10-Q 1 oii-20220331.htm 10-Q OCEANEERING INTERNATIONAL, INC. 1Q 2022 oii-20220331
OCEANEERING INTERNATIONAL INC0000073756December 31March 31, 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2022
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to       
Commission File Number: 1-10945
____________________________________________
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
oii-20220331_g1.jpg
Delaware
95-2628227
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
11911 FM 529
Houston,
Texas
77041
(Address of principal executive offices)(Zip Code)
(713329-4500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed from last report)
____________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.25 per share
OII
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   þ Yes   ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    þ  Yes   ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þAccelerated filer¨
Non-accelerated filer¨Smaller reporting company¨
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   þ No
Number of shares of Common Stock outstanding as of April 22, 2022: 100,253,589 



Oceaneering International, Inc.
Form 10-Q
Table of Contents
 

1

PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
Mar 31, 2022Dec 31, 2021
(in thousands, except share data)
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents$438,019 $538,114 
Accounts receivable, net303,436 262,960 
Contract assets, net171,951 164,847 
Inventory, net162,261 153,682 
Other current assets67,054 68,400 
Total Current Assets1,142,721 1,188,003 
Property and equipment, at cost2,476,639 2,452,421 
Less accumulated depreciation1,996,380 1,962,825 
Net property and equipment480,259 489,596 
Other Assets:
Goodwill34,940 34,908 
Other noncurrent assets101,986 104,255 
Right-of-use operating lease assets142,091 146,097 
Total other assets279,017 285,260 
Total Assets$1,901,997 $1,962,859 
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable$108,015 $122,327 
Accrued liabilities272,651 290,659 
Contract liabilities84,769 88,175 
Total current liabilities465,435 501,161 
Long-term debt701,808 702,067 
Long-term operating lease liabilities153,113 158,503 
Other long-term liabilities79,586 90,104 
Commitments and contingencies
Equity:
Common stock, par value $0.25 per share; 360,000,000 shares authorized; 110,834,088 shares issued
27,709 27,709 
Additional paid-in capital148,060 173,608 
Treasury stock; 10,580,499 and 11,033,098 shares, at cost
(605,893)(631,811)
Retained earnings1,282,703 1,301,913 
Accumulated other comprehensive loss(356,587)(366,458)
Oceaneering shareholders' equity495,992 504,961 
       Noncontrolling interest6,063 6,063 
               Total equity502,055 511,024 
Total Liabilities and Equity$1,901,997 $1,962,859 

The accompanying Notes are an integral part of these Consolidated Financial Statements.
2

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Three Months Ended March 31,
(in thousands, except per share data)
20222021
Revenue$446,159 $437,553 
Cost of services and products400,679 380,896 
Gross margin45,480 56,657 
Selling, general and administrative expense46,519 42,874 
Income (loss) from operations(1,039)13,783 
Interest income796 519 
Interest expense, net of amounts capitalized(9,443)(10,407)
Equity in income (losses) of unconsolidated affiliates294 534 
Other income (expense), net444 (1,453)
Income (loss) before income taxes(8,948)2,976 
Provision (benefit) for income taxes10,262 12,341 
Net Income (Loss)$(19,210)$(9,365)
Weighted-average shares outstanding
    Basic99,963 99,461 
    Diluted99,963 99,461 
Earnings (loss) per share
    Basic$(0.19)$(0.09)
    Diluted$(0.19)$(0.09)

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

3


OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
Three Months Ended March 31,
(in thousands)20222021
Net income (loss)$(19,210)$(9,365)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments9,871 (2,856)
 
Change in unrealized gains for available-for-sale debt securities (1)
 1,054 
Total other comprehensive income (loss)9,871 (1,802)
Comprehensive income (loss)$(9,339)$(11,167)
(1)
There is no income tax expense or benefit associated with the three months ended March 31, 2022 and 2021 due to an offsetting valuation allowance.

