intervention ("RLWI") services. Subsea well intervention services are intended to
maximize production and increase the recovery rate from offshore oil and gas reservoirs or,
alternatively, prepare wells to be plugged and abandoned. These RLWI systems have the capability
to perform a wide variety of cost-effective services for well interventions, including well diagnostics,
damaged well remediation and workovers, and well plugging and abandonment.
Subsea Projects. Our Subsea Projects segment consists of our subsea installation, inspection,
maintenance and repair services, principally in the U.S. Gulf of Mexico and offshore Angola and
India, utilizing a fleet currently consisting of two owned and two chartered dynamically positioned
deepwater vessels with integrated high-specification work-class ROVs onboard, and three owned
shallow water diving and survey vessels, other spot-chartered vessels and other assets. Our owned
vessels are Jones Act-compliant. The dynamically positioned vessels are equipped with thrusters
that allow them to maintain a constant position at a location without the use of anchors. They are
used in the inspection, maintenance and repair of subsea facilities, pipeline or flowline tie-ins,
pipeline crossings and installations. These vessels can also carry and install equipment or umbilicals
required to bring subsea well completions into production (tie-back to production facilities). With our
acquisition of C & C Technologies, Inc. ("C&C") in 2015, further described below, we provide survey
services.
We previously had several deepwater vessels under long term charter. The last of our current
charters of deepwater vessel charters expires in March 2018. With the current market conditions,
we attempt to charter vessels for specific projects on a back-to-back basis with the vessel owners.
Unless indicated otherwise, each of the chartered vessels discussed below is a deepwater
multiservice subsea support vessel outfitted with two of our high-specification work-class ROVs.
Beginning in the third quarter of 2008, we chartered a vessel, the Olympic Intervention IV, for an
initial term of five years. Following extension periods, the charter expired in July 2016, and we
released the vessel to its owner. We had been using the Olympic Intervention IV in the U.S. Gulf of
Mexico.
In 2012, we moved the chartered vessel Ocean Intervention III to Angola and also chartered the
Bourbon Oceanteam 101 to work on a three-year field support vessel services contract for a unit of
BP plc. We had extended the charter of the Bourbon Oceanteam 101 to January 2017. However, in
early 2016, the customer exercised its right, under the field support vessel services contract, to
terminate its use of the Bourbon Oceanteam 101 at the end of May 2016. Under the terms of the
contract, the costs incurred by us associated with the early release and demobilization of the vessel
were reimbursed by the customer. Following the release of the vessel, we redelivered it to the vessel
supplier. The charter for the Ocean Intervention III expired at the end of July 2017. Under the field
support vessel services contract, which has been extended through January 2019, we are continuing
to supply project management and engineering services. We also provide ROV tooling, asset
integrity services and installation and workover control system services as requested by the
customer. Chartered vessels and barges are provided to the customer upon request. Under the field
support vessel services contract, at the customer's request the Ocean Intervention III will be
3
provided for a fixed term from January 2018 until May 2018 with three one-month optional customer
extension periods.
In March 2013, we commenced a five-year bareboat charter for a Jones Act-compliant multiservice
support vessel, the Ocean Alliance, we have been using in the U.S. Gulf of Mexico. In January 2015,
we commenced a two-year contract with a customer for the use of the Ocean Alliance. The contract
expired in January 2017, and we are marketing the vessel for spot market work in the U.S. Gulf of
Mexico. We anticipate that we will return the Ocean Alliance to the vessel owner in the first quarter
of 2018 and we will work with the vessel owner on a back-to-back basis on projects for customers in
the Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multiservice
subsea marine support vessel. We made modifications to the vessel and used the vessel in the U.S.
Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. In
December 2016, we declined our option to extend the charter and the vessel was released.
In November 2015, we commenced a two-year charter for the use of the Island Pride, a multiservice
subsea marine support vessel. We used the vessel under a two-year contract to provide field
support services off the coast of India for an oil and gas customer based in India. In
November 2017, that field services contract expired and we declined our option to extend the vessel
charter.
We also charter or lease vessels on a short-term basis as necessary to augment our fleet.
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 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 4,000 meter 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 U.S. Gulf of Mexico.
These services are required to perform inspection, maintenance and repair projects and hardware
installations.
In 2015, we acquired C&C for approximately $224 million. C&C is a global provider of ocean-bottom
mapping services 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.
Asset Integrity. Through our Asset Integrity division, we provide asset integrity management,
corrosion management, inspection, and non-destructive testing services, principally to customers in
the oil and gas, power generation, and petrochemical industries. We perform these services on both
onshore and offshore facilities, both topside and subsea.
General. During the last five years, we have also made several small acquisitions to add
complementary technology or niche markets. We intend to continue our strategy of acquiring, as
opportunities arise, additional assets or businesses, to improve our market position or expand into
related service and product lines.
Advanced Technologies. Our Advanced Technologies segment provides engineering and related
manufacturing, principally to U.S. Government agencies and their prime contractors in defense and
space exploration activities, the commercial theme park industry and mobile robotics.
4
FINANCIAL INFORMATION ABOUT SEGMENTS
For financial information about our business segments, please see the tables in Note 7 of the Notes
to Consolidated Financial Statements in this report, which present revenue, income from operations,
depreciation and amortization expense and capital expenditures for 2017, 2016 and 2015, and
identifiable assets, property and equipment and goodwill by business segment as of December 31,
2017 and 2016.
DESCRIPTION OF BUSINESS
Oilfield
Our Oilfield business consists of ROVs, Subsea Products, Subsea Projects and Asset Integrity.
ROVs. ROVs are tethered submersible vehicles remotely operated from the surface. We use our
ROVs in the offshore oil and gas industry to perform a variety of underwater tasks, including drill
support, vessel-based inspection, maintenance and repair, installation and construction support,
pipeline inspection and surveys, and subsea production facility operation and maintenance. Work-
class ROVs are outfitted with manipulators, sonar and video cameras, and can operate specialized
tooling packages and other equipment or features to facilitate the performance of specific
underwater tasks. At December 31, 2017, we owned 279 work-class ROVs. We believe we operate
the largest fleet of ROVs in the world. We also believe we are the industry leader in providing ROV
services for drill support, with an estimated 56% market share at the end of 2017.
ROV revenue:
2017
2016
2015
Amount
(in thousands)
393,655
$
522,121
807,723
Percent of Total
Revenue
21%
23%
27%
Subsea Products. We construct a variety of specialty subsea hardware and provide related services.
These include:
•
•
•
•
•
•
•
•
•
various types of subsea umbilicals utilizing thermoplastic hoses and steel tubes, along with
termination assemblies;
tooling, ROV tooling and subsea work packages;
production control equipment;
installation and workover control systems;
clamp connectors;
pipeline connector and repair systems;
subsea and topside control valves;
subsea chemical injection valves; and
riserless light well intervention services.
Offshore well operators use subsea umbilicals and production control equipment to control subsea
wellhead hydrocarbon flow, monitor downhole and wellhead conditions and perform chemical
injection. They are also used to provide power and fluids to other subsea processing hardware,
including pumps and gas/oil separation equipment. ROV tooling provides an additional operational
interface between an ROV and permanently installed equipment located on the sea floor. Subsea
work packages facilitate well and associated equipment intervention for the purposes of flow
remediation and well stimulation.
Subsea Products revenue:
2017
2016
2015
Percent of Total
Revenue
33%
30%
31%
Amount
(in thousands)
625,513
$
692,030
959,714
5
Subsea Projects. We perform subsea oilfield hardware installation and inspection, maintenance and
repair services. We service offshore projects with dynamically positioned vessels that typically have
Oceaneering ROVs onboard. We service shallow water projects with our manned diving operation
utilizing dive support vessels and saturation diving systems.
We perform subsea intervention and hardware installation services, principally in the U.S. Gulf of
Mexico, offshore Angola and offshore India from multiservice vessels that have Oceaneering ROVs
onboard. These services include: subsea well tie-backs; pipeline/flowline tie-ins and repairs;
pipeline crossings; umbilical and other subsea equipment installations; subsea intervention; and
inspection, maintenance and repair activities.
We service oil and gas industry shallow water projects in the U.S. Gulf of Mexico and offshore Angola
with our manned diving operation utilizing the traditional diving techniques of air, mixed gas and
saturation diving, all of which use surface-supplied breathing gas. We supply our diving services
from three owned diving support vessels and other vessels and facilities. We do not use traditional
diving techniques in water depths greater than 1,000 feet.
We also provide both onshore and offshore mapping services. In certain offshore applications, we
utilize customized autonomous underwater vehicles, as well as vessel-mounted and towed
geophysical equipment. We also provide marine construction surveys for both surface and subsea
assets, as well as satellite-based positioning services for drilling rigs and seismic and construction
vessels.
Subsea Projects revenue:
2017
2016
2015
Amount
(in thousands)
291,993
$
472,979
604,484
Percent of Total
Revenue
15%
21%
20%
Asset Integrity. Through our Asset Integrity division, we offer a wide range of asset integrity services
to customers worldwide to help ensure the safety of their facilities onshore and offshore, while
reducing their unplanned maintenance and repair costs. We also provide third-party inspections to
satisfy contractual structural specifications, internal safety standards or regulatory requirements.
We provide these services principally to customers in the oil and gas, petrochemical and power
generation industries. In the U.K., we provide Independent Inspection Authority services for the oil
and gas industry, which include first-pass integrity evaluation and assessment and nondestructive
testing services. We use a variety of technologies to perform pipeline inspections, both onshore and
offshore.
Asset Integrity revenue:
2017
2016
2015
Amount
(in thousands)
236,778
$
275,397
372,957
Percent of Total
Revenue
12%
12%
12%
6
Advanced Technologies
Our Advanced Technologies segment provides engineering services and manufacturing principally to
the U.S. Department of Defense and major defense contractors. We also provide integrated mobile
robotic system solutions to domestic and international theme parks, automotive manufacturers and
retail warehousing. We work with our customers to understand their specialized requirements,
identify and mitigate risks, and provide them value-added, maintainable, safe and certified solutions.
The U.S. Navy is our largest customer in this segment, for whom we perform work primarily on
surface ships and submarines.
We provide support for the U.S. Navy, including underwater operations, data analysis, the design and
development of new underwater tools and systems, and the development of the control software to
operate those systems. We also install and maintain mechanical systems for the Navy's submarines
and surface ships. We support space exploration and technology development by providing our
products and services to NASA and aerospace contractors. Our U.S. Navy and NASA-related
activities substantially depend on continued government funding.
Advanced Technologies revenue:
Amount
Percent of Total
Revenue
2017
2016
2015
MARKETING
(in thousands)
373,568
$
309,076
317,876
19%
14%
10%
Oilfield. Oil and gas exploration and development expenditures fluctuate from year to year. In
particular, budgetary approval for more expensive drilling and production in deepwater, an area in
which we have a high degree of focus, may be postponed or suspended during periods when
exploration and production companies reduce their offshore capital spending. In recent years, we
have focused on increasing our service and product offerings toward our oil and gas customers'
operating expenses and the offshore renewable energy market.
We market our ROVs, Subsea Products, Subsea Projects and Asset Integrity services and products to
domestic, international and foreign national oil and gas companies engaged in offshore exploration,
development and production. We also provide services and products as a subcontractor to other
oilfield service companies operating as prime contractors. Customers for these services typically
award contracts on a competitive-bid basis. These contracts are typically less than one year in
duration, although we enter into multi-year contracts from time to time.
In connection with the services we perform in our Oilfield business, we generally seek contracts that
compensate us on a dayrate basis. Under dayrate contracts, the contractor provides the ROV, vessel
or equipment and the required personnel to operate the unit and compensation is based on a rate
per day for each day the unit is used. The typical dayrate depends on market conditions, the nature
of the operations to be performed, the duration of the work, the equipment and services to be
provided, the geographical areas involved and other variables. Dayrate contracts may also contain
an alternate, lower dayrate that applies when a unit is moving to a new site or when operations are
interrupted or restricted by equipment breakdowns, adverse weather or water conditions or other
conditions beyond the contractor's control. Sales contracts for our products are generally for a fixed
price.
Advanced Technologies. We market our engineered products and services primarily to U.S.
Government agencies and their prime contractors in defense and space exploration activities, and to
domestic and international theme parks, automotive manufacturers and retail warehousing.
Major Customers. Our top five customers in 2017, 2016 and 2015 accounted for 40%, 43% and
38%, respectively, of our consolidated revenue. In 2017 and 2016, four of our top five customers
were oil and gas exploration and production companies served by our Oilfield business segments,
with the other one being the U.S. Navy or other parts of the U.S. Government, which is served by
our Advanced Technologies segment. In 2015, all of our top five customers were oil and gas
exploration and production companies served by our Oilfield business segments. During each of
7
2017, 2016 and 2015, revenue from one customer, BP plc and subsidiaries, accounted for 12%, 18%
and 18%, respectively, of our total consolidated annual revenue.
Although we do not depend on any one customer, the loss of one of our significant customers could,
at least on a short-term basis, have an adverse effect on our results of operations and cash flows.
RAW MATERIALS
Most of the raw materials we use in our manufacturing operations, such as steel in various forms,
copper, electronic components and plastics, are available from many sources. However, some
components we use to manufacture subsea umbilicals are available from limited sources. With the
exception of certain kinds of steel tube, where we are limited in the number of available suppliers,
we can offer alternative materials or technologies in many cases, which depends on the requisite
approval of our customers. Although we have experienced some level of difficulty in obtaining
certain kinds of steel tube in the past due to global demand outstripping capacity, an increase in
supplier capacity, coupled with a drop in global demand, has resolved this issue, and we believe the
situation is unlikely to recur in the near future.
COMPETITION
Our businesses operate in highly competitive industry segments.
Oilfield
We are one of several companies that provide underwater services and specialty subsea hardware on
a worldwide basis. We compete for contracts with companies that have worldwide operations, as
well as numerous others operating locally in various areas. We believe that our ability to provide a
wide range of underwater services and products on a worldwide basis enables us to compete
effectively in all phases of the offshore oilfield life cycle. In some cases involving projects that
require less sophisticated equipment, small companies have been able to bid for contracts at prices
uneconomical to us. Additionally, in some jurisdictions we are subject to foreign governmental
regulations favoring or requiring the awarding of contracts to local contractors or requiring foreign
contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These
regulations may adversely affect our ability to compete.
ROVs. We believe we are the world's largest owner/operator of work-class ROVs employed in oil and
gas related operations. At December 31, 2017, we owned 279 work-class ROVs, and we estimate
that this represented approximately 28% of the work-class ROVs utilized in the oilfield service
industry. We compete with several major companies on a worldwide basis and with numerous others
operating locally in various areas.
Competition for ROV services historically has been based on equipment availability, location of or
ability to deploy the equipment, quality of service and price. The relative importance of these factors
can vary over time based on market conditions. The ability to develop improved equipment and
techniques and to train and retain skilled personnel is also an important competitive factor in our
markets. Demand for ROVs has been decreasing since mid 2014 due to the oil price environment,
and our margins have decreased in recent periods due to lower utilization and pricing pressure, as
price has become a more important factor in the current oil price environment.
Subsea Products. There are many competitors offering specialized products. We are one of several
companies that compete on a worldwide basis for the provision of thermoplastic and steel tube
subsea control umbilicals, and compared to current and forecasted market demand, we are faced
with overcapacity in the umbilical manufacturing market.
Subsea Projects. We perform subsea intervention and hardware installation services, principally in
the U.S. Gulf of Mexico and offshore Angola and India, from multiservice deepwater vessels. We are
one of many companies that offer these services. In general, our competitors can move their
vessels to where we operate from other locations with relative ease. We also have many
competitors that supply commercial diving services to the oil and gas industry in the U.S. Gulf of
Mexico. Our survey and positioning services are similarly competitive.
8
Asset Integrity. The worldwide asset integrity and inspection markets consist of a wide range of
inspection and certification requirements in many industries. We compete in only selected portions
of this market. We believe that our broad geographic sales and operational coverage, long history of
operations, technical reputation, application of various pipeline inspection technologies and
accreditation to international quality standards enable us to compete effectively in our selected asset
integrity and inspection services market segments.
Advanced Technologies
Engineering services is a very broad market with a large number of competitors. We compete in
specialized areas in which we can combine our extensive program management experience,
mechanical engineering expertise and the capability to continue the development of conceptual
project designs into the manufacture of custom equipment for customers.
SEASONALITY AND BACKLOG
We generate a material amount of our consolidated revenue from contracts for services in the U.S.
Gulf of Mexico in our Subsea Projects segment, which is usually more active in the second and third
quarters, as compared to the rest of the year. The European operations of our Asset Integrity
segment are also seasonally more active in the second and third quarters. Revenue in our ROV
segment is subject to seasonal variations in demand, with our first quarter generally being the low
quarter of the year. The level of our ROV seasonality depends on the number of ROVs we have
engaged in vessel-based subsea infrastructure inspection, maintenance, repair and installation,
which is more seasonal than drilling support. Revenue in each of our Subsea Products and Advanced
Technologies segments has generally not been seasonal.
The amounts of backlog orders we believed to be firm as of December 31, 2017 and 2016 were as
follows (in millions):
Oilfield
ROVs
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
As of December 31, 2017
As of December 31, 2016
Total
1+ yr*
Total
1+ yr*
$
$
432 $
276
153
301
1,162
218
1,380 $
198 $
50
38
111
397
47
498 $
431
149
280
1,358
195
444 $
1,553 $
263
91
—
124
478
29
507
*
Represents amounts that were not expected to be performed within one year.
No material portion of our business is subject to renegotiation of profits or termination of contracts
by the U.S. government.
PATENTS AND LICENSES
We currently hold numerous of U.S. and foreign patents and pending patent applications. We have
acquired patents and licenses and granted licenses to others when we have considered it
advantageous for us to do so. Although in the aggregate our patents and licenses are important to
us, we do not regard any single patent or license or group of related patents or licenses as critical or
essential to our business as a whole. In general, we depend on our technological capabilities and the
application of know-how rather than patents and licenses in the conduct of our operations.
9
REGULATION
Our operations are affected from time to time and in varying degrees by foreign and domestic
political developments and foreign, federal and local laws and regulations, including those relating
to:
protection of the environment;
operating from and around offshore drilling, production and marine facilities;
•
• national preference for local equipment and personnel;
• marine vessel safety;
•
• workplace health and safety;
•
•
•
taxation;
license requirements for exportation of our equipment and technology; and
currency conversion and repatriation.
In addition, our Oilfield business primarily depends on the demand for our services and products
from the oil and gas industry and, therefore, is affected by changing taxes, price controls and other
laws and regulations relating to the oil and gas industry generally. The adoption of laws and
regulations curtailing offshore exploration and development drilling for oil and gas for economic and
other policy reasons would adversely affect our operations by limiting demand for our services. We
cannot determine the extent to which new legislation, new regulations or changes in existing laws or
regulations may affect our future operations.
Our operations and properties are subject to a wide variety of increasingly complex and stringent
foreign, federal, state and local environmental laws and regulations, including those governing
discharges into the air and water, the handling and disposal of solid and hazardous wastes, the
remediation of soil and groundwater contaminated by hazardous substances and the health and
safety of employees. Sanctions for noncompliance may include revocation of permits, corrective
action orders, administrative or civil penalties and criminal prosecution. Some environmental laws
provide for strict, joint and several liability for remediation of spills and other releases of hazardous
substances, as well as damage to natural resources. In addition, companies may be subject to
claims alleging personal injury or property damage as a result of alleged exposure to hazardous
substances. These laws and regulations may also expose us to liability for the conduct of or
conditions caused by others, or for our acts that were in compliance with all applicable laws at the
time such acts were performed.
Environmental laws and regulations that apply to our operations include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Clean Air Act, the Clean Water
Act, the Resource Conservation and Recovery Act (each, as amended) and similar laws that provide
for responses to, and liability for, releases of hazardous substances into the environment.
Environmental laws and regulations also include similar foreign, state or local counterparts to the
above-mentioned federal laws, which regulate air emissions, water discharges, hazardous substances
and waste, and require public disclosure related to the use of various hazardous substances. Our
operations are also governed by laws and regulations relating to workplace safety and worker health,
primarily, in the United States, the Occupational Safety and Health Act and regulations promulgated
thereunder.
Compliance with federal, state and local provisions regulating the discharge of materials into the
environment or relating to the protection of the environment has not had a material impact on our
capital expenditures, earnings or competitive position. We cannot predict all of the environmental
requirements or circumstances that will exist in the future but anticipate that environmental control
and protection standards will become increasingly stringent and costly. Based on our experience to
date, we do not currently anticipate any material adverse effect on our business or consolidated
financial position, results of operations or cash flows as a result of future compliance with existing
environmental laws and regulations. However, future events, such as changes in existing laws and
regulations or their interpretation, more vigorous enforcement policies of regulatory agencies, or
stricter or different interpretations of existing laws and regulations, may require additional
expenditures by us, which may be material. Accordingly, there can be no assurance that we will not
incur significant environmental compliance costs in the future.