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

4

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 Three Months Ended March 31,
(in thousands)20222021
Cash Flows from Operating Activities:
Net income (loss)$(19,210)$(9,365)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization32,019 36,471 
Deferred income tax provision (benefit)(168)(1,136)
Net loss (gain) on sales of property and equipment(36)152 
Noncash compensation2,572 3,161 
Noncash impact of lease accounting(1,776)(2,542)
Excluding the effects of acquisitions, increase (decrease) in cash from:
Accounts receivable and contract assets(47,580)(11,616)
Inventory(8,578)10,628 
Other operating assets2,948 (1,672)
Currency translation effect on working capital, excluding cash5,359 (670)
Current liabilities(35,726)(20,373)
Other operating liabilities(10,325)(4,761)
Total adjustments to net income (loss)(61,291)7,642 
Net Cash Provided by (Used in) Operating Activities(80,501)(1,723)
Cash Flows from Investing Activities:
Purchases of property and equipment(19,319)(10,699)
Proceeds from redemption of investments in Angolan bonds 2,361 
Distributions of capital from unconsolidated affiliates 1,195 
Proceeds from sale of property and equipment 36 2,136 
Net Cash Provided by (Used in) Investing Activities(19,283)(5,007)
Cash Flows from Financing Activities:
Other financing activities(2,202)(1,806)
Net Cash Provided by (Used in) Financing Activities(2,202)(1,806)
Effect of exchange rates on cash1,891 (737)
Net Increase (Decrease) in Cash and Cash Equivalents(100,095)(9,273)
Cash and Cash Equivalents—Beginning of Period538,114 452,016 
Cash and Cash Equivalents—End of Period$438,019 $442,743 

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


5

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

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

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF MAJOR ACCOUNTING POLICIES

Basis of Presentation. Oceaneering International, Inc. (“Oceaneering,” “we” or “us”) has prepared these unaudited consolidated financial statements pursuant to instructions for quarterly reports on Form 10-Q, which we are required to file with the United States Securities and Exchange Commission (the “SEC”). These financial statements do not include all information and footnotes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). These financial statements reflect all adjustments that we believe are necessary to present fairly our financial position as of March 31, 2022 and our results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, all such adjustments are of a normal and recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2021. The results for interim periods are not necessarily indicative of annual results.
Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering and our 50% or more owned and controlled subsidiaries. We also consolidate entities that are determined to be variable interest entities if we determine that we are the primary beneficiary; otherwise, we account for those entities using the equity method of accounting. We use the equity method to account for our investments in unconsolidated affiliated companies of which we own an equity interest of between 20% and 50% and as to which we have significant influence, but not control, over operations. We use the cost method for all other long-term investments. Investments in entities that we do not consolidate are reflected on our balance sheet in other noncurrent assets. We eliminate intercompany transactions and accounts in consolidation.
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires that our management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or less from the date of investment.
Allowances for Credit Loss—Financial Assets Measured at Amortized Costs. We identify allowances for credit loss based on future expected losses when accounts receivable, contract assets or held-to-maturity loan receivables are created rather than when losses are probable.
We use the loss-rate method in developing the allowance for credit losses, which involves identifying pools of assets with similar risk characteristics, reviewing historical losses within the last five years and consideration of reasonable supportable forecasts of economic indicators. Changes in estimates, developing trends and other new information could have material effects on future evaluations.
We monitor the credit quality of our accounts receivable and other financing receivable amounts by frequent customer interaction, following economic and industry trends and reviewing specific customer data. Our other receivable amounts include contract assets and held-to-maturity loans receivable, which we consider to have a low risk of loss.
We are monitoring the impacts from the coronavirus (“COVID-19”) outbreak, the Russia-Ukraine conflict and volatility in the oil and natural gas markets on our customers and various counterparties. We have considered the current and expected economic and market conditions, as a result of COVID-19 and the Russia-Ukraine conflict, in calculating credit loss expense for the three-month periods ended March 31, 2022 and 2021 and determined the impacts are de minimis.
As of March 31, 2022, our allowance for credit losses was $0.7 million for accounts receivable and $0.3 million for other receivables.
Financial assets are written off when deemed uncollectible and there is no reasonable expectation of recovering the contractual cash flows. During the three-month period ended March 31, 2022, we did not write off any financial assets.
7

We have elected to apply the practical expedient available under Accounting Standards Codification (“ASC”) Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as amended (“ASC 326”), to exclude the accrued interest receivable balance that is included in our held-to-maturity loans receivable. The amount excluded as of March 31, 2022 and December 31, 2021 was $1.2 million.
Accounts receivable are considered to be past-due after the end of the contractual terms agreed to with the customer. There were no material past-due amounts that we consider uncollectible for our financial assets as of March 31, 2022. We generally do not require collateral from our customers.
Inventory. Inventory is valued at the lower of cost or net realizable value. We determine cost using the weighted-average method. We periodically review the value of items in inventory and record write-downs or write-offs of inventory based on our assessment of market conditions. Write-downs and write-offs are charged to cost of services and products. We did not record any write-downs or write-offs of inventory in the three-month periods ended March 31, 2022 and 2021.
Property and Equipment, Long-Lived Intangible Assets and Right-of-Use Operating Lease Assets. We provide for depreciation of property and equipment on the straight-line method over estimated useful lives. We charge the costs of repair and maintenance of property and equipment to operations as incurred, and we capitalize the costs of improvements that extend asset lives or functionality. Upon the disposition of property and equipment, the related cost and accumulated depreciation accounts are relieved, and any resulting gain or loss is included as an adjustment to cost of services and products.
We capitalize interest on assets where the construction period is anticipated to be more than three months. We did not capitalize interest in the three-month periods ended March 31, 2022 and 2021. We do not allocate general administrative costs to capital projects.
Long-lived intangible assets, primarily acquired in connection with business combinations, include trade names, intellectual property and customer relationships and are being amortized over their respective estimated useful lives.
Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our property and equipment, long-lived intangible assets and right-of-use operating lease assets to determine whether any events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. We did not identify indicators of impairment for property and equipment, long-lived intangible assets or right-of-use operating lease assets for the three-month periods ended March 31, 2022 and 2021.
For assets held for sale or disposal, the fair value of the asset is measured using fair market value less estimated costs to sell. Assets are classified as held for sale when we have a plan for disposal of certain assets and those assets meet the held for sale criteria.
For additional information regarding right-of-use operating lease assets, see “Leases” below.
Goodwill. Our goodwill is evaluated for impairment annually and whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
In our annual evaluation of goodwill, we perform a qualitative or quantitative impairment test. Under the qualitative approach, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we are required to perform the quantitative analysis to determine the fair value for the reporting unit. We then compare the fair value of the reporting unit with its carrying amount and recognize an impairment loss for the amount by which the carrying amount exceeds the fair value of the reporting unit. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. We also consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We did not identify indicators of impairment for goodwill for the three-month periods ended March 31, 2022 and 2021.
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Foreign Currency Translation. The functional currency for most of our foreign subsidiaries is the applicable local currency. Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect as of the balance sheet date, and the resulting translation adjustments are recognized, net of tax, in accumulated other comprehensive income (loss) as a component of shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Operations. We recorded $0.4 million and $(1.9) million of foreign currency transaction gains (losses) in the three-month periods ended March 31, 2022 and 2021, respectively. Those amounts are included as a component of other income (expense), net in our Consolidated Statement of Operations.
Revenue Recognition. All our revenue is realized through contracts with customers. We recognize our revenue according to the contract type. On a daily basis, we recognize service revenue over time for contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly. We use an input method to recognize revenue, because each day of service provided represents value to the customer. The performance obligations in these contracts are satisfied, and revenue is recognized, as the work is performed. When appropriate, we apply the practical expedient to recognize revenue for the amount invoiced when the invoice corresponds directly to the value of our performance to date.
We account for significant fixed-price contracts, mainly relating to our Manufactured Products segment, and to a lesser extent in our Offshore Projects Group (“OPG”) and Aerospace and Defense Technologies (“ADTech”) segments, by recognizing revenue over time using an input, cost-to-cost measurement percentage-of-completion method. This commonly used method allows appropriate calculation of progress on our contracts. A performance obligation is satisfied as we create a product on behalf of the customer over the life of the contract. The remainder of our revenue is recognized at the point in time when control transfers to the customer, thus satisfying the performance obligation.
We have elected to recognize the cost for freight and shipping as an expense when incurred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by us from customers, are excluded from revenue.
In our service-based business lines, we principally charge on a dayrate basis for services provided. In our product-based business lines, predominantly in our Manufactured Products segment, we recognize revenue and profit using the percentage-of-completion method and exclude uninstalled materials and significant inefficiencies from the measure of progress.
We apply judgment in the determination and allocation of transaction price to performance obligations, and the subsequent recognition of revenue, based on the facts and circumstances of each contract. We routinely review estimates related to our contracts and, when required, reflect revisions to profitability in earnings immediately. If an element of variable consideration has the potential for a significant future reversal of revenue, we will constrain that variable consideration to a level intended to remove the potential future reversal. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine it. We did not have any material adjustments to transaction prices during the three months ended March 31, 2022 and 2021. There could be significant adjustments to overall contract costs in the future, due to changes in facts and circumstances.
In general, our payment terms consist of those services billed regularly as provided and those products delivered at a point in time, which are invoiced after the performance obligation is satisfied. Our product and service contracts with milestone payments due at agreed progress points during the contract are invoiced when those milestones are reached, which may differ from the timing of revenue recognition. Our payment terms generally do not provide financing of contracts to customers, nor do we receive financing from customers as a result of these terms.
See Note 3—“Revenue” for more information on our revenue from contracts with customers.
Leases. We determine whether a contract is or contains a lease at inception, whether as a lessee or a lessor. We take into consideration the elements of an identified asset, right to control and the receipt of economic benefit in making those determinations.
As a lessor, we lease certain types of equipment along with the provision of services and utilize the expedient allowing us to combine the lease and non-lease components into a combined component that is accounted for (1) under “Leases” (“ASC 842”), when the lease component is predominant, and (2) under the accounting standard
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Revenue from Contracts with Customers” (“ASC 606”), when the service component is predominant. In general, when we have a service component, it is typically the predominant element and leads to accounting under ASC 606.
As a lessor, we lease certain types of equipment, often providing services at the same time. These leases can be priced on a dayrate or lump-sum basis for periods ranging from a few days to multi-year contracts. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our customer's discretion. These leases generally do not contain options to purchase, material restrictions or covenants that impact our accounting for leases.
As a lessee, we lease land, buildings, vessels and equipment for the operation of our business and to support some of our service line revenue streams. These generally carry lease terms that range from days for operational and support equipment to 15 years for land and buildings. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our discretion. When the exercise of those options is reasonably certain, we include them in the lease assessment. Our leases do not contain material restrictions or covenants that impact our accounting for them, nor do we provide residual value guarantees.
As a lessee, we utilize the practical expedients to not recognize leases with an initial lease term of 12 months or less on the balance sheet and to combine lease and non-lease components together and account for the combined component as a lease for all asset classes, except real estate.
Right-of-use operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement or modification date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at commencement or modification date in determining the present value of future payments. In determining the incremental borrowing rate, we considered our external credit ratings, bond yields for us and our identified peers, the risk-free rate in geographic regions where we operate, and the impact associated with providing collateral over a similar term as the lease for an amount equal to the future lease payments. Our right-of-use operating lease assets also include any lease prepayments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