10
Our quality management systems are registered as being in conformance with ISO 9001:2015 and
cover:
•
•
•
•
•
•
all our Oilfield services and products in the United Kingdom (the "U.K.") and Norway;
our Remotely Operated Vehicle operations in the U.S. Gulf of Mexico, the U.K., Norway, Brazil,
Canada, the Middle East, Australia and Asia;
our Asset Integrity operations in the Western Hemisphere, the Middle East, Australia, the
United States and Indonesia;
our Subsea Projects operations;
our Subsea Products segment; and
the Oceaneering Space Systems, Oceaneering Technologies, Entertainment and Marine
Services units of our Advanced Technologies segment.
ISO 9001 is an internationally recognized system for quality management established by the
International Standards Organization, and the 2015 edition emphasizes customer satisfaction, risk
assessment and continual improvement.
EMPLOYEES
As of December 31, 2017, we had approximately 8,200 employees. Our workforce varies seasonally
and peaks during the second and third quarters. We consider our relations with our employees to be
satisfactory.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
For financial information about our geographic areas of operation, please see the tables in Note 7 of
the Notes to Consolidated Financial Statements in this report, which present revenue for 2017, 2016
and 2015 and long-lived assets as of December 31, 2017 and 2016 attributable to each of our major
geographic areas. For a discussion of risks attendant to our foreign operations, see the discussion in
Item 1A, "Risk Factors" under the heading "Our international operations involve additional risks not
associated with domestic operations."
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We are including the following discussion to inform our existing and potential security holders
generally of some of the risks and uncertainties that can affect our company and to take advantage
of the "safe harbor" protection for forward-looking statements that applicable federal securities law
affords.
From time to time, our management or persons acting on our behalf make forward-looking
statements to inform existing and potential security holders about our company. These statements
may include projections and estimates concerning the timing and success of specific projects and our
future orders, revenue, income and capital spending. Forward-looking statements are generally
accompanied by words such as "estimate," "plan," "project," "predict," "believe," "expect,"
"anticipate," "plan," "forecast," "budget," "goal," "may," "should," or other words that convey the
uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a
statement as being a forward-looking statement and refer to this cautionary statement.
In addition, various statements this report contains, including those that express a belief,
expectation or intention are forward-looking statements. Those forward-looking statements appear
in Part I of this report in Item 1 – "Business," Item 2 – "Properties" and Item 3 – "Legal Proceedings"
and in Part II of this report in Item 7 – "Management's Discussion and Analysis of Financial Condition
and Results of Operations," Item 7A – "Quantitative and Qualitative Disclosures About Market Risk"
and in the Notes to Consolidated Financial Statements incorporated into Item 8 and elsewhere in this
report. These forward-looking statements speak only as of the date of this report, we disclaim any
obligation to update these statements, and we caution you not to rely unduly on them. We have
based these forward-looking statements on our current expectations and assumptions about future
events. While our management considers these expectations and assumptions to be reasonable,
they are inherently subject to significant business, economic, competitive, regulatory and other
risks, contingencies and uncertainties, most of which are difficult to predict and many of which are
11
beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the
following:
• worldwide demand for and prices of oil and gas;
•
changes in, or our ability to comply with, government regulations, including those relating to
the environment;
the continued availability of qualified personnel;
general economic and business conditions and industry trends;
the volatility and uncertainties of credit markets;
the highly competitive nature of our businesses;
decisions about offshore developments to be made by oil and gas exploration, development
and production companies;
cancellations of contracts, change orders and other contractual modifications and the
resulting adjustments to our backlog;
collections from our customers;
the use of subsea completions and our ability to capture associated market share;
the strength of the industry segments in which we are involved;
the levels of oil and gas production to be processed by the Medusa field production spar
platform;
our future financial performance, including availability, terms and deployment of capital;
the consequences of significant changes in currency exchange rates;
changes in tax laws, regulations and interpretation by taxing authorities;
our ability to obtain raw materials and parts on a timely basis and, in some cases, from
limited sources;
operating risks normally incident to offshore exploration, development and production
operations;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
• hurricanes and other adverse weather and sea conditions;
cost and time associated with drydocking of our vessels;
•
adverse outcomes from legal or regulatory proceedings;
•
the risks associated with integrating businesses we acquire;
•
rapid technological changes; and
•
social, political, military and economic situations in foreign countries where we do business
•
and the possibilities of civil disturbances, war, other armed conflicts or terrorist attacks.
We believe the items we have outlined above are important factors that could cause our actual
results to differ materially from those expressed in a forward-looking statement made in this report
or elsewhere by us or on our behalf. We have discussed most of these factors in more detail
elsewhere in this report. These factors are not necessarily all the factors that could affect us.
Unpredictable or unanticipated factors we have not discussed in this report could also have material
adverse effects on actual results of matters that are the subject of our forward-looking statements.
We do not intend to update our description of important factors each time a potential important
factor arises. We advise our security holders that they should (1) be aware that important factors
we do not refer to above could affect the accuracy of our forward-looking statements and (2) use
caution and common sense when considering our forward-looking statements.
AVAILABLE INFORMATION
Our Web site address is www.oceaneering.com. We make available through this Web site under
"Investor Relations — SEC Financial Reports," free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and
Section 16 filings by our directors and executive officers as soon as reasonably practicable after we,
or our executive officers or directors, as the case may be, electronically file those materials with, or
furnish those materials to, the SEC. You may read and copy any materials we file with the SEC at
the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain
information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains a Web site, www.sec.gov, which contains reports, proxy and other information
statements, and other information regarding issuers that file electronically with the SEC.
12
We have adopted, and posted on our Web site: our corporate governance guidelines; a code of ethics
for our Chief Executive Officer and Senior Financial Officers; and charters for the Audit, Nominating
and Corporate Governance and Compensation Committees of our Board of Directors.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers. The following information relates to our executive officers as of February 23,
2018:
NAME
AGE
POSITION
Roderick A. Larson
Clyde W. Hewlett
Alan R. Curtis
Stephen P. Barrett
David K. Lawrence
W. Cardon Gerner
William J. Boyle
Martin J. McDonald
Eric A. Silva
Robert P. Moschetta
51
63
52
60
58
63
57
54
58
62
President and Chief Executive Officer and Director
Chief Operating Officer
Senior Vice President and Chief Financial Officer
Senior Vice President, Business Development
Senior Vice President, General Counsel and Secretary
Senior Vice President and Chief Accounting Officer
Senior Vice President, Asset Integrity
Senior Vice President, Remotely Operated Vehicles
Senior Vice President, Operations Support
Senior Vice President, Health Safety Environment/
Training/Quality
EXECUTIVE
OFFICER
SINCE
EMPLOYEE
SINCE
2012
2011
2015
2015
2012
2006
2016
2015
2017
2017
2012
1988
1995
2015
2005
2006
2016
1989
2014
2000
Each executive officer serves at the discretion of our Chief Executive Officer and our Board of
Directors and is subject to reelection or reappointment each year after the annual meeting of our
shareholders. We do not know of any arrangement or understanding between any of the above
persons and any other person or persons pursuant to which he was selected or appointed as an
officer.
Business Experience. The following summarizes the business experience of our executive officers.
Except where we otherwise indicate, each of these persons has held his current position with
Oceaneering for at least the past five years.
Roderick A. Larson joined Oceaneering in May 2012 as Senior Vice President and Chief Operating
Officer, became President in February 2015 and became President and Chief Executive Officer and
Director in May 2017. Mr. Larson previously held positions with Baker Hughes Incorporated from
1990 until he joined Oceaneering, serving most recently as President, Latin America Region from
January 2011. Previously, he served as Vice President of Operations, Gulf of Mexico Region from
2009 to 2011, Gulf Coast Area Manager from 2007 to 2009, and Special Projects Leader Technical
Training Task from 2006 to 2007.
Clyde W. Hewlett, Chief Operating Officer, has extensive experience in the offshore and subsea
oilfield markets. He joined Oceaneering in 1988 and has held increasingly responsible positions. He
has served as our Vice President of Mobile Offshore Production Systems, Vice President of Subsea
Projects, Senior Vice President of Subsea Projects and Senior Vice President, Subsea Services. He
was promoted to his current position in August 2015.
Alan R. Curtis, Senior Vice President and Chief Financial Officer, joined Oceaneering in 1995 as the
Financial and Operations Controller for our Subsea Products segment, and became Vice President
and Controller of Subsea Products in 2013 and Senior Vice President, Operations Support in 2014.
He was appointed to his current position in August 2015.
Stephen P. Barrett, Senior Vice President, Business Development, joined Oceaneering in July 2015 as
Senior Vice President, Subsea Products. He was appointed to his current position in November 2016.
Prior to joining Oceaneering, he served at FMC Technologies beginning in 1982, progressing through
13
a variety of engineering, sales and marketing, and general management roles. His last three roles at
FMC Technologies were Western Region Subsea General Manager, Global Subsea Products Director
and Global Subsea Services Director.
David K. Lawrence, Senior Vice President, General Counsel and Secretary, joined Oceaneering in
2005 as Assistant General Counsel. He was appointed Associate General Counsel effective
January 2011, Vice President, General Counsel and Secretary in January 2012 and to his current
position in February 2014. He has over 25 years of experience as in-house counsel in the oilfield
services and products industry and manufacturing.
W. Cardon Gerner, Senior Vice President and Chief Accounting Officer, joined Oceaneering in 2006 as
Vice President and Chief Accounting Officer, and became a Senior Vice President in August 2011 and
served as our Chief Financial Officer from that date until August 2015. From 1999 to 2006, he held
various financial positions with Service Corporation International, a global provider of death-care
services, serving as Vice President Accounting from 2002 to 2006. He also served as Senior Vice
President and Chief Financial Officer of Equity Corporation International from 1995 to 1999. He is a
Certified Public Accountant.
William J. Boyle, Senior Vice President, Asset Integrity, joined Oceaneering in March 2016. Prior to
joining Oceaneering, Mr. Boyle held the position of Chief Executive Officer with Underwater Integrity
Solutions from November 2014 until December 2015. Previously, Mr. Boyle held senior leadership
positions at Forum Energy Technologies, Inc. from 2013 to 2014, Clough Limited from 2008 to 2012,
Subsea 7 S.A. from 2005 to 2008, John Wood Group PLC from 2003 to 2005 and Technip S.A. from
1991 to 2003.
Martin J. McDonald, Senior Vice President, Remotely Operated Vehicles, joined Oceaneering in 1989.
He has held a variety of domestic and international positions of increasing responsibility in our ROV
segment and most recently served as Vice President and General Manager for our ROV operations in
the Eastern Hemisphere from 2006 until being appointed to his current position effective
January 2016.
Eric A. Silva, Senior Vice President, Operations Support joined Oceaneering in February 2014 as
Chief Information Officer and Vice President. He was appointed to his current position in August
2015 and was appointed an executive officer in 2017. Prior to joining Oceaneering, Mr. Silva was a
consultant from May 2012 to February 2014 and served as the Chief Information Officer at El Paso
Corporation from 2010 to May 2012. Prior to such time, he was Vice President of Information
Technology of LyondellBasell Industries N.V. (formerly LyondellBasell Industries AF S.C.A.) from
December 2007 to 2010, and was Vice President of Information Technology of Lyondell Chemical
Company from 2002 to 2007.
Robert P. Moschetta, Senior Vice President, Health Safety Environment/Training/Quality, joined
Oceaneering in 2000 as Corporate HSE Director responsible for safety and environmental support for
Oceaneering’s worldwide operations. He became Senior Vice President, Health Safety Environment/
Training/Quality in May 2013, and was appointed an executive officer in 2017.
14
Item 1A. Risk Factors.
We are subject to various risks and uncertainties in the course of our business. The following
summarizes significant risks and uncertainties that may materially and adversely affect our business,
financial condition, results of operations or cash flows and the market value of our securities.
Investors in our company should consider these matters, in addition to the other information we
have provided in this report and the documents we incorporate by reference.
We derive most of our revenue from companies in the offshore oil and gas industry, a
historically cyclical industry with levels of activity that are significantly affected by the
levels and volatility of oil and gas prices.
We derive most of our revenue from customers in the offshore oil and gas exploration, development
and production industry. The offshore oil and gas industry is a historically cyclical industry
characterized by significant changes in the levels of exploration and development activities. Oil and
gas prices, and market expectations of potential changes in those prices, significantly affect the
levels of those activities. Worldwide political, economic and military events have contributed to oil
and gas price volatility and are likely to continue to do so in the future. Since the general decline in
the price of oil from mid 2014, many oil and gas companies made significant reductions in their
capital and operating expenditures, which are adversely impacting demand for the services and
products provided by our Oilfield business. Any prolonged reduction in the overall level of offshore
oil and gas exploration and development activities, whether resulting from changes in oil and gas
prices or otherwise, could materially and adversely affect our financial condition and results of
operations in our segments within our Oilfield business. Some factors that have affected and are
likely to continue affecting oil and gas prices and the level of demand for our services and products
include the following:
• worldwide demand for oil and gas;
•
•
general economic and business conditions and industry trends;
the ability of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain
production levels;
the level of production by non-OPEC countries, including U.S. shale oil;
the ability of oil and gas companies to generate funds for capital expenditures;
domestic and foreign tax policy;
laws and governmental regulations that restrict exploration and development of oil and gas in
various offshore jurisdictions;
technological changes;
the political environment of oil-producing regions;
the price and availability of alternative fuels; and
overall economic conditions.
•
•
•
•
•
•
•
•
Our operations could be adversely impacted by the effects of new regulations.
During 2010, the U.S. government established new regulations relating to the design of wells and
testing of the integrity of wellbores, the use of drilling fluids, the functionality and testing of well
control equipment, including blowout preventers, and other safety and environmental regulations.
The U.S. government requires that operators demonstrate their compliance with those regulations
before commencing deepwater drilling operations. Changes in laws or regulations regarding offshore
oil and gas exploration and development activities, the cost or availability of insurance and the
impacts of these factors on decisions by customers or other industry participants could further
reduce demand for our services, which would have a negative impact on our operations.
15
Our international operations involve additional risks not associated with domestic
operations.
A significant portion of our revenue is attributable to operations in foreign countries. These activities
accounted for approximately 51% of our consolidated revenue in 2017. Risks associated with our
operations in foreign areas include risks of:
•
•
•
•
•
•
•
•
•
•
•
regional and global economic downturns;
disturbances or other risks that may limit or disrupt markets;
expropriation, confiscation or nationalization of assets;
renegotiation or nullification of existing contracts;
foreign exchange restrictions;
foreign currency fluctuations, particularly in countries highly dependent on oil revenue;
foreign taxation, including the application and interpretation of tax laws;
the inability to repatriate earnings or capital;
changing political conditions;
changing foreign and domestic monetary policies; and
social, political, military and economic situations in foreign areas where we do business and
the possibilities of civil disturbances, war, other armed conflict, terrorist attacks or acts of
piracy.
Additionally, in some jurisdictions we are subject to foreign governmental regulations favoring or
requiring the awarding of contracts to local contractors or requiring foreign contractors to employ
citizens of, or purchase supplies from, a particular jurisdiction. These regulations may adversely
affect our ability to compete.
Our exposure to the risks we described above varies from country to country. In recent periods,
economic conditions, political instability and civil unrest in Africa have been our greatest concerns.
There is a risk that a continuation or worsening of these conditions could materially and adversely
impact our future business, operations, financial condition and results of operations. Of our total
consolidated revenue for 2017, we generated approximately 13% from our operations in Africa,
primarily in Angola.
Foreign exchange risks and fluctuations may affect our profitability on certain projects.
We operate on a worldwide basis with substantial operations outside the U.S. that subject us to U.S.
dollar translation and economic risks. In order to manage some of the risks associated with foreign
currency exchange rates, we may enter into foreign currency derivative (hedging) instruments,
especially when there is currency risk exposure that is not naturally mitigated via our contracts.
However, these actions may not always eliminate all currency risk exposure, in particular for our
long-term contracts. A disruption in the foreign currency markets, including the markets with
respect to any particular currencies, could adversely affect our hedging instruments and subject us
to additional currency risk exposure. Based on fluctuations in currency, the U.S. dollar value of our
backlog may from time to time increase or decrease significantly. We do not enter into derivative
instruments for trading or other speculative purposes. Our operational cash flows and cash
balances, though predominately held in U.S. dollars, may consist of different currencies at various
points in time in order to execute our contracts globally. Non-U.S. asset and liability balances are
subject to currency fluctuations when measured period to period for financial reporting purposes in
U.S. dollars.
Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an
uncertain indicator of our future revenues and earnings.
There can be no assurance that the revenues included in our backlog will be realized or, if realized,
will result in profits. Because of project cancellations or potential changes in the scope or schedule
of our customers' projects, we cannot predict with certainty when or if backlog will be realized.
Material delays, suspensions, cancellations or payment defaults could materially affect our financial
condition, results of operations and cash flows. We may be at greater risk of delays, suspensions
and cancellations in the current oil price environment.
16
Reductions in our backlog due to cancellation by a customer or for other reasons would adversely
affect, potentially to a material extent, the revenues and earnings we actually receive from contracts
included in our backlog. Many of our ROV contracts have 30-day notice termination clauses. Some
of the contracts in our backlog provide for cancellation fees in the event customers cancel projects.
These cancellation fees usually provide for reimbursement of our out-of-pocket costs, revenues for
work performed prior to cancellation and a varying percentage of the profits we would have realized
had the contract been completed. We typically have no contractual right upon cancellation to the
total contract revenues as reflected in our backlog. If we experience significant project terminations,
suspensions or scope adjustments to contracts reflected in our backlog, our financial condition,
results of operations and cash flows may be adversely impacted.
A global financial crisis could impact our business and financial condition in ways that we
currently cannot predict.
A recurrence of the credit crisis and related turmoil in the global financial system that occurred in
2008 and 2009 could have an impact on our business and our financial condition. In particular, the
cost of capital increased substantially while the availability of funds from the capital markets
diminished significantly. Although the capital markets have recovered, in a recurrence, our ability to
access the capital markets in the future could be restricted or be available only on terms we do not
consider favorable. Limited access to the capital markets could adversely impact our ability to take
advantage of business opportunities or react to changing economic and business conditions and
could adversely impact our ability to continue our growth strategy. Ultimately, we could be required
to reduce our future capital expenditures substantially. Such a reduction could have a material
adverse effect on our business and our consolidated financial condition, results of operations and
cash flows. A recurrence of such a global financial crisis could have further impacts on our business
that we currently cannot predict or anticipate.
A global financial crisis or economic recession could have an impact on our suppliers and our
customers, causing them to fail to meet their obligations to us, which could have a material adverse
effect on our revenue, income from operations and cash flows.
If one or more of the lenders under our revolving credit facility were to become unable or unwilling
to perform their obligations under that facility, our borrowing capacity could be reduced. Our
inability to borrow under our revolving credit facility could limit our ability to fund our future
operations and growth.
In addition, we maintain our cash balances and short-term investments in accounts held by major
banks and financial institutions located principally in North America, Europe, Africa and Asia, and
some of those accounts hold deposits that exceed available insurance. It is possible that one or
more of the financial institutions in which we hold our cash and investments could become subject to
bankruptcy, receivership or similar proceedings. As a result, we could be at risk of not being able to
access material amounts of our cash, which could result in a temporary liquidity crisis that could
impede our ability to fund operations.
Employee, agent or partner misconduct or our overall failure to comply with laws or
regulations could weaken our ability to win contracts, which could result in reduced revenues
and profits.
Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities
by one or more of our employees, agents or partners could have a significant negative impact on our
business and reputation. Such misconduct could include the failure to comply with the U.S. Foreign
Corrupt Practices Act ("FCPA"), which prohibits companies and their intermediaries from making
improper payments to non-U.S. officials, as well as the failure to comply with government
procurement regulations, regulations on lobbying or similar activities, regulations pertaining to the
internal controls over financial reporting and various other applicable laws or regulations, including
the U.K. Bribery Act. We operate in some countries that international corruption monitoring groups
have identified as having high levels of corruption. Our activities create the risk of unauthorized
payments or offers of payments by one of our employees or agents that could be in violation of the
FCPA or other applicable anti-corruption laws. The precautions we take to prevent and detect
misconduct, fraud or non-compliance with applicable laws and regulations may not be effective, and
17
we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or
acts of misconduct could subject us to fines, penalties or other sanctions, which could have a
material adverse effect on our business and our consolidated financial condition, results of operations
and cash flows.