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

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3.    REVENUE

Revenue by Category

The following tables presents revenue disaggregated by business segment, geographical region, and timing of transfer of goods or services.
Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021
Business Segment:
Energy Services and Products
Subsea Robotics$127,989 $119,119 
Manufactured Products82,692 86,825 
Offshore Projects Group97,397 89,234 
Integrity Management & Digital Solutions56,570 54,048 
Total Energy Services and Products364,648 349,226 
Aerospace and Defense Technologies81,511 88,327 
Total$446,159 $437,553 
Geographic Operating Areas:
Foreign:
Africa$63,409 $62,792 
Asia and Australia49,561 37,547 
Norway45,277 52,294 
United Kingdom38,757 43,180 
Brazil30,351 20,653 
Other23,048 20,435 
Total Foreign250,403 236,901 
United States195,756 200,652 
Total$446,159 $437,553 
Timing of Transfer of Goods or Services:
Revenue recognized over time$417,003 $408,173 
Revenue recognized at a point in time29,156 29,380 
Total$446,159 $437,553 

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

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

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

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

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

4.    INCOME TAXES

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

On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in the United States. In accordance with the rules and procedures under the CARES Act, we filed certain refund claims to carry back a portion of our U.S. net operating loss. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expect to receive combined refunds of approximately $33 million, of which we have received $10 million as of March 31, 2022. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of March 31, 2022.
We conduct our international operations in jurisdictions that have varying laws and regulations regarding income and other taxes, some of which are subject to interpretation. We recognize the expense or benefit for an uncertain tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the uncertain tax position is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.
We have accrued a net total of $15 million and $12 million in other long-term liabilities on our balance sheet for worldwide unrecognized tax liabilities as of March 31, 2022 and December 31, 2021, respectively. We account for any applicable interest and penalties related to uncertain tax positions as a component of our provision for income taxes in our consolidated financial statements. Changes in our management's judgment related to those liabilities would affect our effective income tax rate in the periods of change.
Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following table lists the earliest tax years open to examination by tax authorities where we have significant operations:
JurisdictionPeriods
United States2014
United Kingdom2019
Norway2017
Angola2013
Brazil2017
Australia2017

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

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

6.    DEBT
Long-term debt consisted of the following: 
(in thousands)Mar 31, 2022Dec 31, 2021
4.650% Senior Notes due 2024$400,000 $400,000 
6.000% Senior Notes due 2028300,000 300,000 
Interest rate swap settlements6,037 6,572 
Unamortized debt issuance costs(4,229)(4,505)
Long-term debt$701,808 $702,067 

In 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.

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

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

In October 2014, we entered into a credit agreement (as amended, the “Prior Credit Agreement”) with a group of banks. The Prior Credit Agreement initially provided for a $500 million five-year revolving credit facility (the “Prior Revolving Credit Facility”). The Prior Credit Agreement also provided for a $300 million term loan, which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and cash on hand.

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In February 2018, we entered into Agreement and Amendment No. 4 to the Prior Credit Agreement ("Amendment No. 4"). Amendment No. 4 amended the Prior Credit Agreement to, among other things, extend the maturity of the Prior Revolving Credit Facility to January 25, 2023. As of March 31, 2022, we had no borrowings outstanding under the Prior Revolving Credit Facility. See Note 10—“Subsequent Event” for information on the retirement of our Prior Revolving Credit Facility and entry into a new senior secured credit facility in April 2022. As of March 31, 2022, we were in compliance with all the covenants set forth in the Prior Credit Agreement.

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

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

7.    COMMITMENTS AND CONTINGENCIES

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

performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and
workers’ compensation claims, Jones Act claims, occupational hazard claims, premises liability claims and other claims.

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

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

The carrying values of cash and cash equivalents approximate their fair values due to the short-term maturity of the underlying instruments. Accounts receivable are generated from a broad group of customers, primarily from within the energy industry, which is our major source of revenue. Due to their short-term nature, carrying values of our accounts receivable and accounts payable approximate fair market values.

We estimated the aggregate fair market value of the Senior Notes to be $688 million as of March 31, 2022, based on quoted prices. Since the market for the Senior Notes is not an active market, the fair value of the Senior Notes is classified within Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than quoted prices in active
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markets for similar assets and liabilities that are observable or can be corroborated by observable market data for substantially the full terms for the assets or liabilities).

Foreign currency gains (losses) related to the Angolan kwanza of $0.9 million and $(1.4) million in the three-month periods ended March 31, 2022 and 2021, respectively, were primarily related to increasing (declining) exchange rates for the Angolan kwanza relative to the U.S. dollar. We recorded foreign currency transaction gains (losses) related to the Angolan kwanza as a component of other income (expense), net in our Consolidated Statements of Operations.
Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola. As of March 31, 2022 and December 31, 2021, we had the equivalent of approximately $1.7 million and $1.0 million, respectively, of kwanza cash balances in Angola reflected on our Consolidated Balance Sheets.
To mitigate our currency exposure risk in Angola, we have used kwanza to purchase equivalent Angolan central bank (Banco Nacional de Angola) bonds. The bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. As of March 31, 2022 and December 31, 2021, we had $6.2 million, respectively, of Angolan bonds on our Consolidated Balance Sheets. Because we intend to sell the bonds if we are able to repatriate the proceeds, we have classified these bonds as available-for-sale securities, and they are recorded in other current assets in our Consolidated Balance Sheets. During the three-month period ended March 31, 2021, we sold a portion of these bonds for $2.4 million and recognized a gain of $0.3 million as a component of other income (expense), net in our Consolidated Statement of Operations. We did not sell any of our Angolan bonds in the three-month period ended March 31, 2022.
We estimated the fair market value of the Angolan bonds to be $6.4 million as of March 31, 2022 and December 31, 2021, respectively, using quoted market prices. Since the market for the Angolan bonds is not an active market, the fair value of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP. As of March 31, 2022 and December 31, 2021, we have $0.2 million in unrealized gains, net of tax, related to these bonds as a component of accumulated other comprehensive loss in our Consolidated Balance Sheets.