Our business strategy contemplates future acquisitions. Acquisitions of other businesses
or assets present various risks and uncertainties.
We may pursue growth through the acquisition of businesses or assets that will enable us to broaden
our service and product offerings and expand into new markets. We may be unable to implement
this element of our growth strategy if we cannot identify suitable businesses or assets, reach
agreement on potential strategic acquisitions on acceptable terms or for other reasons. Moreover,
acquisitions involve various risks, including:
•
•
•
•
•
•
•
•
•
difficulties relating to the assimilation of personnel, services and systems of an acquired
business and the assimilation of marketing and other operational capabilities;
challenges resulting from unanticipated changes in customer and other third-party
relationships subsequent to acquisition;
additional financial and accounting challenges and complexities in areas such as tax planning,
treasury management, financial reporting and internal controls;
assumption of liabilities of an acquired business, including liabilities that were unknown at the
time the acquisition transaction was negotiated;
possible liabilities under the FCPA and other anti-corruption laws;
diversion of management's attention from day-to-day operations;
failure to realize anticipated benefits, such as cost savings and revenue enhancements;
potentially substantial transaction costs associated with acquisitions; and
potential impairment resulting from the overpayment for an acquisition.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be
available on attractive terms. Moreover, to the extent an acquisition transaction financed by non-
equity consideration results in goodwill, it will reduce our tangible net worth, which might have an
adverse effect on credit availability.
Additionally, an acquisition may bring us into businesses we have not previously conducted and
expose us to additional business risks that are different from those we have previously experienced.
Our business strategy also includes development and commercialization of new
technologies to support our growth. The development and commercialization of new
technologies require capital investment and involve various risks and uncertainties.
Our future growth will depend on our ability to continue to innovate by developing and
commercializing new service and product offerings. Investments in new technologies involve varying
degrees of uncertainties and risk. Commercial success depends on many factors, including the levels
of innovation, the development costs and the availability of capital resources to fund those costs, the
levels of competition from others developing similar or other competing technologies, our ability to
obtain or maintain government permits or certifications, the effectiveness of production, distribution
and marketing efforts, and the costs to customers to deploy and provide support for the new
technologies. We may not achieve significant revenues from new service and product investments
for a number of years, if at all. Moreover, new services and products may not be profitable, and,
even if they are profitable, our operating margins from new services and products may not be as
high as the margins we have experienced historically.
The loss of the services of one or more of our key personnel, or our failure to attract,
assimilate and retain trained personnel in the future, could disrupt our operations and
result in loss of revenues.
Our success depends on the continued active participation of our executive officers and key
operating personnel. The unexpected loss of the services of any one of these persons could
adversely affect our operations.
Our operations require the services of employees having the technical training and experience
necessary to obtain the proper operational results. As a result, if we should suffer any material loss
18
of personnel to competitors or be unable to employ additional or replacement personnel with the
requisite level of training and experience to adequately operate our equipment, our operations could
be adversely affected. A significant increase in the wages paid by other employers could result in a
reduction in our workforce, increases in wage rates, or both.
We may not be able to compete successfully against current and future competitors.
Our businesses operate in highly competitive industry segments. Some of our competitors or
potential competitors have greater financial or other resources than we have. Our operations may
be adversely affected if our current competitors or new market entrants introduce new products or
services with better features, performance, prices or other characteristics than those of our services
and products. This factor is significant to our segments' operations, particularly in the segments
within our Oilfield business, where capital investment is critical to our ability to compete.
We rely on intellectual property law and confidentiality agreements to protect our
intellectual property. We also rely on intellectual property we license from third parties.
Our failure to protect our intellectual property rights, or our inability to obtain or renew
licenses to use intellectual property of third parties, could adversely affect our business.
We rely on a variety of intellectual property rights that we use in our services and products, and our
success depends, in part, on our ability to protect our proprietary information and other intellectual
property. Our intellectual property could be challenged, invalidated, circumvented or rendered
unenforceable. In addition, effective intellectual property protection may be limited or unavailable in
some foreign countries where we operate.
Our failure to protect our intellectual property rights may result in the loss of valuable technologies
or adversely affect our competitive business position. We rely significantly on proprietary
technology, information, processes and know-how that are not subject to patent or copyright
protection. We seek to protect this information through trade secret or confidentiality agreements
with our employees, consultants, subcontractors or other parties, as well as through other security
measures. These agreements and security measures may be inadequate to deter or prevent
misappropriation of our confidential information. In the event of an infringement of our intellectual
property rights, a breach of a confidentiality agreement or divulgence of proprietary information, we
may not have adequate legal remedies to protect our intellectual property.
In some instances, we have augmented our technology base by licensing the proprietary intellectual
property of third parties. However, it is possible that the tools, techniques, methodologies, programs
and components we use to provide our services or products may infringe on the intellectual property
rights of others. In the future, we may not be able to obtain necessary licenses on commercially
reasonable terms. Royalty payments under licenses from third parties, if available, or developing
non-infringing technologies could materially increase our costs. Additionally, if a license or non-
infringing technology were not available, we might not be able to continue providing a particular
service or product, which could materially and adversely affect our financial condition, results of
operations and cash flows.
Litigation to determine the scope of intellectual property rights, even if ultimately successful, could
be costly and could divert management's attention away from other aspects of our business. In
addition, our trade secrets may otherwise become known or be independently developed by
competitors.
Our information technology systems are subject to interruption and cybersecurity risks
that could adversely impact our operations.
We continue to evaluate potential replacements or upgrades of existing key information technology
systems. The implementation of new information technology systems or upgrades to existing
systems subjects us to inherent costs and risks associated with replacing or changing these systems,
including potential disruption of our internal control structure, substantial capital expenditures,
demands on management time and other risks. Our possible new information technology systems
implementations or upgrades may not result in productivity improvements at the levels anticipated,
or at all. In addition, the implementation of new or upgraded information technology systems may
cause disruptions in our business operations. Any such disruption, and any other information
technology system disruptions, if not anticipated and appropriately mitigated, could have a material
adverse effect on our operations.
19
Our operations (both onshore and offshore) are highly dependent on information technology
systems. Threats to our information technology systems associated with cybersecurity risks and
cyber incidents or attacks continue to grow. In addition, breaches to our systems could go unnoticed
for some period of time. Risks associated with these threats include disruptions of certain systems
on our vessels or utilized to operate our ROVs; other impairments of our ability to conduct our
operations; loss of or damage to intellectual property, proprietary information or customer data;
disruption of our customers’ operations; loss or damage to our customer data delivery systems; and
increased costs to prevent, respond to or mitigate cybersecurity incidents. If such a cyber-incident
were to occur, it could have a material adverse effect on our business and our consolidated financial
condition, results of operations and cash flows.
Our offshore oilfield operations involve a variety of operating hazards and risks that could
cause losses.
Our operations are subject to the hazards inherent in the offshore oilfield business. These include
blowouts, explosions, fires, collisions, capsizings and severe weather conditions. These hazards
could result in personal injury and loss of life, severe damage to or destruction of property and
equipment, pollution or environmental damage and suspension of operations. We may incur
substantial liabilities or losses as a result of these hazards. While we maintain insurance protection
against some of these risks, and seek to obtain indemnity agreements from our customers requiring
the customers to hold us harmless from some of these risks, our insurance and contractual
indemnity protection may not be sufficient or effective to protect us under all circumstances or
against all risks. The occurrence of a significant event not fully insured or indemnified against or the
failure of a customer to meet its indemnification obligations to us could materially and adversely
affect our results of operations and financial condition.
Laws and governmental regulations may add to our costs or adversely affect our
operations.
Our business is affected by changes in public policy and by federal, state, local and foreign laws and
regulations relating to the offshore oil and gas industry. Offshore oil and gas exploration and
production operations are affected by tax, environmental, safety and other laws, by changes in those
laws, application or interpretation of existing laws, and changes in related administrative regulations.
It is also possible that these laws and regulations may in the future add significantly to our operating
costs or those of our customers or otherwise directly or indirectly affect our operations.
Environmental laws and regulations can increase our costs, and our failure to comply with
those laws and regulations can expose us to significant liabilities.
Risks of substantial costs and liabilities related to environmental compliance issues are inherent in
our operations. Our operations are subject to extensive federal, state, local and foreign laws and
regulations relating to the generation, storage, handling, emission, transportation and discharge of
materials into the environment. Permits are required for the operation of various facilities, and those
permits are subject to revocation, modification and renewal. Governmental authorities have the
power to enforce compliance with their regulations, and violations are subject to fines, injunctions or
both. In some cases, those governmental requirements can impose liability for the entire cost of
cleanup on any responsible party without regard to negligence or fault and impose liability on us for
the conduct of or conditions others have caused, or for our acts that complied with all applicable
requirements when we performed them. It is possible that other developments, such as stricter
environmental laws and regulations, and claims for damages to property or persons resulting from
our operations, would result in substantial costs and liabilities. Our insurance policies and the
contractual indemnity protection we seek to obtain from our customers may not be sufficient or
effective to protect us under all circumstances or against all risks involving compliance with
environmental laws and regulations.
Our internal controls may not be sufficient to achieve all stated goals and objectives.
Our internal controls and procedures were developed through a process in which our management
applied its judgment in assessing the costs and benefits of such controls and procedures, which, by
their nature, can provide only reasonable assurance regarding the control objectives. The design of
any system of internal controls and procedures is based, in part, on various assumptions about the
likelihood of future events. We cannot assure that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.
20
The use of estimates could result in future adjustments to our assets, liabilities and
results of operations.
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States 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.
Uncertainties in the interpretation and application of the 2017 U.S. tax reform legislation
could materially affect our tax obligations and effective tax rate.
U.S. tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") was
enacted on December 22, 2017, and significantly affected U.S. tax law by changing how the United
States imposes income tax on multinational corporations. The U.S. Department of the Treasury has
broad authority to issue regulations and interpretative guidance that may significantly impact how
we will apply the law and impact our results of operations in the period issued. The Tax Act requires
complex computations not previously required under U.S. tax law. As such, the application of
accounting guidance for such items is currently uncertain. Further, compliance with the Tax Act and
the accounting for such provisions require accumulation of information not previously required or
regularly produced. As a result, we have provided a provisional estimate on the effect of the Tax Act
in our financial statements. As additional regulatory guidance is issued by the applicable taxing
authorities, accounting treatment is clarified, and we refine estimates in calculating the effect, our
final analysis may be different from our current provisional amounts. Any difference, which could
materially affect our tax obligations and effective tax rate, will be recorded in the period that the
final analysis is completed.
We may issue preferred stock whose terms could adversely affect the voting power or
value of our common stock.
Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one
or more classes or series of preferred stock having such preferences, powers and relative,
participating, optional and other rights, including preferences over our common stock respecting
dividends and distributions, as our board of directors may determine. The terms of one or more
classes or series of preferred stock could adversely impact the voting power or value of our common
stock. For example, we might grant holders of preferred stock the right to elect some number of our
directors in all events or on the happening of specified events or the right to veto specified
transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might
assign to holders of preferred stock could affect the residual value of the common stock.
Provisions in our corporate documents and Delaware law could delay or prevent a change
in control of our company, even if that change would be beneficial to our shareholders.
The existence of some provisions in our corporate documents and Delaware law could delay or
prevent a change in control of our company, even if that change would be beneficial to our
shareholders. Our certificate of incorporation and bylaws contain provisions that may make
acquiring control of our company difficult, including:
•
•
•
•
provisions relating to the classification, nomination and removal of our directors;
provisions regulating the ability of our shareholders to bring matters for action at annual
meetings of our shareholders;
provisions requiring the approval of the holders of at least 80% of our voting stock for a
broad range of business combination transactions with related persons; and
the authorization given to our board of directors to issue and set the terms of preferred stock.
In addition, the Delaware General Corporation Law imposes restrictions on mergers and other
business combinations between us and any holder of 15% or more of our outstanding common
stock.
Item 1B. Unresolved Staff Comments.
None.
21
Item 2. Properties.
We maintain office, shop and yard facilities in various parts of the world to support our operations.
We consider these facilities, which we describe below, to be suitable for their intended use. In these
locations, we typically own or lease office facilities for our administrative and engineering staff, shops
equipped for fabrication, testing, repair and maintenance activities and warehouses and yard areas
for storage and mobilization of equipment to work sites. All sites are available to support any of our
business segments as the need arises. The groupings that follow associate our significant offices
with the primary business segment they serve.
Oilfield. In general, our Oilfield business segments share facilities. Our location in Morgan City,
Louisiana consists of ROV manufacturing and training facilities, vessel docking facilities, open and
covered warehouse space and offices. The Morgan City facilities primarily support operations in the
United States. We have regional support offices for our North Sea, Africa, Brazil and Southeast Asia
operations in: Aberdeen, Scotland; Stavanger and Bergen, Norway; Dubai, U.A.E.; Rio de Janeiro
and Macaé, Brazil; Luanda, Angola; Chandigarh, India; Perth, Australia; Kuala Lumpur, Malaysia;
Baku, Azerbaijan; and Singapore. We also have operational bases in various other locations.
We use workshop and office space in Houston, Texas in our Subsea Products, Subsea Projects and
Asset Integrity business segments. Our principal manufacturing facilities for our Subsea Products
segment are located in or near: Houston, Texas; Panama City, Florida; Aberdeen and Rosyth,
Scotland; Nodeland and Stavanger, Norway; Perth, Australia; Luanda, Angola; and Niterói and
Macaé, Brazil. Each of these manufacturing facilities is suitable for its intended purpose and has
sufficient capacity to respond to increases in demand for our subsea products that may be
reasonably anticipated in the foreseeable future.
For a description of the vessels we use in our Subsea Projects operations, see the discussion in Item
1. "Business" under the heading "GENERAL DEVELOPMENT OF BUSINESS – Oilfield – Subsea
Projects."
Advanced Technologies. Our primary facilities for our Advanced Technologies segment are leased
offices and workshops in Hanover, Maryland. We have regional offices in Chesapeake, Virginia;
Bremerton, Washington; Pearl Harbor, Hawaii; and San Diego, California, which support our services
for the U.S. Navy. We also have an office in Orlando, Florida, which supports our commercial theme
park animation activities, facilities in Utrecht, Netherlands, to support robotic activities, and facilities
in Houston, Texas, to support our space industry activities.
Item 3.
Legal Proceedings.
On June 17, 2014, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of
the then current members of our board of directors and one of our former directors, as defendants,
and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through
the complaint, the plaintiff asserted, on behalf of our company, actions for breach of fiduciary duties
and unjust enrichment in connection with prior determinations of our board of directors relating to
nonexecutive director compensation. The plaintiff sought relief including disgorgement of payments
made to the defendants, an award of unspecified damages and an award for attorneys’ fees and
other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief.
Subsequently, the parties to the litigation jointly requested and received a series of extension orders
from the Court to extend the time for certain filings. The last such extension expired on
September 16, 2016. By letter dated August 30, 2017, we received notice from the Office of the
Register in Chancery advising the parties that the Court was closing the matter for failure to
prosecute or to comply with an order of the Court.
In the ordinary course of business, we are subject to actions for damages alleging personal injury
under the general maritime laws of the United States, including the Jones Act, for alleged
negligence. We report actions for personal injury to our insurance carriers and believe that the
22
settlement or disposition of those claims will not have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
Various other actions and claims are pending against us, most of which are covered by insurance.
Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate
liability, if any, that may result from these other actions and claims will not materially affect our
results of operations, cash flows or financial position.
Item 4. Mine Safety Disclosures.
Not applicable.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Our common stock is listed on the New York Stock Exchange under the symbol OII. We submitted to
the New York Stock Exchange during 2017 a certification of our Chief Executive Officer regarding
compliance with the Exchange's corporate governance listing standards. We have also included as
exhibits to this 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
2017
2016
High
Low
High
Low
$
29.53 $
24.57 $
39.04 $
28.21
26.95
26.04
20.74
21.43
17.11
36.92
31.55
32.12
25.33
28.36
24.33
22.47
On February 23, 2018, there were 458 holders of record of our common stock. On that date, the
closing sales price, as quoted on the New York Stock Exchange, was $19.92. In 2017, we declared
quarterly dividends of $0.15 per share in the first three quarters. With an outlook for diminishing
cash flow from operations for 2018, we felt it prudent to focus our resources on growth and
positioning the company for the future. Consequently, our Board did not declare a quarterly dividend
to be paid in the fourth quarter of 2017. Although we will continue to review our dividend position
on a quarterly basis, we do not anticipate our Board reinstating a quarterly cash dividend until we
see a significant improvement in our market outlook and projected free cash flow. In 2016, we
declared quarterly cash dividends of $0.27 per share in the first three quarters and $0.15 per share
in the fourth quarter.
In December 2014, our Board of Directors approved a share repurchase program under which we
may repurchase up to 10 million shares of our common stock on a discretionary basis. The 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 program
will be held as treasury stock for future use. The new program does not obligate us to repurchase
any particular number of shares. Under the program, we had repurchased 2.0 million shares of our
23
common stock for $100 million through December 31, 2015. We did not repurchase any shares
during 2016 or 2017.
EQUITY COMPENSATION PLAN INFORMATION
The following presents equity compensation plan information as of December 31, 2017:
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected
in the first column)
1,181,805
—
1,181,805
N/A
N/A
N/A
2,761,163
—
2,761,163
In the table above, the number of securities to be issued upon exercise of outstanding options,
warrants and rights shown as of December 31, 2017 are restricted stock units and shares of
restricted stock granted under our 2010 incentive plan, as amended.
At December 31, 2017, there were: (1) no shares of Oceaneering common stock under equity
compensation plans not approved by security holders available for grant; and (2) 2,761,163 shares
of Oceaneering common stock under equity compensation plans approved by security holders
available for grant in the form of stock options, stock appreciation rights or stock awards. We have
not granted any stock options since 2005 and the Compensation Committee of our Board of Directors
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, our Board of Directors has expressed its intention to refrain from using stock options as
a component of nonemployee director compensation for the foreseeable future. For a description of
the material features of our equity compensation arrangements, see the discussion in Note 8 of
Notes to Consolidated Financial Statements under the heading "Incentive Plan."
24
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, 2012 through
December 31, 2017. 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, 2012; and (2) any Oceaneering dividends
are reinvested. The shareholder return shown is not necessarily indicative of future performance.
2012
2013
2014
2015
2016
2017
December 31,
Oceaneering
100.00
148.35
112.27
73.26
56.96
43.46
S&P 500
100.00
132.39
150.51
152.59
170.84
208.14
PHLX Oil Service Sector
100.00
129.11
98.42
75.40
89.72
74.28
25
Item 6.
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)
2017
2016
2015
2014
2013
Revenue
$ 1,921,507
$ 2,271,603
$ 3,062,754
$ 3,659,624
$ 3,287,019
Cost of services and products
1,726,897
1,992,376
2,457,325
2,800,423
2,521,483
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
$
$
$
$
$
$
194,610
183,954
10,656
166,398
0.45
1.68
213,519
$
$
$
$
$
279,227
208,463
70,764
24,586
0.96
0.25
250,247
$
$
$
$
$
605,429
231,619
373,810
231,011
1.08
2.34
241,235
$
$
$
$
$
859,201
230,871
628,330
428,329
1.03
4.00
229,779
$
$
$
$
$
765,536
220,420
545,116
371,500
0.84
3.42
202,228
104,958
$
142,513
$
423,988
$
426,671
$
393,590
Other Financial Data:
(dollars in thousands)
Working capital ratio
Working capital
Total assets
Long-term debt
As of December 31,
2017
2016
2015
2014
2013
2.72
2.48
2.46
2.52
1.97
$ 751,605
$ 754,231
$ 901,537
$ 1,034,413
$ 706,187
$ 3,023,950
$ 3,130,315
$ 3,429,536
$ 3,504,940
$ 3,128,500
$ 792,312
$ 793,058
$ 795,836
$ 743,469
$
—
Shareholders' equity
$1,659,164
$ 1,516,643
$ 1,578,734
$ 1,657,471
$ 2,043,440
Goodwill as a percentage of Shareholders'
equity
27%
29%
27%
20%
17%
26
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Certain statements in this annual report on Form 10-K, 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 2018 results of operations, items below the operating income line and
segment operating results, and the factors underlying those expectations, including our
expectations about demand and pricing for our oilfield services and products as a result of the
factors we specify in "Overview" and "Results of Operations" below;
projections relating to floating rig demand and subsea tree installations;
the adequacy of our liquidity and capital resources to support our operations and internally
generated growth initiatives;
our projected capital expenditures for 2018;
our plans to add ROVs to our fleet;
our intentions relating to the subsea support vessel scheduled for delivery in 2018;
our expectations regarding deferred tax assets and our belief that our goodwill will not be
impaired during 2018;
the adequacy of our accruals for expected liabilities related to our deductible obligations 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 anticipation of a discrete tax item in the first quarter of 2018;
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 this report. 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 2017, 2016 and 2015.