In the three-month period ended June 30, 2021, we were notified by a customer in our Manufactured Products segment that it was suspending a contract that was substantially complete. Specific to this contract, we billed and received $18 million of accounts receivable in the first quarter of 2022. As of March 31, 2022, we had outstanding contract assets of approximately $17 million for the contract and contract liabilities of $5.8 million prepaid for storage of components. As of December 31, 2021, we had outstanding contract assets of approximately $33 million for the contract and contract liabilities of $11 million prepaid for storage of components. We are in discussions with the customer concerning the timing of remaining payments. We continue to believe that we will realize these contract assets at their book values, although we can provide no assurance as to the timing of receipt of the remaining payments.

8.    EARNINGS (LOSS) PER SHARE, SHARE-BASED COMPENSATION AND SHARE REPURCHASE PLAN
Earnings (Loss) per Share. For each period presented, the only difference between our calculated weighted-average basic and diluted number of shares outstanding is the effect of outstanding restricted stock units. In periods where we have a net loss, the effect of our outstanding restricted stock units is anti-dilutive, and therefore does not increase our diluted shares outstanding.
For each period presented, our net income (loss) allocable to both common shareholders and diluted common shareholders is the same as our net income (loss) in our consolidated statements of operations.
Share-Based Compensation. Annually, the Compensation Committee granted restricted units of our common stock to certain of our key executives and employees and restricted common stock to our nonemployee directors. The restricted stock units granted to our key executives and key employees generally vest in full on the third anniversary of the award date, conditional on continued employment. The restricted stock unit grants can vest pro rata over three years, provided the individual meets certain age and years-of-service requirements. The grants of restricted stock to our nonemployee directors were scheduled to vest in full on the first anniversary of the award date, conditional upon continued service as a director, except for the 2021 grant to one director who retired from our board of directors as of the date of our annual meeting of shareholders in May 2021, which vested on that date.
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Each grantee of shares of restricted stock is deemed to be the record owner of those shares during the restriction period, with the right to vote and receive any dividends on those shares. The restricted stock units outstanding have no voting or dividend rights.
For each of the restricted stock units granted in 2020 through March 31, 2022, at the earlier of three years after grant or at termination of employment or service, the grantee will be issued one share of our common stock for each unit vested. As of March 31, 2022 and December 31, 2021, respective totals of 2,653,723 and 2,447,259 shares of restricted stock and restricted stock units were outstanding.
We estimate that share-based compensation cost not yet recognized related to shares of restricted stock or restricted stock units, based on their grant-date fair values, was $20 million as of March 31, 2022. This expense is being recognized on a graded-vesting basis over three years for awards attributable to individuals meeting certain age and years-of-service requirements, and on a straight-line basis over the applicable vesting period of one or three years for the other awards.
Share Repurchase Plan. In December 2014, our Board of Directors approved a share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. Under the program, which has no expiration date, we had repurchased 2.0 million shares for $100 million through December 31, 2015. We have not repurchased any shares under this plan since 2015, and are not obligated to make any future repurchases. We account for the shares we hold in treasury under the cost method, at average cost.

9.    BUSINESS SEGMENT INFORMATION

We are a global technology company delivering engineered services and products and robotic solutions to the offshore energy, defense, aerospace, manufacturing and entertainment industries.

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

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

Manufactured ProductsOur Manufactured Products segment provides the following:
distribution and connection systems including production control umbilicals and field development hardware and pipeline connection and repair systems to the energy industry; and
autonomous mobile robot technology and entertainment systems to a variety of industries.

Offshore Projects GroupOur OPG segment provides the following:
subsea installation and intervention, including riserless light well intervention services, inspection, maintenance and repair (“IMR”) services, principally in the U.S. Gulf of Mexico and offshore Angola, utilizing owned and charter vessels;
installation and workover control systems and ROV workover control systems;
project management and engineering; and
drill pipe riser services and systems and wellhead load relief solutions.

Integrity Management & Digital SolutionsOur IMDS segment provides the following:
asset integrity management services;
software and analytical solutions for the bulk cargo maritime industry; and
software, digital and connectivity solutions for the energy industry.