(dollars in thousands)
Revenue
Gross Margin
Gross Margin %
Operating Income
Operating Income %
Net Income
2017
$1,921,507
Year Ended December 31,
2016
$2,271,603
2015
$3,062,754
194,610
279,227
605,429
10%
12%
20%
10,656
70,764
373,810
1%
3%
12%
166,398
24,586
231,011
Our business substantially depends on the level of spending on offshore developments by our
customers in the oil and gas industry. During 2017, we generated approximately 81% of our
27
revenue, and 80% of our operating income before Unallocated Expenses, from services and products
we provided to the oil and gas industry. In 2017, our revenue decreased by 15%, with the larger
percentage decreases occurring in our Subsea Projects and ROV segments, which decreased from
lower oilfield activity resulting from the general decline in crude oil prices from mid 2014. Starting in
2015, we have taken initiatives to align our operations with current and anticipated declining activity
and pricing levels. These initiatives required us to reduce our workforce, incur unusual expenses,
and make certain accounting adjustments.
The $166 million consolidated net income we had in 2017 was substantially more than the $25
million we earned in 2016, and the $1.68 earnings per diluted share was our highest since 2015.
The $142 million increase from 2016 net income was primarily attributable to a deferred income tax
benefit of $189 million resulting from the December 2017 enactment of U.S. tax reform legislation
commonly referred to as the 2017 Tax Cuts and Jobs Act (the "Tax Act"). In 2017, our operating
income decreased $60 million from 2016 on lower profit contributions from oilfield business, most
notably:
•
•
our Subsea Products segment, which had $30 million less operating income on $67 million
less revenue; and
our Subsea Projects segment, which had $24 million less operating income on $181 million
less revenue.
In 2017, we invested in the following capital projects:
• $40 million to add to or upgrade our work-class ROVs;
• $30 million to add capabilities in our Subsea Projects segment, including $8 million related to
a new subsea support vessel scheduled for delivery in 2018; and
• $28 million to add capabilities in our Subsea Products segment.
We expect to incur a net loss in 2018, and we expect a decrease in operating income from 2017.
With our limited market visibility resulting from the uncertain energy market, and uncertainties in
the interpretation and application of the Tax Act that could materially affect our tax obligations and
effective tax rate, we are not providing earnings per share guidance for 2018. We anticipate lower
global demand for deepwater drilling, field development, and inspection, maintenance and repair
activities due to the current and anticipated oil price environment, which has led to spending cuts
from our customers and pricing pressure. Below the operating income line, we expect:
•
•
•
•
a loss on our equity investment in Medusa Spar LLC as volume continues to be low in current
producing zones;
increased interest expense from higher interest rates on our debt, partially from a higher
fixed rate on debt we issued in February 2018 and from higher floating interest rates, which
affect our floating rate debt and our swaps to floating rates on $200 million of fixed-rate debt;
and
in the first quarter, a discrete additional tax expense of approximately $2 million related to
our share-based compensation plan; and
foreign currency exchange losses principally due to Angolan kwanza devaluation. We
estimate we incurred a loss of approximately $6 million due to the devaluation of the Angolan
kwanza in January 2018.
28
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
energy industries. 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
2017
150
47
46%
2016
177
60
53%
2015
241
84
69%
Demand for floating rigs is the primary leading indicator of the strength of the deepwater market.
According to industry data published by IHS Petrodata, excluding rigs under construction, at the end
of 2017 there were 263 floating drilling rigs in operation or available for work throughout the world,
with 147 of those rigs under contract. Of the 147 rigs under contract, 43 have contract terms
expiring during the first six months of 2018. The offshore rig count stabilized in 2017 at
approximately 150 rigs. Supported by increased tendering activity, rig demand is expected to
increase in the future.
In addition to floating rig demand, the number of subsea tree completions is another leading
indicator, and the primary demand driver for our Subsea Products lines. According to industry data
published by Infield Systems Limited in December 2017, there will be 243 subsea tree installations in
2018, down from 280 in 2017, 295 in 2016 and 319 in 2015. Subsea tree installations are forecast
to stay the same at 243 in 2019.
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 to a lesser extent in our Subsea Projects and Advanced Technologies segments, using
the percentage-of-completion method. In 2017, we accounted for 20% 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.
29
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.
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" ("ASU
2014-09"). This standard, as amended, 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 interim and annual reporting periods beginning after December 15, 2017. Early
application is not permitted before periods beginning after December 15, 2016, and we have elected
to apply ASU 2014-09 by recognizing the cumulative effect of applying ASU 2014-09 at the date of
initial application and not adjusting comparative information.
We formed a project team to implement this standard. Our project team produced the procedures
and control changes required to address the impacts that ASU 2014-09 may have on our business.
We completed training our staff on the procedures and controls that came into effect
January 1, 2018. We continue to believe that our project plan will enable us to complete all of the
required work to implement our new procedures and controls and calculate the cumulative effect of
applying ASU 2014-09 at the date of initial application, in line with the timeline and requirements of
the standard.
In our service-based business lines, which principally charge on a dayrate basis for services
provided, we have preliminarily concluded there will be no significant impact in the amount or
pattern of revenue and profit recognition as a result of the implementation of ASC 2014-09. In our
product based business lines, we expect impacts on the pattern of our revenue and profit recognition
as a result of the implementation of ASC 2014-09.
Based on our overall assessment performed to date, we do not have a significant adjustment to be
made to retained earnings on January 1, 2018.
Property and Equipment and Long-lived Intangible Assets. We periodically and upon the
occurrence of a triggering event review the realizability of our property and equipment and long-
lived intangible assets 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 benefits of the assets, any historical or future profitability measurements and other
external market conditions or factors that may be present. If such impairment indicators are present
or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we
determine whether an impairment has occurred through the use of an undiscounted cash flows
analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has
occurred, we recognize a loss for the difference between the carrying amount and the fair value of
the asset. For 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.
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.
30
Goodwill. In our annual evaluation of goodwill for impairment, we first assess qualitative factors to
determine whether the existence of events or circumstances led to a determination that it was 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, we determined it was more likely than not that the
fair value of a reporting unit was less than its carrying amount, we were required to perform the first
step of the two-step impairment test. We tested the goodwill attributable to each of our reporting
units for impairment as of December 31, 2017 and 2016 and concluded that there was no
impairment. In 2017, our closest test was in our Subsea Projects segment. Due to lower levels of
offshore activity by our oilfield customers, our Subsea Projects segment's fair value exceeded its
carrying value by approximately 20%. Although we do not believe our goodwill will be impaired
during 2018, our Subsea Project's goodwill could be at risk of impairment if offshore energy activity
significantly deteriorates from our currently assumed activity levels. In January 2017, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04
"Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment." This
update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from
the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied
fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the
amendments in this update, an entity should perform its annual, or interim, goodwill impairment test
by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize
an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value. However, the loss recognized should not exceed the total amount of goodwill allocated to that
reporting unit. Additionally, an entity should consider income tax effects from any tax deductible
goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss,
if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit
to determine if the quantitative impairment test is necessary. The amendments in this update are
effective beginning January 1, 2020. Early adoption is permitted for testing dates after January 1,
2017, and the update is to be applied on a prospective basis. We adopted this update effective
January 1, 2017.
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 and our
estimates regarding the realizability of items such as foreign tax credits may change.
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. 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. Although we have
considered estimated future taxable income and ongoing prudent and feasible tax-planning
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. Provisions for valuation allowances impact our income tax provision in the
period in which such adjustments are identified and recorded.
In March 2016, the FASB issued ASU 2016-09, "Compensation – Stock Compensation Improvements
to Employee Share-Based Payment Accounting." This update requires that all excess tax benefits
and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be
recognized as income tax expense or benefit in the income statement. The tax effects of exercised
or vested awards should be treated as discrete items in the reporting period in which they occur. An
entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes
payable in the current period. Currently, an entity must determine, for each award, whether the
difference between the deduction for tax purposes and the compensation cost recognized for
31
financial reporting purposes results in either an excess tax benefit or a tax deficiency. The
amendments in this update are effective for us beginning January 1, 2017. Through
December 31, 2016, we recognized excess tax benefits in additional paid-in capital, and tax
deficiencies have been recognized as an offset to accumulated excess tax benefits. In 2017, we
recorded a tax deficiency in the first quarter and, under this new standard, we recognized it as a
discrete item in our income statement rather than in additional paid-in capital. We also expect a tax
deficiency in the first quarter of 2018, which will be recognized as a discrete item in our income
statement.
As further discussed in Note 3, "Income Taxes," the Tax Act was enacted on December 22, 2017, and
significantly affected how the United States imposes income tax on multinational corporations. The
U.S. Department of the Treasury and other regulatory bodies have not finalized potential changes to
existing laws and regulations which may result from the Tax Act. In accordance with SEC Staff
Accounting Bulletin No. 118 ("SAB No. 118"), we have recorded provisional estimates to reflect the
effects of the provisions of the Tax Act on our income tax assets and liabilities as of
December 31, 2017. We continue to collect additional information to support and refine our
calculations of the impacts of these changes on our operations and recorded income tax assets and
liabilities. The ultimate impacts of the Tax Act may differ from our provisional estimates due to
changes in our interpretations and assumptions as well as additional regulatory guidance.
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.
32
Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our operations and growth
initiatives. At December 31, 2017, we had working capital of $752 million, including cash and cash
equivalents of $430 million. Additionally, we had $500 million available through our revolving credit
facility under a credit agreement further described below.
In October 2014, we entered into a credit agreement (as amended, the "Credit Agreement") with a
group of banks. In February 2018, we entered into Agreement and Amendment No. 4 to Credit
Agreement ("Amendment No. 4") to the Credit Agreement. The Credit Agreement provides for a
$500 million five-year revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement
previously provided for a $300 million three-year term loan, which we repaid in full in
February 2018, using net proceeds from our February 2018 offering of our 6.000% Senior Notes due
2028 described further below. Subject to certain conditions, the aggregate commitments under the
Revolving Credit Facility may be increased by up to $300 million at any time upon agreement
between us and existing or additional lenders. Borrowings under the Revolving Credit Facility may
be used for general corporate purposes. Amendment No. 4 amended the Credit Agreement to,
among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with
the extending Lenders, which represent 90% of the existing commitments of the Lenders, such that
(a) the total commitments for the Revolving Credit Facility will be $500 million until
October 25, 2021, and thereafter $450 million until January 25, 2023.
Borrowings under the Revolving Credit Facility bear interest at an Adjusted Base Rate or the
Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin
based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the
ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such
debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the
Adjusted Base Rate, from 0.125% to 0.750%; and (2) in the case of advances bearing interest at
the Eurodollar Rate, from 1.125% to 1.750%. The Adjusted Base Rate is the highest of (1) the per
annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus
0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from
0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage
Ratio. The commitment fees are included as interest expense in our consolidated financial
statements.
The Credit Agreement contains various covenants that we believe are customary for agreements of
this nature, including, but not limited to, restrictions on our ability and the ability of each of our
subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or
consolidate, sell assets and enter into certain restrictive agreements. We are also subject to a
maximum adjusted total Capitalization Ratio (as defined in the Credit Agreement) of 55%. The
Credit Agreement includes customary events of default and associated remedies. As of
December 31, 2017, 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 "2024 Senior Notes"). We pay interest on the 2024 Senior
Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the 2024 Senior Notes prior to maturity at
specified redemption prices. We used the net proceeds from the offering for general corporate
purposes, including funding the C&C acquisition, other capital expenditures and repurchases of
shares of our common stock.
We incurred $6.9 million of issuance costs related to the 2024 Senior Notes and $2.6 million of new
loan costs, including costs of the amendments prior to Amendment No. 4, related to the Credit
Agreement. We are amortizing those costs, which are included on our balance sheet, as a reduction
of debt for the 2024 Senior Notes and as an other non-current asset for the Credit Agreement, to
interest expense to November 2024 for the 2024 Senior Notes and to January 2023 for the Credit
Agreement.
33
We have two interest rate swaps in place on a total of $200 million of the 2024 Senior Notes for the
period to November 2024. See Note 6 of Notes to Consolidated Financial Statements included in this
report for a description of these interest rate swaps.
In February 2018, we completed the public offering of $300 million aggregate principal amount of
6.000% Senior Notes due 2028 (the "2028 Senior Notes"). We will pay interest on the 2028 Senior
Notes on February 1 and August 1 of each year, beginning on August 1, 2018. The 2028 Senior
Notes are scheduled to mature on February 1, 2028. We may redeem some or all of the 2028 Senior
Notes at specified redemption prices. We used the net proceeds from the offering to repay our term
loan indebtedness referred to above.
In 2018, we incurred $4.1 million of issuance costs related to the 2028 Senior Notes and $0.5 million
of new loan costs related to Amendment No. 4. We will amortize these costs, which will be included
on our balance sheet as a reduction of debt for the 2028 Senior Notes and as an other non-current
asset for the Credit Agreement, to interest expense through November 2028 for the 2028 Senior
Notes and to January 2023 for Amendment No. 4.
Our maximum outstanding indebtedness during 2017 under the Credit Agreement and 2024 Senior
Notes was $800 million, and our total interest costs, including commitment fees, were $32.4 million.
Our capital expenditures, including business acquisitions, for 2017, 2016 and 2015 were $105
million, $143 million and $424 million, respectively. Our capital expenditures in 2017 included $40
million in our ROV segment, $28 million in our Subsea Products segment and $30 million in our
Subsea Projects segment. Our capital expenditures in 2016 included $50 million in our ROV
segment, $57 million in our Subsea Products segment and $26 million in our Subsea Projects
segment. Our capital expenditures in 2015 included our acquisition of C & C Technologies, Inc.
("C&C") for approximately $224 million. C&C is a global provider of ocean-bottom mapping services
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. In addition to the C&C acquisition, our capital expenditures in 2015 included:
$58 million for upgrading and expanding our ROV fleet; $69 million in our Subsea Products segment,
principally for growth of our tooling and installation and workover control systems capabilities; and
$52 million in our Subsea Projects segment, including $43 million related to a new subsea support
vessel scheduled for delivery in 2018.
For 2018, we expect our capital expenditures to be in the range of $80 million to $120 million,
exclusive of business acquisitions. This estimate includes $22 million in our Subsea Projects
segment to complete the new-build subsea support vessel, to be named the Ocean Evolution,
scheduled for delivery in the second quarter of 2018. During the third quarter of 2013, we signed an
agreement with a shipyard for the construction of the Ocean Evolution. 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 4,000 meter
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 U.S. Gulf
of Mexico. These services are required to perform inspection, maintenance and repair projects and
hardware installations.
Our capital expenditures during 2017, 2016 and 2015 included $40 million, $50 million and $58
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 currently plan to add new ROVs only to meet contractual commitments. We
added seven, six, and 16 ROVs to our fleet and retired eight, 41 and 36 units during 2017, 2016
and 2015, respectively, and transferred one to our Advanced Technologies segment in 2015,
resulting in a total of 279 work-class systems in the fleet at December 31, 2017. Over the past
34
three years, we retired a greater number of ROVs than we have added due to market conditions and
outlook.
We previously had several deepwater vessels under long term charter. The last of our current
charters of deepwater vessel charters expires in March 2018. With the current market conditions,
we attempt to charter vessels for specific projects on a back-to-back basis with the vessel owners.
Unless indicated otherwise, each of the chartered vessels discussed below is a deepwater
multiservice subsea support vessel outfitted with two of our high-specification work-class ROVs.
Beginning in the third quarter of 2008, we chartered a vessel, the Olympic Intervention IV, for an
initial term of five years. Following extension periods, the charter expired in July 2016, and we
released the vessel to its owner. We had been using the Olympic Intervention IV in the U.S. Gulf of
Mexico.
In 2012, we moved the chartered vessel Ocean Intervention III to Angola and also chartered the
Bourbon Oceanteam 101 to work on a three-year field support vessel services contract for a unit of
BP plc. We had extended the charter of the Bourbon Oceanteam 101 to January 2017. However, in
early 2016, the customer exercised its right, under the field support vessel services contract, to
terminate its use of the Bourbon Oceanteam 101 at the end of May 2016. Under the terms of the
contract, the costs incurred by us associated with the early release and demobilization of the vessel
were reimbursed by the customer. Following the release of the vessel, we redelivered it to the vessel
supplier. The charter for the Ocean Intervention III expired at the end of July 2017. Under the field
support vessel services contract, which has been extended through January 2019, we are continuing
to supply project management and engineering services. We also provide ROV tooling, asset
integrity services and installation and workover control system services as requested by the
customer. Chartered vessels and barges are provided to the customer upon request. Under the
field support vessel services contract, at the customer's request the Ocean Intervention III will be
provided for a fixed term from January 2018 until May 2018 with three one-month optional customer
extension periods.
In March 2013, we commenced a five-year bareboat charter for a Jones Act-compliant multiservice
support vessel, the Ocean Alliance, we have been using in the U.S. Gulf of Mexico. In January 2015,
we commenced a two-year contract with a customer for the use of the Ocean Alliance. The contract
expired in January 2017, and we are marketing the vessel for spot market work in the U.S. Gulf of
Mexico. We anticipate that we will return the Ocean Alliance to the vessel owner in the first quarter
of 2018 and we will work with the vessel owner on a back-to-back basis on projects for customers in
the Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multiservice
subsea marine support vessel. We made modifications to the vessel and used the vessel in the U.S.
Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. In
December 2016, we declined our option to extend the charter and the vessel was released.
In November 2015, we commenced a two-year charter for the use of the Island Pride, a multiservice
subsea marine support vessel. We used the vessel under a two-year contract to provide field
support services off the coast of India for an oil and gas customer based in India. In
November 2017, that field services contract expired and we declined our option to extend the vessel
charter.
We also charter or lease vessels on a short-term basis as necessary to augment our fleet.
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 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
35
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 4,000 meter 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 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 $136 million, $339 million and $564 million of cash provided from
operating activities in 2017, 2016 and 2015, respectively, were affected by cash increases/
(decreases) of: (1) $13 million, $123 million and $179 million, respectively, of changes in accounts
receivable; (2) $66 million, $18 million and $33 million, respectively, of changes in inventory; and
(3) $(76) million, $(115) million and $(42) million, respectively, of changes in accounts payable and
accrued liabilities. In each of 2017, 2016 and 2015, our accounts receivable, inventory and accounts
payable and accrued liabilities all decreased as a result of lower revenue and activity in general from
each year's preceding year. The 2016 and 2015 decreases in inventory were in addition to write-
downs totaling $30 million and $26 million, respectively, in our ROV and Subsea Products segments
discussed below.
In 2017, we used a net of $112 million in investing activities, with $105 million used to fund the
capital expenditures described above and $11 million used to purchase Angolan central bank bonds
indexed to the U.S. dollar. In 2016, we used a net of $169 million in investing activities, with $143
million used to fund the capital expenditures and business acquisitions described above and $39
million used to purchase Angolan central bank bonds indexed to the U.S. dollar. In 2015, we used a
net of $437 million in investing activities, with $424 million used to fund the capital expenditures and
business acquisitions described above.
In 2017, we used $46 million in financing activities, primarily for the $44 million of cash dividends
we paid. In 2016, we used $96 million in financing activities, primarily for the $94 million of cash
dividends we paid. In 2015, we used $160 million in financing activities. We borrowed $50 million,
repurchased 2.0 million shares for $100 million and paid cash dividends of $106 million.
In December 2014, our Board of Directors approved a share repurchase program under which we
may repurchase up to 10 million shares of our common stock on a discretionary basis. The 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 program does not obligate us to
repurchase any particular number of shares. We account for the shares we hold in treasury under
the cost method, at average cost. Through December 31, 2015 under the program, we repurchased
2 million shares of our common stock for $100 million. We did not repurchase any shares in 2017 or
2016.
As of December 31, 2017, we retained 12.6 million of the shares we had repurchased through this
and a prior program. We expect to hold the shares repurchased for future use.
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, 2017 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, Norwegian
kroner and Brazilian real would result in lower operating income. See Item 7A – "Quantitative and
Qualitative Disclosures About Market Risk."
36
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.
(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,
2017
2016
2015
$ 393,655
$ 522,121
$ 807,723
50,937
59,038
227,330
13%
11%
28%
22,366
25,193
192,514
6%
5%
24%
101,951
47,282
112,588
59,963
121,944
83,838
46%
53%
69%
625,513
97,086
692,030
140,275
959,714
257,755
16%
20%
27%
45,539
75,938
175,585
7%
11%
18%
276,000
431,000
652,000
291,993
25,021
472,979
51,392
604,484
114,672
9%
11%
19%
10,279
34,476
92,034
4%
7%
15%
236,778
37,382
275,397
41,458
372,957
47,342
16%
15%
13%
11,231
7,551
18,235
5%
3%
5%
$ 1,547,939
$ 1,962,527
$ 2,744,878
210,426
292,163
647,099
14%
15%
24%
89,415
143,158
478,368
6%
7%
17%
37
Historically, we built new ROVs to increase the size of our fleet in response to demand to support
deepwater drilling and vessel-based inspection, maintenance and repair ("IMR") and installation
work. These vehicles are designed for use around the world in water depths of 10,000 feet or more.
In 2015, as a result of declining market conditions, we began building fewer ROVs, generally limiting
additions to meet contractual commitments. We added seven, six and 16 ROVs in 2017, 2016 and
2015, respectively, while retiring 85 units over the three-year period and transferring one to our
Advanced Technologies segment over that period. Our ROV fleet size was 279 at December 31,
2017, 280 at December 31, 2016 and 315 at December 31, 2015. We have decreased our ROV fleet
size over the last three years as a result of lower market demand.
In the year ended December 31, 2017, our ROV operating income declined slightly on a revenue
decline of 25%. Revenue declined on fewer days-on-hire at lower average dayrates. ROV revenue
in 2017 also included a $7.3 million sale of accessory equipment that was integrated into a
customer's rigs. Both the days-on-hire and lower dayrates are a result of the continued decline in
market conditions for offshore drilling and production. Operating income in 2017 did not decline
from 2016, as we incurred $41.0 million of charges in 2016 further described below.
Our ROV operating income decreased in the year ended December 31, 2016 compared to the prior
year, as a result of lower days on hire and lower average revenue per day-on-hire, as well as 2016
inventory write-downs and fixed asset write-offs totaling $36.0 million. During 2016, the leading
indicator for deepwater activity, contracted floating rigs, continued to decline as the rate of rigs being
idled, either by contract termination or expiration, continued. This prevailing market condition
required us to reassess the number of ROVs we had in our fleet, as well as the associated inventory.
As a result of our reassessment, in 2016 we recorded $36.0 million of charges consisting of: (1)
$25.2 million for a reserve for excess inventory; and (2) $10.8 million for the retirement of 39
ROVs. During 2016 we also incurred charges related to restructuring expenses of $3.8 million and
bad debt expenses of $1.2 million.
In our financial statements, the charges incurred in 2016 are reflected in our cost of services and
products, except for the charges related to bad debts, which are reflected in general and
administrative expenses.
For ROVs in 2018, we project increased days on hire. However, we expect lower operating income
due to a shift in geographic mix and continued competitive pricing driving our average revenue per
day lower. We normally expect to retire, on average, 4% to 5% of our fleet on an annual basis,
although we retired a greater number in each of 2016 and 2015 due to market conditions.
Our Subsea Products segment consists of two business units: (1) manufactured products; and (2)
service and rental. Manufactured products include production control umbilicals and specialty subsea
hardware, while service and rental includes tooling, subsea work systems and installation and
workover control systems. The following table presents revenue from manufactured products and
service and rental, as their respective percentages of total Subsea Products revenue:
Manufactured Products
Service and Rental
Year Ended December 31,
2017
2016
2015
64%
36%
65%
35%
61%
39%
For the year ended December 31, 2017, our Subsea Products revenue and operating income
decreased from the prior year across both business units, but most notably due to lower pricing of
service and rental.
38
For the year ended December 31, 2016, our Subsea Products revenue and operating income
decreased from the prior year across both business units, but most notably due to lower demand for
and pricing of service and rental. In 2016 we incurred the following charges:
• $8.2 million, predominantly for tools and inventory in our portfolio used to support deepwater
drilling and operations;
• $3.7 of restructuring expenses; and
• $1.9 million of allowances for bad debts.
Due to deteriorating market conditions, we wrote down Subsea Products inventory $10.3 million in
2015, including $9.0 million associated with our decision to cease manufacture of subsea BOP control
systems. In 2015, Subsea Products also incurred the following charges:
• $8.7 million of restructuring expenses;
• $6.6 million of a non-current asset reserve; and
• $4.8 million for an allowance for bad debts.
In our financial statements, the charges incurred in both 2016 and 2015 are reflected in our cost of
services and products, except for the charges related to the allowances for bad debts, which are
reflected in general and administrative expenses. The restructuring expenses related to severance
costs for incurred and designated future workforce reductions and costs associated with closing
excess facilities. The charge for a non-current asset reserve related to prepaid non-income taxes
based on consumption, and the charge amount is based on our estimate of the amount that will
expire due to reduced activity going forward. The allowance for bad debts in 2015 related to a
customer that filed for bankruptcy and was unable to pay for a built umbilical.
We anticipate our Subsea Products segment operating income in 2018 to be lower than in 2017 on a
decline in pricing and manufacturing throughput as we enter the year with less backlog compared to
the prior year. Until we see an increase in backlog and throughput, our outlook for margins is to
weaken further into the low- to mid-single digit range. Our Subsea Products backlog was $276
million at December 31, 2017, approximately 36% lower than it was at December 31, 2016. The
backlog decrease from 2016 was principally in umbilicals.
Our Subsea Projects operating income was lower in the year ended December 31, 2017 compared to
the prior year, as a result of generally lower vessel demand and pricing, and the release in May 2016
of the Bourbon Oceanteam 101, which was previously deployed under the field support vessel
services contract offshore Angola.
For the year ended December 31, 2016, our Subsea Projects revenue and operating income
decreased from that of the prior year, as a result of decreased demand and lower pricing for
deepwater vessel services, including the completion during April 2015 of work associated with the
Bourbon Evolution 803, a vessel we chartered on a short-term basis for use offshore Angola
associated with our field support vessel services contract, and the release in May 2016 of the
Bourbon Oceanteam 101, which was previously deployed under the same contract offshore Angola.
In 2018, our Subsea Projects segment is expected to have a more challenging year with reduced
international vessel and diving activity, and continued competitive pressures on vessel dayrates in
the spot call out market in the Gulf of Mexico, and a scheduled regulatory drydocking of our vessel
Ocean Intervention. Unlike the beginning of 2017, we entered 2018 with no meaningful fixed-term
vessel contracts with customers.
For the year ended December 31, 2017, compared to the prior year, Asset Integrity's operating
income improved on lower revenue, as we benefited from restructuring efforts we made in prior
periods and our 2016 operating results included the bad debt expenses and restructuring charges
described below.
For the year ended December 31, 2016, our Asset Integrity revenue and operating income decreased
from that of the prior year across most of our operating areas, due to decreased demand and
pricing. Our Asset Integrity results in 2016 included bad debt expense of $5.0 million, which is
39
reflected in selling, general and administrative expense, and $1.4 million of restructuring charges,
which are reflected in our cost of services and products.
We anticipate our 2018 operating income for Asset Integrity to increase slightly over that of 2017.
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,
2017
$ 373,568
2016
$ 309,076
2015
$ 317,876
44,421
33,784
30,034
12%
11%
9%
22,039
11,809
9,689
6%
4%
3%
For the year ended December 31, 2017, compared to the prior year, Advanced Technologies
operating income was higher, from improved volume of theme park-related projects.
For the year ended December 31, 2016, Advanced Technologies operating income was higher than
that of the corresponding period of 2015, due to improved execution on commercial theme park and
other projects.
We project continuing improvement in our Advanced Technologies operating income in 2018, due to
increased activity within the commercial theme park arena.
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,
2017
$ (60,237)
2016
$ (46,720)
2015
$ (71,704)
3%
2%
2%
(100,798)
(84,203)
(114,247)
5%
4%
4%
Our unallocated expenses have trended with the amounts of our incentive compensation expenses.
Our unallocated expenses for the year ended December 31, 2017 increased compared to 2016,
primarily due to higher 2017 estimated expenses related to incentive compensation from our
performance units and bonuses.
Our unallocated gross margin and operating expenses decreased in 2016 as compared to 2015, due
to lower compensation expenses related to the expected annual bonuses and valuation of
performance units awarded under our incentive plan. We anticipate Unallocated Expenses to
increase $12 million to $18 million in 2018.
40
Other. The table that follows sets forth our 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 (benefit) for income taxes
Year Ended December 31,
2017
2016
2015
$
7,355 $
3,900 $
607
(27,817)
(25,318)
(25,050)
(1,983)
(6,055)
(184,242)
244
(6,244)
18,760
2,230
(15,336)
105,250
Interest income increased in 2017 from our investment in Angola bonds, as mentioned in"Liquidity
and Capital Resources" above, and an increase in the short-term interest rates received on our cash
equivalents in the U.S.
In addition to interest on borrowings, interest expense includes amortization of loan costs, fees for
lender commitments under our revolving credit agreement and fees for standby letters of credit and
bank guarantees that banks issue on our behalf for performance bonds, bid bonds and self-insurance
requirements.
Interest expense increased in 2017 over 2016 from higher short-term interest rates. We capitalized
$4.6 million, $3.7 million and $2.4 million of interest in 2017, 2016 and 2015, respectively,
associated with the new-build vessel described under "Liquidity and Capital Resources" above.
Included in other income (expense), net are foreign currency transaction losses of $5.2 million, $4.8
million and $15.4 million for 2017, 2016 and 2015, respectively. In 2017, we did not incur
significant currency transaction losses in any one currency. The losses in 2016 and 2015 primarily
related to Angola, which devalued its currency by 18% in 2016 and 24% in 2015. In 2016, other
income (expense), net also includes curtailment costs of $1.1 million related to the Norway defined
benefit plan. In January 2018, Angola devalued its currency by an additional 20%. We estimate we
incurred a foreign currency transaction loss of approximately $6 million as a result of the effect of
this devaluation. We likely would incur further foreign currency exchange losses in Angola if further
currency devaluations occur.
Our effective tax rate, including foreign, state and local taxes, was 43.3% and 31.3% for 2016 and
2015, respectively. On December 22, 2017, the Tax Act was enacted, most notably reducing the
U.S. corporate tax rate to 21% effective January 1, 2018, and creating a territorial tax system with a
one-time mandatory tax on applicable previously-deferred foreign earnings of U.S. subsidiaries. As a
result of the Tax Act, we estimated and recorded a $189.1 million non-cash benefit in the fourth
quarter of 2017, making the effective tax rate for 2017 not meaningful. Various components of the
Tax Act contributed to the $189.1 million non-cash benefit. At December 31, 2017, we remeasured
our deferred tax assets and liabilities to reflect the reduction in the U.S. corporate income tax rate
from 35% to 21%, resulting in a provisional $23.1 million decrease in income tax expense for the
year ended December 31, 2017. Prior to enactment, we provided deferred taxes liabilities
associated with certain unrepatriated earnings that will now be subject to tax-free repatriation,
resulting in a provisional $222.0 million decrease in income tax expense for the year ended
December 31, 2017. The transition tax and resulting territorial type tax regime impacts the
utilization of our remaining foreign tax credits, resulting in a provisional valuation allowance of $56.0
million against such deferred tax assets and a corresponding increase to income tax expense for the
year ended December 31, 2017. We are continuing our analysis of the effects that the provisions of
the Tax Act may have on us in future periods.
In 2016, the increase in the effective tax rate was primarily due to a change in the mix of income or
losses between the U.S. and certain foreign jurisdictions. This resulted in a recapture of prior year
U.S. manufacturing deductions and a limitation of the current benefit from certain foreign tax
payments. In 2015, the primary difference between our effective tax rates and the U.S. federal
statutory rate of 35% was from our intent to indefinitely reinvest in certain of our international
operations. Therefore, we were not providing for U.S. taxes on a portion of our foreign earnings.
41
In 2018, we anticipate our effective tax benefit rate on a loss before income taxes will be
approximately 5% before discrete items and any potential adjustments to our provisional estimates
related to the Tax Act recorded in 2017. Our effective tax rate benefit could be affected by the
geographical mix of earnings and losses, and taxes in certain jurisdictions that may exceed the tax
benefit from losses in other jurisdictions which may not be realized due to valuation allowances
provided. We project a discrete income tax provision of approximately $2 million in the first quarter
of 2018 associated with our share-based incentive plan.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by SEC rules.
Contractual Obligations
At December 31, 2017, after taking into account the effects of Amendment No. 4 to the Credit
Agreement, the issuance of the 2028 Senior Notes and repayment of the Term Loan Facility in
February 2018 as described in Liquidity and Capital Resources above, 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
2018
2019-2020
2021-2022
After 2022
$ 800,000 $
— $
4,311
234,398
4,311
26,932
124,378
123,055
— $
—
— $ 800,000
—
—
42,695
1,039
32,375
132,396
138
146
Other Long-term Obligations reflected on
our Balance Sheet under GAAP
TOTAL
52,532
857
1,736
173
49,766
$1,215,619 $ 155,155 $
45,470 $
32,686 $ 982,308
At December 31, 2017, we had outstanding purchase order commitments totaling $124 million,
including approximately $22 million for the construction of the new subsea support vessel, to be
named the Ocean Evolution, scheduled for delivery in 2018.
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 benefits over the expected service period. Our total accrued liabilities,
current and long-term, under this post-employment benefit were $3.9 million and $4.5 million at
December 31, 2017 and 2016, respectively.
42
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.
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are currently exposed to certain market risks arising from transactions we have entered into in
the normal course of business. These risks relate to interest rate changes and fluctuations in foreign
exchange rates. Except for our exposure in Angola, we do not believe these risks are material. We
have not entered into any market risk sensitive instruments for speculative or trading purposes.
When we have a significant amount of borrowings, we typically manage our exposure to interest rate
changes through the use of a combination of fixed- and floating-rate debt. See Note 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 have two interest rate swaps in place on a total of
$200 million of the 2024 Senior Notes for the period to November 2024. See Note 6 of Notes to
Consolidated Financial Statements included in this report for a description of these interest rate
swaps. We believe significant interest rate changes would not have a material near-term impact on
our future earnings or cash flows.
Because we operate in various 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, the Norwegian kroner and the Brazilian real 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 equity section of our Consolidated Balance Sheets. We recorded net adjustments of $11
million, $(6) million and $(119) million to our equity accounts in 2017, 2016 and 2015, respectively.
Negative adjustments reflect the net impact of the strengthening of the U.S. dollar against various
foreign currencies for locations where the functional currency is not the U.S. dollar. Conversely,
positive adjustments reflect the effect of a weakening U.S. dollar.
We recorded foreign currency transaction losses of $5.2 million, $4.8 million and $15.4 million for
2017, 2016 and 2015, respectively. Those gains and losses are included in Other income
(expense), net in our Consolidated Statements of Operations in those respective periods. In 2017,
we did not incur significant currency transaction losses in any one currency. Since the second
quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has
been declining, although the exchange rate was relatively stable during the 2017. The currency
transaction losses in Angola have related primarily to the remeasurement of our Angolan kwanza
cash balances to U.S. dollars. Conversion of cash balances from kwanza to U.S. dollars is controlled
by the central bank in Angola, and the central bank has slowed this process since mid-2015, causing
our kwanza cash balances to subsequently increase. The losses in 2016 and 2015 primarily related
to Angola, which devalued its currency by 18% in 2016 and 24% in 2015. As of December 31,
2017, we had the equivalent of approximately $27 million of cash in kwanza in Angola reflected on
our balance sheet. In January 2018, Angola devalued its currency by an additional 20%. We
estimate we incurred a foreign currency transaction loss of approximately $6 million as a result of
the effect of this devaluation. We likely would incur further foreign currency exchange losses in
Angola if further currency devaluations occur.
To mitigate our currency exposure risk in Angola, we have used kwanza to purchase $70 million
equivalent Angolan central bank (Banco Nacional de Angola) bonds with maturities of $60 million
during 2018 and $10 million in 2020. These bonds are denominated as U.S. dollar equivalents, so
that, upon payment of semi-annual interest and principal upon maturity, payment is made in
kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. Our intent is to
reinvest funds from maturing bonds in similar, long-term assets.
44
Item 8.
Financial Statements and Supplementary Data.
In this report, our consolidated financial statements and supplementary data appear following the
signature page to this report and are incorporated into this item by reference.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
45
Item 9A. Controls and Procedures.
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, 2017 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, 2017 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, 2017.
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.
46
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Oceaneering International, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Oceaneering International, Inc. and subsidiaries' internal control over financial reporting as
of December 31, 2017, 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"). In our opinion, Oceaneering International, Inc. and subsidiaries (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2017, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheets of the Company
as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive
income, equity and cash flows for each of the three years in the period ended December 31, 2017, and the
related notes and our report dated February 28, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting
and for its assessment for 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 are a
public accounting firm registered with the PCAOB and are required to be independent with respect to
Oceaneering International, Inc. in accordance with the U.S. federal securities laws and applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 28, 2018
47
Item 9B.
Other Information.
None.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
The information with respect to the directors and nominees for election to our Board of Directors is
incorporated by reference from the section "Election of Directors" in our definitive proxy statement to
be filed on or before May 1, 2018, relating to our 2018 Annual Meeting of Shareholders.
Information concerning our Audit Committee and the audit committee financial experts is
incorporated by reference from the sections entitled "Corporate Governance" and "Committees of the
Board – Audit Committee" in the proxy statement referred to in this Item 10. Information
concerning our Code of Ethics is incorporated by reference from the section entitled "Code of Ethics"
for the Chief Executive Officer and Senior Financial Officers in the proxy statement previously
referred to in this Item 10.
The information with respect to our executive officers is provided under the heading "Executive
Officers of the Registrant" following Item 1 of Part I of this report. There are no family relationships
between any of our directors or executive officers.
The information with respect to the reporting by our directors and executive officers and persons
who own more than 10% of our Common Stock under Section 16 of the Securities Exchange Act of
1934 is incorporated by reference from the section entitled "Section 16(a) Beneficial Ownership
Reporting Compliance" in the proxy statement previously referred to in this Item 10.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference from the sections entitled
"Compensation Committee Interlocks and Insider Participation," "Compensation Discussion and
Analysis," "Report of the Compensation Committee," "Compensation of Executive Officers," and
"Compensation of Nonemployee Directors" in the proxy statement referred to in Item 10 above.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information required by Item 12 is incorporated by reference from (1) the Equity Compensation
Plan Information table appearing in Item 5 – "Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities" in Part II of this report and (2) the
section "Security Ownership of Management and Certain Beneficial Owners" in the proxy statement
referred to in Item 10 above.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated by reference from the sections entitled
"Corporate Governance" and "Certain Relationships and Related Transactions" in the proxy statement
referred to in Item 10 above.
Item 14. Principal Accounting Fees and Services.
The information required by Item 14 is incorporated by reference from the section entitled
"Ratification of Appointment of Independent Auditors – Fees Incurred for Audit and Other Services
provided by Ernst & Young LLP" in the proxy statement referred to in Item 10 above.
48
Part IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Documents filed as part of this report.
1.
Financial Statements:
(i) Report of Independent Registered Public Accounting Firm
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Income
(iv) Consolidated Statements of Comprehensive Income
(v) Consolidated Statements of Cash Flows
(vi) Consolidated Statements of Equity
(vii) Notes to Consolidated Financial Statements
2.
Financial Statement Schedules:
All schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because they are not
required under the relevant instructions or because the required information is not
significant.
3.
Exhibits:
Exhibit Index
Registration
or File
Number
Form of
Report
Report
Date
Exhibit
Number
*
*
*
*
*
*
*
*
*
*
(cid:22)(cid:17)(cid:19)(cid:20)(cid:3) (cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
(cid:22)(cid:17)(cid:19)(cid:21)(cid:3) (cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)
(cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
1-10945
1-10945
10-K
8-K
Dec. 2000
May 2008
(cid:22)(cid:17)(cid:19)(cid:22)(cid:3) (cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)
1-10945
8-K
May 2014
(cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
(cid:22)(cid:17)(cid:19)(cid:23)(cid:3) (cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:37)(cid:92)(cid:79)(cid:68)(cid:90)(cid:86)
1-10945
8-K
Aug. 2015
(cid:23)(cid:17)(cid:19)(cid:20)(cid:3) (cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:80)(cid:72)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:38)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)
(cid:23)(cid:17)(cid:19)(cid:21)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:26)(cid:15)
1-10945
8-K
Oct. 2014
(cid:21)(cid:19)(cid:20)(cid:23)(cid:15)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:80)(cid:82)(cid:81)(cid:74)(cid:3)(cid:50)(cid:70)(cid:72)(cid:68)(cid:81)(cid:72)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:15)(cid:3)(cid:58)(cid:72)(cid:79)(cid:79)(cid:86)(cid:3)(cid:41)(cid:68)(cid:85)(cid:74)(cid:82)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:15)(cid:3)
(cid:49)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)
(cid:83)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:87)(cid:82)
(cid:23)(cid:17)(cid:19)(cid:22)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:49)(cid:82)(cid:17)(cid:3)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)
1-10945
8-K
Nov. 2015
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:23)(cid:17)(cid:19)(cid:23)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:49)(cid:82)(cid:17)(cid:3)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)
1-10945
8-K
Nov. 2016
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:23)(cid:17)(cid:19)(cid:24)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:49)(cid:82)(cid:17)(cid:3)(cid:22)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)
1-10945
8-K
June 2017
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:23)(cid:17)(cid:19)(cid:25)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:49)(cid:82)(cid:17)(cid:3)(cid:23)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)
1-10945
8-K
Feb. 2018
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:23)(cid:17)(cid:19)(cid:26)(cid:3) (cid:44)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:15)
1-10945
8-K
Nov. 2014
(cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:50)(cid:70)(cid:72)(cid:68)(cid:81)(cid:72)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:58)(cid:72)(cid:79)(cid:79)(cid:86)(cid:3)(cid:41)(cid:68)(cid:85)(cid:74)(cid:82)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:15)(cid:3)(cid:49)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)
(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:72)(cid:72)(cid:15)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:50)(cid:70)(cid:72)(cid:68)(cid:81)(cid:72)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)
3.01
3.1
3.1
3.1
4.1
4.1
4.1
4.1
4.1
4.1
49
*
4.08(cid:3) First Supplemental Indenture, dated
1-10945
8-K
Nov. 2014
4.2
November 21, 2014, between Oceaneering
International, Inc. and Wells Fargo Bank,
National Association, as Trustee, providing
for the issuance of Oceaneering
International, Inc.’s 4.650% Senior Notes
due 2024 (including Form of Notes)
*
4.09(cid:3) Second Supplemental Indenture, dated
1-10945
8-K
Feb. 2018
4.2
February 6, 2018, between Oceaneering
International, Inc. and Wells Fargo Bank,
National Association, as Trustee, providing
for the issuance of Oceaneering
International, Inc.'s 6.000% Senior Notes
due 2028 (including Form of Notes)
We and certain of our consolidated subsidiaries are parties to debt instruments under which the total amount
of securities authorized does not exceed 10% of our total consolidated assets. Pursuant to paragraph 4(iii)(A)
of Item 601(b) of Regulation S-K, we agree to furnish a copy of those instruments to the Securities and
Exchange Commission on request.
*
*
10.01+(cid:3)Oceaneering International, Inc. Retirement
Investment Plan, with amendments through
December 28, 2016
10.02+(cid:3)Oceaneering Retirement Investment Plan
Trust Agreement effective December 31,
2013
1-10945
10-K
Feb. 2017
10.1
1-10945
10-K
Dec. 2014
10.13
*
10.03+(cid:3)Amended and Restated Service Agreement
1-10945
8-K
Dec. 2006
10.1
dated as of December 21, 2006 between
Oceaneering and John R. Huff
*
10.04+(cid:3)Modification to Service Agreement dated as
1-10945
8-K
Dec. 2008
10.9
of December 21, 2006 between Oceaneering
and John R. Huff
*
10.05+(cid:3)Trust Agreement dated as of May 12, 2006
between Oceaneering and United Trust
Company, National Association
1-10945
8-K
May 2006
10.2
*
10.06+(cid:3)First Amendment to Trust Agreement dated
1-10945
8-K
Dec. 2008
10.10
as of May 12, 2006 between Oceaneering
International, Inc. and Bank of America
National Association, as successor trustee
*
10.07+(cid:3)Oceaneering International, Inc.
1-10945
8-K
Dec. 2008
10.5
Supplemental Executive Retirement Plan, as
amended and restated effective January 1,
2009
*
10.08+(cid:3)Amended and Restated Oceaneering
1-10945
8-K
Dec. 2008
10.6
International, Inc. Supplemental Executive
Retirement Plan, as amended and restated
effective January 1, 2000 (for Internal
Revenue Code Section 409A-grandfathered
benefits)
*
*
*
*
*
*
*
*
*
10.09+(cid:3)Form of Change-of-Control Agreement and
1-10945
8-K
Aug. 2015
Annex for Roderick A. Larson
10.10+(cid:3)Form of Change-of-Control Agreement
10.11+(cid:3)Form of Indemnification Agreement
10.12+(cid:3)2010 Incentive Plan
1-10945
1-10945
8-K
8-K
333-166612 S-8
May 2011
May 2011
May 2010
10.3
10.5
10.4
4.6
10.13+(cid:3)Amended and Restated 2010 Incentive Plan(cid:3)
1-10945
DEF 14A
Apr. 2015
Appendix A
10.14+(cid:3)Second Amended and Restated 2010
Incentive Plan
10.15+(cid:3)Form of 2017 Performance Unit Agreement,
including 2017 Performance Award: Goals
and Measures
1-10945
DEF 14A
Mar. 2017
Appendix A
1-10945
8-K
Feb. 2017
10.1
10.16+(cid:3)Form of 2017 Restricted Stock Unit
1-10945
8-K
Feb. 2017
Agreement
10.17+(cid:3)Form of 2017 Nonemployee Director
Restricted Stock Agreement
1-10945
8-K
Feb. 2017
10.2
10.3
50
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
10.18+(cid:3)Form of 2017 Nonemployee Director
1-10945
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:43)(cid:88)(cid:74)(cid:75)(cid:72)(cid:86)
10.19+(cid:3)2017 Nonemployee Director Restricted Stock
1-10945
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:48)(cid:70)(cid:40)(cid:89)(cid:82)(cid:92)
8-K
8-K
Feb. 2017
May 2017
10.20+(cid:3)2017 Annual Cash Bonus Award Program
1-10945
8-K
Feb. 2017
(cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)
10.21+(cid:3)Supplemental 2017 Performance Unit
1-10945
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:47)(cid:68)(cid:85)(cid:86)(cid:82)(cid:81)
10.22+(cid:3)Supplemental 2017 Restricted Stock Unit
1-10945
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:47)(cid:68)(cid:85)(cid:86)(cid:82)(cid:81)
10.23+(cid:3)Retention Agreement dated February 24,
1-10945
(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:42)(cid:72)(cid:85)(cid:81)(cid:72)(cid:85)
10.24+(cid:3)Form of 2016 Restricted Stock Unit
1-10945
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
10.25+(cid:3)Form of 2016 Performance Unit Agreement
1-10945
10.26+(cid:3)Form of 2016 Performance Award: Goals
1-10945
(cid:68)(cid:81)(cid:71)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)
(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
10.27+(cid:3)Form of 2016 Nonemployee Director
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
1-10945
10.28+(cid:3)2016 Annual Cash Bonus Award Program
1-10945
(cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
May 2017
May 2017
Feb. 2017
Feb. 2016
Feb. 2016
Feb. 2016
Feb. 2016
Feb. 2016
10.29+(cid:3)Form of 2015 Restricted Stock Unit
1-10945
8-K
Feb. 2015
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
10.30+(cid:3)Form of 2015 Performance Unit Agreement
1-10945
10.31+(cid:3)2015 Performance Award: Goals and
1-10945
(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)
(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
8-K
8-K
Feb. 2015
Feb. 2015
10.4
10.3
10.5
10.1
10.2
10.6
10.1
10.2
10.3
10.4
10.5
10.1
10.2
10.3
10.32+(cid:3)Form of 2015 Nonemployee Director
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:72)(cid:86)(cid:86)(cid:85)(cid:86)(cid:17)(cid:3)
(cid:38)(cid:82)(cid:79)(cid:79)(cid:76)(cid:81)(cid:86)(cid:15)(cid:3)(cid:43)(cid:88)(cid:73)(cid:73)(cid:15)(cid:3)(cid:43)(cid:88)(cid:74)(cid:75)(cid:72)(cid:86)(cid:15)(cid:3)(cid:48)(cid:88)(cid:85)(cid:83)(cid:75)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:68)(cid:83)(cid:83)(cid:68)(cid:86)
10.33+(cid:3)Form of 2015 Nonemployee Director
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)
(cid:39)(cid:72)(cid:86)(cid:53)(cid:82)(cid:70)(cid:75)(cid:72)
1-10945
8-K
Feb. 2015
10.4
1-10945
8-K
Feb. 2015
10.5
*
10.34+(cid:3)Oceaneering International, Inc. 2015 Annual
1-10945
8-K
Feb. 2015
10.7
Bonus Program Award Summary
12.01(cid:3) Computation of Ratio of Earnings to Fixed Charges
21.01(cid:3) Subsidiaries of Oceaneering
23.01(cid:3) Consent of Independent Registered Public Accounting Firm
31.01(cid:3) Rule 13a – 14(a)/15d – 14(a) certification of principal executive officer(cid:3)
31.02(cid:3) Rule 13a – 14(a)/15d – 14(a) certification of principal financial officer(cid:3)
32.01(cid:3) Section 1350 certification of principal executive officer
32.02(cid:3) Section 1350 certification of principal financial officer
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
* Exhibit previously filed with the Securities and Exchange Commission, as indicated,
and incorporated herein by reference.
+ Management contract or compensatory plan or arrangement.
51
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
OCEANEERING INTERNATIONAL, INC.
Date: February 28, 2018
By:
/S/ RODERICK A.LARSON
Roderick A. Larson
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Signature
Title
Date
/S/ RODERICK A. LARSON
Chief Executive Officer and Director
February 28, 2018
Roderick A. Larson
(Principal Executive Officer)
/S/ ALAN R. CURTIS
Senior Vice President and Chief Financial Officer
February 28, 2018
Alan R. Curtis
(Principal Financial Officer)
/S/ W. CARDON GERNER
Senior Vice President and Chief Accounting Officer
February 28, 2018
W. Cardon Gerner
(Principal Accounting Officer)
/S/ JOHN R. HUFF
Chairman of the Board
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
John R. Huff
/S/ WILLIAM B. BERRY
Director
William B. Berry
/S/ T. JAY COLLINS
Director
T. Jay Collins
/S/ DEANNA L. GOODWIN
Director
Deanna L. Goodwin
/S/ M. KEVIN MCEVOY
Director
M. Kevin McEvoy
/S/ PAUL B. MURPHY, JR.
Director
Paul B. Murphy, Jr.
/S/ JON ERIK REINHARDSEN Director
Jon Erik Reinhardsen
/S/ STEVEN A. WEBSTER
Director
Steven A. Webster
52
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements
Report of Independent Registered Public Accounting Firm(cid:3)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income(cid:3)
Consolidated Statements of Cash Flows
Consolidated Statements of 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(cid:3)
Employee Benefit Plans
Selected Quarterly Financial Data (unaudited)
Index to Schedules
All schedules for which provision is made in the applicable regulations of the Securities and Exchange
Commission have been omitted because they are not required under the relevant instructions or
because the required information is not significant.
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Oceaneering International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Oceaneering International, Inc.
and subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated
statements of income, comprehensive income, equity and cash flows for each of the three years in
the period ended December 31, 2017, and the related notes (collectively referred to as the
"consolidated financial statements"). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2017 and
2016, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2017, 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) (PCAOB), the Company's internal control over financial reporting as of
December 31, 2017, 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 28, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Company's auditor since 2002.
Houston, Texas
February 28, 2018
54
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
Current Assets:
December 31,
2017
2016
Cash and cash equivalents
$ 430,316 $
450,193
Accounts receivable, net of allowances for doubtful accounts of $6,217 and
$8,288
Inventory
Prepaid expenses
Total Current Assets
Property and Equipment, at cost
Less accumulated depreciation
Net Property and Equipment
Other Assets:
Goodwill
Other non-current assets
Total Other Assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Total Current Liabilities
Long-term Debt
Other Long-term Liabilities
Commitments and Contingencies
Equity:
Common Stock, par value $0.25 per share; 360,000,000 shares authorized;
110,834,088 shares issued
Additional paid-in capital
Treasury stock; 12,554,714 and 12,768,726 shares, at cost
Retained earnings
Accumulated other comprehensive loss
Oceaneering Shareholders' Equity
Noncontrolling Interest
Total Equity
Total Liabilities and Equity
476,903
215,282
64,901
489,749
280,130
42,523
1,187,402
1,262,595
2,815,579
2,728,125
1,751,375
1,574,867
1,064,204
1,153,258
455,599
316,745
772,344
443,551
270,911
714,462
$ 3,023,950 $ 3,130,315
$
85,539 $
77,593
350,258
435,797
792,312
131,323
430,771
508,364
793,058
312,250
27,709
225,125
27,709
227,566
(718,946)
(731,202)
2,417,412
2,295,234
(292,136)
(302,664)
1,659,164
1,516,643
5,354
—
1,664,518
1,516,643
$ 3,023,950 $ 3,130,315
The accompanying Notes are an integral part of these Consolidated Financial Statements.
55
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
Year Ended December 31,
2016
2017
2015
$ 1,921,507 $ 2,271,603 $ 3,062,754
1,726,897
1,992,376
2,457,325
194,610
183,954
10,656
7,355
279,227
208,463
70,764
3,900
605,429
231,619
373,810
607
Interest expense, net of amounts capitalized
(27,817)
(25,318)
(25,050)
Equity earnings (losses) of unconsolidated affiliates
Other income (expense), net
Income (loss) before Income Taxes
Provision (benefit) for income taxes
Net Income
Cash dividends declared per Share
Basic Earnings per Share
Weighted average basic shares outstanding
Diluted Earnings per Share
(1,983)
(6,055)
(17,844)
(184,242)
244
2,230
(6,244)
(15,336)
43,346
18,760
336,261
105,250
$ 166,398 $
24,586 $
231,011
$
$
$
0.45 $
1.69 $
0.96 $
0.25 $
98,238
98,035
1.68 $
0.25 $
1.08
2.35
98,417
2.34
98,808
Weighted average diluted shares outstanding
98,764
98,424
The accompanying Notes are an integral part of these Consolidated Financial Statements.
56
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended December 31,
2016
2015
2017
Net Income
$ 166,398 $
24,586 $
231,011
Other comprehensive income (loss), net of tax:
Foreign currency translation
Pension-related adjustments
Other comprehensive income (loss)
Comprehensive Income
10,723
(5,559)
(118,705)
(195)
3,258
1,532
10,528
(2,301)
(117,173)
$ 176,926 $
22,285 $
113,838
The accompanying Notes are an integral part of these Consolidated Financial Statements.
57
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Year Ended December 31,
2016
2015
2017
Net income
$ 166,398 $
24,586 $
231,011
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income tax provision (benefit)
Inventory write-downs
Net loss (gain) on dispositions of property and equipment
Noncash compensation
Excluding the effects of acquisitions, increase (decrease) in cash
from:
Accounts receivable
Inventory
Other operating assets
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
Other investments
213,519
250,247
241,235
(235,013)
—
216
11,518
13,144
65,502
(38,163)
98
30,490
387
14,687
123,036
17,833
53,946
(9,183)
(5,499)
13,148
(29,920)
136,478
(38,985)
(12,491)
314,853
339,439
29,090
25,990
4,917
17,289
178,796
33,192
(65,786)
(30,228)
(41,585)
(45,943)
(14,125)
332,842
563,853
(93,680)
(112,392)
(199,970)
(11,278)
(30,121)
(224,018)
(11,451)
(39,130)
(19,531)
Currency translation effect on working capital, excluding cash
8,017
Accounts payable and accrued liabilities
(76,309)
(115,212)
Distributions of capital from unconsolidated affiliates
2,556
6,470
5,963
Dispositions of property and equipment and life insurance
proceeds
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
1,818
5,702
376
(112,035)
(169,471)
(437,180)
Net proceeds of bank credit facilities, net of new loan costs
—
—
Employer tax withholding on settlement of shares
(1,702)
(1,921)
49,665
(3,198)
Cash dividends
Purchases of treasury stock
Net Cash Used in Financing Activities
Effect of exchange rates on cash
Net Increase (Decrease) in Cash and Cash Equivalents
(44,220)
(94,138)
(106,454)
—
—
(100,459)
(45,922)
(96,059)
(160,446)
1,602
(19,877)
(8,951)
64,958
(11,706)
(45,479)
Cash and Cash Equivalents—Beginning of Period
450,193
385,235
430,714
Cash and Cash Equivalents—End of Period
$ 430,316 $
450,193 $
385,235
The accompanying Notes are an integral part of these Consolidated Financial Statements.
58
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax deficiencies from employee benefit
plans
Cash dividends
—
—
—
—
—
—
—
—
2,338
(1,947)
(3,004)
—
—
—
10,428
1,947
—
—
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Currency
Translation
Adjustments
Pension
Oceaneering
Shareholders'
Equity
Noncontrolling
Interests
Total Equity
Accumulated Other
Comprehensive Income
(Loss)
Balance, December 31, 2014
$ 27,709
$ 229,640
$ (656,917)
$ 2,240,229
$ (178,810)
$ (4,380)
$ 1,657,471
$
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Tax benefits from employee benefit plans
Cash dividends
Treasury stock purchases, 2,000,000
shares
—
—
—
—
—
—
—
—
—
2,163
(1,871)
247
—
—
—
—
11,928
1,871
—
—
(100,459)
—
(118,705)
1,532
(117,173)
—
—
—
—
—
—
—
—
—
—
14,091
—
247
(106,454)
(100,459)
231,011
231,011
Balance, December 31, 2015
27,709
230,179
(743,577)
2,364,786
(297,515)
(2,848)
1,578,734
—
—
—
—
(106,454)
—
—
—
—
(94,138)
24,586
—
—
(5,559)
3,258
—
—
—
—
—
—
—
—
410
—
24,586
(2,301)
12,766
—
(3,004)
(94,138)
1,516,643
166,398
10,528
9,815
—
(44,220)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 1,657,471
231,011
(117,173)
14,091
—
247
(106,454)
(100,459)
1,578,734
24,586
(2,301)
12,766
—
(3,004)
(94,138)
1,516,643
166,398
10,528
9,815
—
(44,220)
5,354
Balance, December 31, 2016
27,709
227,566
(731,202)
2,295,234
(303,074)
Net Income
Other Comprehensive Income
Restricted stock unit activity
Restricted stock activity
Cash dividends
Noncontrolling interest
—
—
—
—
—
—
—
—
480
(2,921)
—
—
—
—
9,335
2,921
—
—
166,398
—
—
—
—
(44,220)
—
10,723
(195)
—
—
—
—
—
—
—
—
—
5,354
Balance, December 31, 2017
$ 27,709
$ 225,125
$(718,946) $2,417,412
$ (292,351) $
215
$ 1,659,164
$
5,354
$ 1,664,518
The accompanying Notes are an integral part of these Consolidated Financial Statements.
59
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. We use the cost method for all other long-
term investments. Investments in entities that we do not consolidate are reflected on our balance
sheet in Other non-current assets. 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.
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 the lower of cost or net realizable value. We determine cost using
the weighted-average method. During 2016, we recorded inventory write-downs totaling $30.5
million for excess inventory of $25.2 million in our ROV segment and $5.3 million in our Subsea
Products segment. In 2015, we recorded inventory write-downs totaling $26.0 million: $15.7 million
attributable to remotely operated vehicle components, as we determined the components would not
be used as a result of the deterioration in market conditions, and $10.3 million in our Subsea
Products segment, primarily the result of our decision to cease manufacturing subsea blow out
preventer ("BOP") control systems.
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 eight years. Amortization expense on intangible
assets was $10.2 million, $10.2 million and $7.8 million in 2017, 2016 and 2015, respectively.
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 $4.6 million, $3.7 million and $2.4 million of interest in 2017, 2016 and
2015, respectively. 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.
60
Our management periodically, and upon the occurrence of a triggering event, reviews the
realizability of our property and equipment and long-lived intangible assets 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 benefits of the assets, any historical
or future profitability measurements and other external market conditions or factors that may be
present. If such impairment indicators are present or other factors exist that indicate that the
carrying amount of an asset may not be recoverable, we determine whether an impairment has
occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for
which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the
difference between the carrying amount and the fair value of the asset. For assets held for sale or
disposal, the fair value of the asset is measured using fair market value less estimated 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.
Business Acquisitions. We account for business combinations using the acquisition method of
accounting, with acquisition prices being allocated to the assets acquired and liabilities assumed
based on their fair values at the respective dates of acquisition.
In August 2017, we acquired a 60% controlling ownership interest in Dalgidj LLC ("Dalgidj") for
approximately $12.4 million to be paid in 2017 and 2018. In connection with the purchase of the
equity interest, we advanced Dalgidj $6.4 million to pay off certain of its indebtedness. Dalgidj is an
Azerbaijan company that provides office and yard facilities for warehousing, logistics and
administration to foreign and local companies in the Caspian Sea basin. Dalgidj also owns a 49%
interest in a joint venture, which provides remotely operated vehicle solutions, air diving services,
and engineering and project management services.
We have accounted for this acquisition by allocating the purchase price to the assets acquired and
liabilities assumed based on their estimated fair values at the date of acquisition. This purchase
price allocation is preliminary and is subject to change when we obtain final asset and liability
valuations. Dalgidj's operating results are included in our Subsea Projects segment, and its activity
subsequent to the date of acquisition was not significant. We have recognized $5.4 million in
Noncontrolling Interest on our Consolidated Balance Sheets.
In April 2015, we completed the acquisition of C & C Technologies, Inc. ("C&C"). C&C is a global
provider of ocean-bottom mapping services 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. The acquisition price of
approximately $224 million was paid in cash. We have accounted for this acquisition by allocating
the purchase price to the assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. Based on the terms of the acquisition agreement, all of our goodwill and
other intangible assets associated with the C&C acquisition will be deductible for income tax
purposes. We have included C&C's operations in our consolidated financial statements starting from
the date of closing, and its operating results are reflected in our Subsea Projects segment. The
acquisition of C&C did not have a material effect on our operating results, cash flows from operations
or financial position.
We made several other smaller acquisitions during the periods presented, none of which were
material.
Goodwill. In our annual evaluation of goodwill for impairment, we first assess qualitative factors to
determine whether the existence of events or circumstances led to a determination that it was 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, we determined it was more likely than not that the
fair value of a reporting unit was less than its carrying amount, we were required to perform the first
step of the two-step impairment test. We tested the goodwill attributable to each of our reporting
units for impairment as of December 31, 2017 and 2016 and concluded that there was no
impairment. In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting
61
Standards Update ("ASU") 2017-04 "Intangibles - Goodwill and Other (Topic 350) Simplifying the
Test for Goodwill Impairment." This update simplifies how an entity is required to test goodwill for
impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill
impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying
amount of that goodwill. Under the amendments in this update, an entity should perform its annual,
or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying
amount. An entity should recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value. However, the loss recognized should not exceed the
total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider
income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit
when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform
the qualitative assessment for a reporting unit to determine if the quantitative impairment test is
necessary. The amendments in this update are effective beginning January 1, 2020. Early adoption
is permitted for testing dates after January 1, 2017, and the update is to be applied on a prospective
basis. We adopted this update effective January 1, 2017.
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 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 2017, we accounted for 20% 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.
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.
62
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,
2017
349,233 $
2016
538,986
(309,355)
(488,814)
39,878 $
50,172
$
$
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,
2017
145,258 $
2016
178,914
(111,330)
(81,800)
33,928 $
97,114
$
$
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 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% 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.
For more information on income taxes, please see Note 3.
Foreign Currency Translation. The functional currency for most of our foreign subsidiaries is the
applicable local currency. Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated into U.S. dollars using average exchange rates during the
period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the
exchange rates in effect at the balance sheet date, and the resulting translation adjustments are
recognized, net of tax, 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 $5.2 million, $4.8 million and $15.4 million of foreign currency
transaction losses in 2017, 2016 and 2015, respectively, and those amounts are included as a
component of Other income (expense), net.
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 Plan. In December 2014, our Board of Directors approved a share repurchase program
under which we may repurchase up to 10 million shares of our common stock on a discretionary
basis. The 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
63
will be determined by management based on its evaluation of these factors. We expect that any
shares repurchased under the program will be held as treasury stock for future use. The program
does not obligate us to repurchase any particular number of shares. We account for the shares we
hold in treasury under the cost method, at average cost. Under the program, we had repurchased 2
million shares of our common stock for $100 million through December 31, 2017.
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, other comprehensive income or changes in assets or liabilities,
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 swaps we
have in effect.
New Accounting Standards. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts
with Customers." ASU 2014-09, as amended, 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 interim and annual reporting periods beginning after
December 15, 2017. Early application is not permitted before periods beginning after December 15,
2016, and we have elected to apply ASU 2014-09 by recognizing the cumulative effect of applying
ASU 2014-09 at the date of initial application and not adjusting comparative information.
We formed a project team to implement this standard. Our project team produced the procedures
and control changes required to address the impacts that ASU 2014-09 may have on our business.
We completed training our staff on the procedures and controls that came into effect
January 1, 2018. We continue to believe that our project plan will enable us to complete all of the
required work to implement our new procedures and controls and calculate the cumulative effect of
applying ASU 2014-09 at the date of initial application, in line with the timeline and requirements of
the standard.
In our service-based business lines, which principally charge on a dayrate basis for services
provided, we have preliminarily concluded there will be no significant impact in the amount or
pattern of revenue and profit recognition as a result of the implementation of ASC 2014-09. In our
product based business lines, we expect impacts on the pattern of our revenue and profit recognition
as a result of the implementation of ASC 2014-09.
Based on our overall assessment performed to date, we do not have a significant adjustment to be
made to retained earnings on January 1, 2018.
In July 2015, the FASB issued ASU 2015-11, "Inventory - Simplifying the Measurement of
Inventory." ASU 2015-11 requires companies to measure inventory at the lower of cost or net
realizable value rather than at the lower of cost or market. Net realizable value is the estimated
selling price in the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. This guidance was effective for our inventories beginning
January 1, 2017. This update has not had a material impact on our consolidated financial
statements.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments—Overall (Subtopic 825-10)
Recognition and Measurement of Financial Assets and Financial Liabilities." This update:
•
•
requires equity investments (except those accounted for under the equity method of
accounting or those that result in consolidation of the investee) to be measured at fair value,
with changes in fair value recognized in net income; and
simplifies the impairment assessment of equity investments without readily determinable fair
values by requiring a qualitative assessment to identify impairment. When a qualitative
assessment indicates that impairment exists, an entity is required to measure the investment
at fair value.
64
ASU 2016-01 is effective for us beginning on January 1, 2018. We do not anticipate that this update
will have a material effect on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases." This update requires reporting entities
to separate the lease components from the non-lease components in a contract and recognize lease
assets and lease liabilities on the balance sheet for substantially all lease arrangements.
ASU 2016-02 is effective for us beginning January 1, 2019. We have formed a project team to
implement ASU 2016-02 and we are currently evaluating the requirements of ASU 2016-02 and have
not yet determined its impact on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, "Compensation – Stock Compensation –
Improvements to Employee Share-Based Payment Accounting." This update simplifies several
aspects of accounting for share-based payment transactions, including the income tax consequences,
classification of awards as either equity or liabilities, and the classification on the statement of cash
flows. In addition, the update allows an entity-wide accounting policy election to either estimate the
number of awards that are expected to vest or account for forfeitures when they occur. The element
of the update that will have the most impact on our financial statements will be income tax
consequences. Excess tax benefits and tax deficiencies on share-based compensation awards are
now included in our tax provision within our condensed consolidated statement of operations as
discrete items in the reporting period in which they occur, rather than (as was the previous
accounting treatment) recording in additional paid-in capital on our condensed consolidated balance
sheets. We have also elected to continue our current policy of estimating forfeitures of share-based
compensation awards at the time of grant and revising in subsequent periods to reflect actual
forfeitures. In our consolidated statements of cash flows for the years ended December 31, 2016
and 2015, we have reclassified two items to conform with the presentation specified under
ASU 2016-09: (1) we have reclassified the effect related to the tax deficiency associated with share-
based compensation from financing activities to operating activities; and (2) we have reclassified the
amounts related to withholding tax payments from operating activities to financing activities. Other
than these two cash flow items applied retrospectively, we have implemented ASU 2016-09
prospectively beginning January 1, 2017.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740) – Intra-Entity Transfers
of Assets Other than Inventory." Current U.S. GAAP generally prohibits the recognition of current
and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an
outside party. The amendments in this update will eliminate the exception for an intra-entity transfer
of an asset other than inventory. Two common examples of assets included within the scope of this
update are intellectual property and property, plant and equipment. The exception for an intra-entity
transfer of inventory will remain in place. The amendments in this update are effective for us
beginning January 1, 2018. We do not anticipate that this update will have a material effect on our
consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, "Income Statement – Reporting Comprehensive
Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income." The amendments in this update allow a reclassification from accumulated other
comprehensive income to retained earnings for stranded tax effects resulting from the
December 2017 enactment of U.S. tax reform legislation commonly referred to as the Tax Cuts and
Jobs Act (the "Tax Act"). However, because the amendments only relate to the reclassification of the
income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in
tax laws or rates be included in income from continuing operations is not affected. The amendments
in this update also require certain disclosures about stranded tax effects. The amendments in this
update are effective for us beginning January 1, 2019, and early adoption is permitted. We do not
anticipate that this update will have a material effect on our consolidated financial statements.
65
2. SELECTED BALANCE SHEET INFORMATION
The following is information regarding selected balance sheet accounts:
(in thousands)
Inventory:
Remotely operated vehicle parts and components
Other inventory, primarily raw materials
Total
Other Non-Current Assets:
Intangible assets, net
Angola bonds
Cash surrender value of life insurance policies
Investment in unconsolidated affiliates
Deferred income taxes
Other
Total
Accrued Liabilities:
Payroll and related costs
Accrued job costs
Deferred revenue
Income taxes payable
Other
Total
Other Long-Term Liabilities:
Deferred income taxes
Supplemental Executive Retirement Plan
Accrued post-employment benefit obligations
Other
Total
December 31,
2017
2016
$ 97,313 $ 118,236
117,969
161,894
$ 215,282 $ 280,130
$ 85,293 $ 87,801
68,280
54,987
49,094
24,633
34,458
59,130
60,160
39,826
12,187
11,807
$ 316,745 $ 270,911
$ 101,989 $ 141,485
58,823
63,040
30,589
95,817
59,331
122,223
35,126
72,606
$ 350,258 $ 430,771
$ 42,040 $ 236,113
45,037
3,352
40,894
49,163
4,648
22,326
$ 131,323 $ 312,250
66
3. INCOME TAXES
In December 2017, the United States enacted the Tax Act, which includes a number of changes to
existing U.S. tax laws that have an impact on our income tax provision, most notably a reduction of
the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after
December 31, 2017, and the creation of a territorial tax system with a one time mandatory tax on
applicable previously deferred earnings of foreign subsidiaries. The Tax Act also makes prospective
changes beginning in 2018, including a base erosion and anti abuse tax ("BEAT"), a global intangible
low taxed income ("GILTI") tax, additional limitations on the deductibility of executive compensation,
limitations on the deductibility of interest expense and repeal of the domestic manufacturing
deduction.
We recognized the income tax effects of the Tax Act in our financial statements for the year ended
December 31, 2017 in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), which
provides SEC staff guidance for the application of accounting standards for income taxes in the
reporting period in which the Tax Act was enacted. As such, our financial results reflect provisional
amounts for those specific income tax effects of the Tax Act for which the accounting is incomplete
but a reasonable estimate could be determined. The 2017 Tax Act's U.S. tax law changes that we
believe will have a material impact on our federal income taxes are as follows:
Reduction of the U.S. corporate income tax rate. At December 31, 2017, we remeasured our
deferred tax assets and liabilities to reflect the reduction in the U.S. corporate income tax
rate from 35 percent to 21 percent, resulting in a $23.1 million decrease in income tax
expense for the year ended December 31, 2017 and a corresponding $23.1 million decrease
in net deferred tax liabilities as of December 31, 2017. However, our accounting for U.S.
deferred taxes is based on estimates, which could change and potentially affect the
measurement of these balances or potentially give rise to new deferred tax amounts; and
Transition tax on foreign earnings. The Tax Act imposes a one time transition tax on
applicable unremitted earnings and profits of the foreign subsidiaries of our U.S.
subsidiaries. Prior to enactment of the Tax Act, we recognized a deferred tax liability for
certain foreign earnings that were considered to be repatriated and did not recognize a
deferred tax liability related to the unremitted earnings of certain of our foreign subsidiaries
that we considered to be indefinitely reinvested. The final determination of the transition tax
requires further analysis regarding the amount and composition of our historical foreign
earnings and tax pools due to estimates related to certain yet-to-be filed current foreign tax
returns, foreign statutory financial reports and foreign tax audits. The final determination is
expected to be completed and reflected in our financial statements issued for subsequent
reporting periods that fall within the measurement period provided by SAB 118. We have
provided a provisional mandatory repatriation tax of approximately $9.0 million fully offset by
available foreign tax credits. Additionally, upon enactment, we believe that certain of our
foreign earnings, where we recognized a deferred tax liability upon future repatriation, will
now be subject to tax-free repatriation. As a result, we have recognized a provisional $222
million decrease in income tax expense for the year ended December 31, 2017 and a
corresponding decrease in net deferred tax liabilities as of December 31, 2017. The transition
tax will also impact the utilization of our remaining foreign tax credits, which will impact our
valuation allowance analysis related to those deferred tax assets. We have provided a
provisional valuation allowance of $56.0 million against such deferred tax assets.
67
Our provisions (benefit) for income taxes and our cash taxes paid are as follows:
(in thousands)
Current:
Domestic
Foreign
Total current
Deferred:
Domestic
Foreign
Total deferred
Year Ended December 31,
2016
2015
2017
$
13,390 $
(6,899) $
37,381
50,771
(213,200)
(21,813)
(235,013)
25,561
18,662
(8,617)
8,715
98
11,028
65,132
76,160
40,284
(11,194)
29,090
Total provision (benefit) for income taxes
Cash taxes paid
$ (184,242) $
18,760 $
105,250
$
43,347 $
75,819 $
119,591
The components of income (loss) before income taxes are as follows:
(in thousands)
Domestic
Foreign
Income (loss) before income taxes
$
$
Year Ended December 31,
2016
2017
(93,053) $ (180,132) $
75,209
223,478
2015
51,018
285,243
(17,844) $
43,346 $
336,261
As of December 31, 2017 and 2016, 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
Net operating loss and other carryforwards
Other
Gross deferred tax assets
Valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Unremitted foreign earnings not considered indefinitely reinvested
Basis difference in equity investments
Total deferred tax liabilities
Net deferred income tax liability
December 31,
2017
2016
$
22,325 $
38,602
2,015
11,652
222,065
2,203
9,830
24,663
14,140
46,745
260,260
133,980
(206,586)
(4,200)
53,674 $
129,780
65,366 $
86,237
—
5,715
257,414
10,055
71,081 $
353,706
17,407 $
223,926
$
$
$
$
68
Our net deferred tax liability is reflected within our balance sheet as follows:
(in thousands)
Deferred tax liabilities
Long-term deferred tax assets
Net deferred income tax liability
December 31,
2017
42,040 $
2016
236,113
(24,633)
(12,187)
17,407 $
223,926
$
$
At December 31, 2017, we had approximately $56 million of foreign tax credits and no U.S. net
operating losses available to reduce future payments of U.S. federal income taxes. The tax credits
expire commencing in 2024. As a result of the Tax Act, we have established a deferred tax asset
valuation allowance against the entire carryforward.
At December 31, 2017, we had approximately $740 million of net operating and other loss
carryforwards that were generated in various worldwide jurisdictions. The carryforwards include
$692 million that do not expire and $48 million that will expire from 2018 through 2025. We have
recorded a valuation allowance of $33 million on losses and other deferred tax assets as our
management believes at this time that it is more likely than not that the deferred tax asset will not
be realized. At December 31, 2017, we have a foreign deferred tax asset of approximately $113
million relating to a net operating loss included on tax returns filed in 2017. Although this net
operating loss carryforward has an indefinite life, a corresponding valuation allowance for the same
amount was recognized because our management believes it will never be realized based on the
nature of the loss and our current organizational structure.
Reconciliations between the actual provision for income taxes (benefit) on continuing operations and
that computed by applying the U.S. statutory rate of 35% to income before income taxes were as
follows:
Year Ended December 31,
2017
2016
2015
Income tax provision (benefit) at the U.S. statutory rate
$
(6,245) $
15,171 $
117,691
Tax Act - earnings subject to tax-free repatriation
Tax Act - remeasure of net U.S. deferred tax liabilities
Valuation allowances
Foreign tax rate differential
Stock compensation
Other items, net
(222,019)
(23,124)
89,217
(21,163)
3,112
(4,020)
—
—
4,200
(1,766)
—
1,155
—
—
—
(8,505)
—
(3,936)
Total provision (benefit) for income taxes
$ (184,242) $
18,760 $
105,250
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 $0.6 million, $1.2 million and $(0.9) million in 2017, 2016 and 2015, respectively, for
penalties and interest on uncertain tax positions, which brought our total liabilities for penalties and
interest on uncertain tax positions to $2.6 million and $3.2 million on our balance sheets at
December 31, 2017 and 2016, 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:
69
(in thousands)
Beginning of year
Additions based on tax positions related to the current year
Reductions for expiration of statutes of limitations
Additions (reductions) 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,
2016
2015
2017
$
6,330 $
5,245 $
1,213
(650)
314
(962)
(906)
1,999
(1,028)
114
—
—
5,575
260
(1,649)
1,059
—
—
$
5,339 $
6,330 $
5,245
Including associated foreign tax credits and penalties and interest, we have accrued a net total of
$5.6 million in the caption "other long-term liabilities" on our balance sheet at December 31, 2017
for unrecognized tax benefits. 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:
Jurisdiction
United States
United Kingdom
Norway
Angola
Brazil
Australia
Periods
2014
2015
2007
2013
2012
2013
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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
5.
DEBT
Year Ended December 31,
2016
2015
2017
$ 1,181,229 $ 1,509,786 $ 2,001,167
740,278
761,817
1,061,587
1,921,507
2,271,603
3,062,754
1,040,817
1,330,218
1,585,305
625,843
60,237
615,438
46,720
800,316
71,704
1,726,897
1,992,376
2,457,325
140,412
114,435
179,568
146,379
415,862
261,271
(60,237)
(46,720)
(71,704)
$
194,610 $
279,227 $
605,429
Long-term Debt consisted of the following:
(in thousands)
4.650% Senior Notes due 2024:
Principal of the notes
Issuance costs, net of amortization
Fair value of interest rate swaps on $200 million of principal
Term Loan Facility
Revolving Credit Facility
Long-term Debt
December 31,
2017
2016
$ 500,000 $ 500,000
(4,698)
(2,990)
(5,385)
(1,557)
300,000
300,000
—
—
$ 792,312 $ 793,058
In October 2014, we entered into a credit agreement (as amended, the "Credit Agreement") with a
group of banks. In February 2018, we entered into Agreement and Amendment No. 4 to Credit
Agreement ("Amendment No. 4") to the Credit Agreement. The Credit Agreement provides for a
$500 million five-year revolving credit facility (the "Revolving Credit Facility"). The Credit Agreement
previously provided for a $300 million three-year term loan, which we repaid in full in
February 2018, using net proceeds from our February 2018 offering of our 6.000% Senior Notes due
2028 described further below. Subject to certain conditions, the aggregate commitments under the
Revolving Credit Facility may be increased by up to $300 million at any time upon agreement
between us and existing or additional lenders. Borrowings under the Revolving Credit Facility may
be used for general corporate purposes. Amendment No. 4 amended the Credit Agreement to,
among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with
the extending Lenders, which represent 90% of the existing commitments of the Lenders, such that
(a) the total commitments for the Revolving Credit Facility will be $500 million until
October 25, 2021, and thereafter $450 million until January 25, 2023.
Borrowings under the Revolving Credit Facility bear interest at an Adjusted Base Rate or the
Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin
based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the
ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such
debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the
Adjusted Base Rate, from 0.125% to 0.750%; and (2) in the case of advances bearing interest at
71
the Eurodollar Rate, from 1.125% to 1.750%. The Adjusted Base Rate is the highest of (1) the per
annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus
0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from
0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage
Ratio. The commitment fees are included as interest expense in our consolidated financial
statements.
The Credit Agreement contains various covenants that we believe are customary for agreements of
this nature, including, but not limited to, restrictions on our ability and the ability of each of our
subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or
consolidate, sell assets and enter into certain restrictive agreements. We are also subject to a
maximum adjusted total Capitalization Ratio (as defined in the Credit Agreement) of 55%. The
Credit Agreement includes customary events of default and associated remedies. As of
December 31, 2017, 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 "2024 Senior Notes"). We pay interest on the 2024 Senior
Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to mature on
November 15, 2024. We may redeem some or all of the 2024 Senior Notes prior to maturity at
specified redemption prices. We used the net proceeds from the offering for general corporate
purposes, including funding the C&C acquisition, other capital expenditures and repurchases of
shares of our common stock.
We incurred $6.9 million of issuance costs related to the 2024 Senior Notes and $2.6 million of new
loan costs, including costs of the amendments prior to Amendment No. 4, related to the Credit
Agreement. We are amortizing those costs, which are included on our balance sheet, as a reduction
of debt for the 2024 Senior Notes and as an other non-current asset for the Credit Agreement, to
interest expense to November 2024 for the 2024 Senior Notes and to January 2023 for the Credit
Agreement.
We have two interest rate swaps in place on a total of $200 million of the 2024 Senior Notes for the
period to November 2024. See Note 6 of Notes to Consolidated Financial Statements included in this
report for a description of these interest rate swaps.
In February 2018, we completed the public offering of $300 million aggregate principal amount of
6.000% Senior Notes due 2028 (the "2028 Senior Notes"). We will pay interest on the 2028 Senior
Notes on February 1 and August 1 of each year, beginning on August 1, 2018. The 2028 Senior
Notes are scheduled to mature on February 1, 2028. We may redeem some or all of the 2028 Senior
Notes at specified redemption prices. We used the net proceeds from the offering to repay our term
loan indebtedness referred to above.
We made cash interest payments of $32.4 million, $29.2 million and $27.2 million in 2017, 2016 and
2015, respectively.
72
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At December 31, 2017, we occupied several facilities under noncancellable operating leases expiring
at various dates through 2035. Future minimum rentals under all of our operating leases, including
vessel rentals, are as follows:
(in thousands)
2018
2019
2020
2021
2022
$
31,243
23,116
19,579
16,929
15,446
Thereafter
Total Lease Commitments
132,396
$
238,709
Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was
approximately $97 million, $205 million and $229 million in 2017, 2016 and 2015, respectively.
Insurance
The workers' compensation, maritime employer's liability and comprehensive general liability
insurance policies that we purchase each include a deductible layer, for which we would be
responsible, that we consider financially prudent. Insurance above the deductible layers 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 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, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of
the then current members of our board of directors and one of our former directors, as defendants,
and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through
the complaint, the plaintiff asserted, on behalf of our company, actions for breach of fiduciary duties
and unjust enrichment in connection with prior determinations of our board of directors relating to
nonexecutive director compensation. The plaintiff sought relief including disgorgement of payments
made to the defendants, an award of unspecified damages and an award for attorneys’ fees and
other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief.
Subsequently, the parties to the litigation jointly requested and received a series of extension orders
from the Court to extend the time for certain filings. The last such extension expired on September
16, 2016. By letter dated August 30, 2017, we received notice from the Office of the Register in
Chancery advising the parties that the Court was closing the matter for failure to prosecute or to
comply with an order of the Court.
In the ordinary course of business, we are subject to actions for damages alleging personal injury
under the general maritime laws of the United States, including the Jones Act, for alleged
negligence. We report actions for personal injury to our insurance carriers and believe that the
settlement or disposition of those claims will not have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
Various other actions and claims are pending against us, most of which are covered by insurance.
Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate
73
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 $67 million and $54 million in letters of credit outstanding as of December 31, 2017 and
2016, 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 we have an underlying exposure. Other
financial instruments that potentially subject us to concentrations of credit risk are principally cash
and cash equivalents and accounts receivable.
The carrying values of cash and cash equivalents approximate their fair values due to the short-term
maturity of the underlying instruments. Accounts receivable are generated from a broad group of
customers, primarily from within the energy industry, which is our major source of revenue. Due to
their short-term nature, carrying values of our accounts receivable and accounts payable
approximate fair market values. We had borrowings of $300 million as of December 31, 2017 under
our term loan facility. Due to the short-term nature of the associated interest rate periods, the
carrying value of our debt under the term loan facility approximated its fair value. The fair value of
this debt is classified as Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than
quoted prices in active markets for similar assets and liabilities that are observable or can be
corroborated by observable market data for substantially the full term for the assets or liabilities).
We estimated the fair market value of the 2024 Senior Notes to be $489 million at December 31,
2017 based on quoted prices. Since the market for the 2024 Senior Notes is not an active market,
the fair value of the 2024 Senior Notes is classified within Level 2 in the fair value hierarchy under
U.S. GAAP.
We have two interest rate swaps in place on a total of $200 million of the 2024 Senior Notes for the
period to November 2024. The agreements swap the fixed interest rate of 4.650% on $200 million
of the 2024 Senior Notes to the floating rate of one month LIBOR plus 2.426% and on another $100
million to one month LIBOR plus 2.823%. We estimate the combined fair value of the interest rate
swaps to be a net liability of $3.0 million at December 31, 2017, which is included on our balance
sheet in our other long-term liabilities These values were arrived at using a discounted cash flow
model using Level 2 inputs.
Since the second quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S.
dollar generally has been declining, although the exchange rate was relatively stable during 2017.
As our functional currency in Angola is the U.S. dollar, we recorded foreign currency transaction
losses related to the kwanza of $0.1 million, $7.3 million and $17.4 million in 2017, 2016 and 2015,
as a component of Other income (expense), net in our Consolidated Statements of Income for those
respective periods. Our foreign currency transaction losses in 2016 and 2015 related primarily to
the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Conversion of cash
balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central
bank has slowed this process since mid-2015, causing our kwanza cash balances to increase. As of
December 31, 2017, we had the equivalent of approximately $27 million of cash in kwanza in Angola
reflected on our balance sheet.
To mitigate our currency exposure risk in Angola, we have used kwanza to purchase $70 million
equivalent Angolan central bank (Banco Nacional de Angola) bonds with maturities of $60 million
during 2018 and $10 million in 2020. The bonds are denominated as U.S. dollar equivalents, so
that, upon payment of semi-annual interest and principal upon maturity, payment is made in
kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. Our intent is to
reinvest funds from maturing bonds in similar, long-term assets.
74
We estimated the fair market value of the Angolan bonds to be $68 million at December 31, 2017
using quoted prices. Since the market for the Angolan bonds is not an active market, the fair value
of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP.
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. 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 energy
exploration, development and production activities. Our Subsea Products segment supplies a variety
of specialty subsea hardware and related services. Our Subsea Projects segment provides
multiservice subsea support vessels and oilfield diving and support vessel operations, primarily for
inspection, maintenance and repair and installation activities. Since April 2015, we have also
provided survey, autonomous underwater vehicle ("AUV") and satellite-positioning services. 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-energy 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, 2017 from those used in our consolidated financial
statements for the years ended December 31, 2016 and 2015.
75
The table that follows presents Revenue, Income from Operations and Depreciation and Amortization
Expense by business segment:
(in thousands)
Revenue
Oilfield
Year Ended December 31,
2016
2015
2017
Remotely Operated Vehicles
$
393,655 $
522,121 $
807,723
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
Income from Operations
Oilfield
625,513
291,993
236,778
692,030
472,979
275,397
959,714
604,484
372,957
1,547,939
1,962,527
2,744,878
373,568
309,076
317,876
$ 1,921,507 $ 2,271,603 $ 3,062,754
Remotely Operated Vehicles
$
22,366 $
25,193 $
192,514
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
45,539
10,279
11,231
89,415
22,039
75,938
34,476
7,551
143,158
11,809
175,585
92,034
18,235
478,368
9,689
(100,798)
(84,203)
(114,247)
$
10,656 $
70,764 $
373,810
Depreciation and Amortization Expense
Oilfield
Remotely Operated Vehicles
$
113,979 $
140,967 $
143,364
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Unallocated Expenses
Total
52,561
31,869
7,715
53,759
34,042
14,336
49,792
29,863
10,713
206,124
243,104
233,732
3,171
4,224
3,120
4,023
2,549
4,954
$
213,519 $
250,247 $
241,235
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 2016, we recognized restructuring expenses of $11.6 million, attributable to each reporting
segment as follows:
• Remotely Operated Vehicles - $3.8 million;
• Subsea Products - $3.7 million;
• Subsea Projects - $2.1 million;
• Asset Integrity - $1.4 million;
• Advanced Technologies - $0.5 million; and
• Unallocated Expenses - $0.1 million.
The restructuring expenses were all severance costs, of which $8.4 million was unpaid at
December 31, 2016 and paid in 2017.
76
During 2015, we recognized restructuring expenses of $25.4 million, attributable to each reporting
segment as follows:
• Remotely Operated Vehicles - $7.2 million;
• Subsea Products - $8.7 million;
• Subsea Projects - $2.5 million;
• Asset Integrity - $6.4 million;
• Advanced Technologies - $0.2 million; and
• Unallocated Expenses - $0.4 million.
The restructuring expenses consisted substantially of severance costs that totaled $23.1 million
during the year, of which $7.0 million was unpaid at December 31, 2015 and paid in 2016.
During each of 2017, 2016 and 2015, revenue from one customer, BP plc and subsidiaries,
accounted for 12%, 18% and 18% of our total consolidated annual revenue, respectively.
The following table presents Assets, Property and Equipment and Goodwill by business segment as of
the dates indicated:
(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
December 31,
2017
2016
$
650,832 $
755,894
788,586
626,791
268,055
833,919
608,411
261,410
2,334,264
2,459,634
129,185
560,501
101,756
568,925
$ 3,023,950 $ 3,130,315
$
420,088 $
485,063
329,486
272,649
19,445
344,973
273,384
24,571
1,041,668
1,127,991
10,850
11,686
12,057
13,210
$ 1,064,204 $ 1,153,258
Remotely Operated Vehicles
$
24,777 $
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Total
103,128
155,292
150,560
433,757
21,842
24,406
99,336
154,823
143,144
421,709
21,842
$
455,599 $
443,551
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.
77
The following table presents Capital Expenditures, including business acquisitions, by business
segment for the periods indicated:
(in thousands)
Capital Expenditures
Oilfield
Year Ended December 31,
2016
2015
2017
Remotely Operated Vehicles
$
40,425 $
50,339 $
Subsea Products
Subsea Projects
Asset Integrity
Total Oilfield
Advanced Technologies
Corporate and Other
Total
27,711
29,544
3,651
56,669
25,602
3,910
57,558
69,434
276,308
9,841
101,331
136,520
413,141
2,063
1,564
2,742
3,251
5,015
5,832
$
104,958 $
142,513 $
423,988
Geographic Operating Areas
The following tables summarize certain financial data by geographic area:
(in thousands)
Revenue
Foreign:
Africa
United Kingdom
Norway
Asia and Australia
Brazil
Other
Total Foreign
United States
Total
(in thousands)
Property and equipment, net
Foreign:
Norway
Africa
United Kingdom
Asia and Australia
Brazil
Other
Total Foreign
United States
Total
Year Ended December 31,
2016
2015
2017
$
256,198 $
486,615 $
659,038
236,177
178,712
193,865
42,607
81,364
988,923
932,584
304,635
166,180
196,679
73,280
66,870
367,326
250,272
245,978
118,056
116,647
1,294,259
1,757,317
977,344
1,305,437
$ 1,921,507 $ 2,271,603 $ 3,062,754
December 31,
2017
2016
$
78,279 $
83,129
135,345
159,715
87,601
50,057
50,842
25,346
427,470
636,734
67,522
61,135
55,224
22,322
449,047
704,211
$ 1,064,204 $ 1,153,258
Revenue is based on location where services are performed and products are manufactured.
78
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 $17.4 million, $20.0 million and $22.8
million for the plan years ended December 31, 2017, 2016 and 2015, respectively.
We also make matching contributions to foreign employee savings plans similar in nature to a 401(k)
plan. In 2017, 2016 and 2015, these contributions, principally related to plans associated with U.K.
and Norwegian subsidiaries, were $9.1 million, $12.1 million and $15.1 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 2017, 2016 and 2015 were $3.2 million, $3.3 million and $3.3 million, respectively.
We have defined benefit plans covering some of our employees in the U.K. and Norway. During
2016, we agreed to settlements with almost all the participants in the Norway plan. Our curtailment
costs for the Norway plan in 2016 were $1.1 million and are included in other income (expense), net.
The projected benefit obligations for the U.K. plan were $21 million and $18 million, at
December 31, 2017 and 2016, respectively, and the fair values of the plan assets (using Level 2
inputs) for the U.K. plan were $22 million and $19 million at December 31, 2017 and 2016,
respectively. The assets of the U.K. plan have been invested in individual pensioners' annuities in
anticipation of the plan settlement, which is expected to occur in the second quarter of 2018.
Incentive Plan
Under our Second Amended and Restated 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 primarily 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(s) 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 has
been no stock option activity after December 31, 2010 and 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.
79
In 2017, 2016 and 2015, the Compensation Committee granted awards of performance units to
certain of our key executives and employees. 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 approved specific financial goals and measures (as defined), for each of the three-year
periods ending December 31, 2019, 2018 and 2017 to be used as the basis for the final value of the
performance units. The final value of each performance unit granted in 2017 may range from $0 to
$200 and the value of the performance units granted in each of 2016 and 2015 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 (benefit) related to the performance units was $4.2 million,
$(4.2) million and $6.8 million in 2017, 2016 and 2015, respectively. As of December 31, 2017,
there were 379,892 performance units outstanding.
During 2017, 2016 and 2015, the Compensation Committee granted restricted units of our common
stock to certain of our key executives and employees. During 2016, our Board of Directors granted
restricted common stock to our nonemployee directors. During 2016 and 2015, our Board of
Directors granted restricted units of our common stock to our Chairman and restricted common
stock to our other nonemployee directors. Over 80%, 65%, and 65% of the grants made to our
employees in 2017, 2016 and 2015, 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 of restricted stock units made to our Chairman vest pro rata over three years, as these
participants meet certain age and years-of-service requirements. For the grants of restricted stock
units 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 of restricted stock to our nonemployee directors were
scheduled to vest in full on the first anniversary of the award date conditional upon continued service
as a director, with one exception. In February 2015, 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 the director's service continued until the election of directors at our
subsequent annual meeting of shareholders in May 2015. 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 the existing service
agreement with our Chairman, which provides 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 additional tax charge realized from tax deductions less than the financial statement expense of
our restricted stock grants was $3.1 million, $3.0 million and $0.9 million in 2017, 2016 and 2015,
respectively. The 2017 charge was recognized in our consolidated statement of income and the
2016 and 2015 charges were recognized in our consolidated statements of equity.
80
The following is a summary of our restricted stock and restricted stock unit activity for 2017, 2016
and 2015:
Balance at December 31, 2014
Granted
Issued
Forfeited
Balance at December 31, 2015
Granted
Issued
Forfeited
Balance at December 31, 2016
Granted
Issued
Forfeited
Number
814,400
$
380,991
(311,119)
(52,981)
831,291
587,953
(278,572)
(88,665)
1,052,007
489,514
(277,968)
(81,748)
Balance at December 31, 2017
1,181,805
$
Weighted
Average
Fair Value
Aggregate
Intrinsic
Value
63.30
52.40
57.94
$ 16,518,000
60.45
60.49
27.90
61.48
$ 7,866,000
43.03
43.48
26.70
61.90
$ 7,038,000
34.15
32.84
The restricted stock units granted in 2017, 2016 and 2015 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.
Grants of restricted stock units are valued at their estimated fair values as of their respective grant
dates. The grants in 2017, 2016 and 2015 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 $10.9 million, $13.9 million and $15.9
million for 2017, 2016 and 2015, respectively. As of December 31, 2017, we had $11.0 million of
future expense to be recognized related to our restricted stock unit plans over a weighted average
remaining life of 1.7 years.
81
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 $3.9
million and $4.5 million at December 31, 2017 and 2016, 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 margin
Income (loss) from operations
Net income (loss)
Diluted earnings per share
Weighted average number of
diluted shares outstanding
Quarter Ended
Revenue
Gross margin
Income (loss) from operations
Net income (loss)
Diluted earnings per share
Weighted average number of
diluted shares outstanding
March 31
June 30
2017
Sept. 30
Dec. 31
Total
$
446,176 $
515,036 $
476,120 $
484,175 $ 1,921,507
44,855
(150)
(7,534)
53,571
9,390
2,132
54,885
10,531
41,299
(9,115)
(1,768)
173,568
194,610
10,656
166,398
$
(0.08) $
0.02 $
(0.02) $
1.76 $
1.68
98,138
98,751
98,270
98,852
98,764
March 31
June 30
2016
Sept. 30
Dec. 31
Total
$
608,344 $
625,539 $
549,275 $
488,445 $ 2,271,603
97,480
48,099
25,103
95,233
38,380
22,309
35,443
(11,856)
(11,798)
51,071
(3,859)
(11,028)
279,227
70,764
24,586
$
0.26 $
0.23 $
(0.12) $
(0.11) $
0.25
98,286
98,424
98,061
98,064
98,424
82
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Oceaneering International, Inc.
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Annual Report 2017
Directors
John R. Huff, Chairman
A Director of Suncor Energy Inc. and Hi-Crush GP
LLC, the general partner of Hi-Crush Partners LP
M. Kevin McEvoy
A Director of EMCOR Group, Inc. and former Chief
Executive Officer of Oceaneering International, Inc.
William B. Berry
A Director of Continental Resources, Inc. and
Frank’s International N.V.
T. Jay Collins
A Director of Murphy Oil Corporation; Pason Systems
Inc.; NuMat Technologies, Inc.; and a Director and
Chairman of Texas Institute of Science, Inc.
Deanna L. Goodwin
A Director of Arcadis NV
Roderick A. Larson
President and Chief Executive Officer of
Oceaneering International, Inc. and a Director of
Newpark Resources, Inc.
Paul B. Murphy, Jr.
Chief Executive Officer, a Director, and Chairman
of Cadence Bancorporation, and Chief Executive
Officer of Cadence Bancorp, LLC; a Director of
GP Natural Resource Partners LLC, the general
partner of Natural Resource Partners L.P.; and a
Director of Hines Real Estate Investment Trust, Inc.
Jon Erik Reinhardsen
Chairman of Statoil ASA; and a Director of
Borregaard ASA and Telenor ASA
Steven A. Webster
Co-Managing Partner of Avista Capital Partners LP;
a Director and Chairman of Carrizo Oil & Gas, Inc.;
a Director of Era Group, Inc.; and Trust Manager
of Camden Property Trust
Senior Management
Roderick A. Larson
President and
Chief Executive Officer
Clyde W. Hewlett
Chief Operating Officer
Alan R. Curtis
Senior Vice President and
Chief Financial Officer
W. Cardon Gerner
Senior Vice President and
Chief Accounting Officer
David K. Lawrence
Senior Vice President,
General Counsel and Secretary
Martin J. McDonald
Senior Vice President,
Remotely Operated Vehicles
Eric A. Silva
Senior Vice President,
Operations Support
Stephen P. Barrett
Senior Vice President,
Business Development
William J. Boyle
Senior Vice President,
Asset Integrity
Marvin J. Migura
Senior Vice President
Robert P. Moschetta
Senior Vice President,
Health Safety Environment/
Training/Quality
Oceaneering International, Inc.
General Information
Stock Symbol: OII
Stock traded on NYSE
CUSIP Number: 675232102
Please direct communications
concerning stock transfer
requirements or lost
certificates to our transfer agent.
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
Annual Shareholders’ Meeting
Date: May 4, 2018
Time: 8:30 a.m. CDT
Location:
Oceaneering International, Inc.
11911 FM 529
Houston, TX 77041
Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233
Overnight Deliveries:
462 South 4th Street, Suite 1600
Louisville, KY 40202
Independent Registered
Public Accounting Firm
Ernst & Young LLP
5 Houston Center
1401 McKinney Street
Houston, TX 77010-4034
Counsel
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, TX 77002-4995
Forward-Looking Statements
In accordance with the safe-harbor provisions of
the Private Securities Litigation Reform Act of 1995,
Oceaneering cautions that statements in this 2017
annual report which are forward-looking, and provide
other than historical information, involve risks,
contingencies and uncertainties that may impact our
actual results of operations, including those we refer
to under the headings "CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS"
and "Risk Factors" in Part I of the accompanying
Annual Report on Form 10-K. These forward-
looking statements more specifically include:
(1) statements in the 2017 Letter to Shareholders
about Oceaneering’s: expectations regarding
2018 being another challenging year; outlook for
the full year of 2018; confidence in its liquidity
providing financial flexibility; intention to continue
investing in current and adjacent market niches;
expected benefits from the Ecosse acquisition and
expectation that the acquisition will be accretive to
2018 earnings and cash flow; targeted growth areas;
intentions to remain focused on looking for growth
opportunities, maintaining or growing its market
share, and becoming more efficient and controlling
its costs, without sacrificing its superior safety
performance; expectations beyond 2018, including
with respect to an increase in offshore oil and gas
activity and expenditures and improving demand
for Oceaneering’s energy-related services and
products; and (2) other statements identified in Part
II, Item 7– "Management’s Discussion and Analysis
of Financial Condition and Results of Operations”
of the accompanying 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.
2017 Annual Report
Oceaneering International, Inc.
11911 FM 529 I Houston, Texas I 77041-3000
713.329.4500 | oceaneering.com