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

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

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from
those used in our consolidated financial statements for the year ended December 31, 2021.
The table that follows presents revenue, income (loss) from operations and depreciation and amortization expense, by business segment:
 Three Months Ended
(in thousands)Mar 31, 2022Mar 31, 2021Dec 31, 2021
Revenue
Energy Services and Products
Subsea Robotics$127,989 $119,119 $134,315 
Manufactured Products82,692 86,825 102,940 
Offshore Projects Group97,397 89,234 85,356 
Integrity Management & Digital Solutions56,570 54,048 60,469 
Total Energy Services and Products364,648 349,226 383,080 
Aerospace and Defense Technologies81,511 88,327 83,629 
Total$446,159 $437,553 $466,709 
Income (Loss) from Operations
Energy Services and Products
Subsea Robotics$11,552 $14,619 $21,012 
Manufactured Products2,643 2,753 (20,228)
Offshore Projects Group666 8,813 6,754 
Integrity Management & Digital Solutions3,508 2,474 6,015 
Total Energy Services and Products18,369 28,659 13,553 
Aerospace and Defense Technologies11,844 16,839 10,562 
Unallocated Expenses(31,252)(31,715)(36,687)
Total$(1,039)$13,783 $(12,572)
Depreciation and Amortization
Energy Services and Products
Subsea Robotics$19,001 $22,952 $21,029 
Manufactured Products3,072 3,227 3,111 
Offshore Projects Group7,297 7,125 7,405 
Integrity Management & Digital Solutions1,030 1,124 1,091 
Total Energy Services and Products30,400 34,428 32,636 
Aerospace and Defense Technologies656 1,276 676 
Unallocated Expenses963 767 474 
Total$32,019 $36,471 $33,786 

We determine Income (Loss) from Operations for each business segment before interest income or expense, other income (expense) and provision for income taxes. We do not consider an allocation of these items to be practical.
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Income (Loss) from Operations
During the three-month period ended March 31, 2021 and December 31, 2021, we recorded adjustments attributable to each of our reporting segments as follows:
For the Three Months Ended March 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOPGIMDSADTechUnallocated ExpensesTotal
Adjustments for the effects of:
Other$395 $537 $149 $217 $10 $— $1,308 
Total of adjustments$395 $537 $149 $217 $10 $— $1,308 
For the Three Months Ended December 31, 2021
(in thousands)Subsea RoboticsManufactured ProductsOPGIMDSADTechUnallocated ExpensesTotal
Adjustments for the effects of:
Provision for Evergrande losses, net$— $29,549 $— $— $— $— 29,549 
Total of adjustments$ $29,549 $ $ $ $ $29,549 
There were no adjustments of a similar nature during the three-month period ended March 31, 2022.

Depreciation and Amortization

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

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

10.    SUBSEQUENT EVENT

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

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

We may borrow under the Revolving Credit Facility at either (1) a base rate, determined as the greatest of (A) the prime rate of Wells Fargo Bank, National Association, (B) the federal funds effective rate plus 12 of 1% and (C) Adjusted Term SOFR (as defined in the credit agreement governing the Revolving Credit Facility) for a one-month tenor plus 1%, in each case plus the applicable margin, which varies from 1.25% to 2.25% depending on our Consolidated Net Leverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility), or (2) Adjusted Term SOFR plus the applicable margin, which varies from 2.25% to 3.25% depending on our Consolidated Net Leverage Ratio. We will also pay a facility fee based on the amount of the underlying commitment that is being utilized, which fee varies from 0.300% to 0.375%, with the higher rate owed when we use the facility less.

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

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

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

Certain statements we make in this quarterly report on Form 10-Q are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our expectations about:
the impacts of the coronavirus (“COVID-19”) pandemic and the Russia-Ukraine conflict on the United States and the global economy, as well as on our business;
our second-quarter 2022 operating results and the contributions from our segments to those results, as well as the amount of Unallocated Expenses for the second quarter;
tax refunds under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and other tax refunds;
our cash tax payments and projected capital expenditures for 2022;
free cash flow, which we define as net cash provided by operating activities less cash paid for purchases of property and equipment, in 2022 and in future periods;
increased costs to operate our business, including the availability and market for our chartered vessels;
future demand, order intake and business activity levels;
the collectability of accounts receivable and realizability of contract assets at the amounts reflected on our most-recent balance sheet;
the backlog of our Manufactured Products segment, to the extent backlog may be an indicator of future revenue or productivity;
the adequacy of our liquidity, cash flows and capital resources;
the condition of debt markets and our possible future debt repurchases;
shares to be repurchased under our share repurchase plan;
the implementation of new accounting standards and related policies, procedures and controls;
our expectations about growth in the area of energy transition;
seasonality; and
industry conditions.

These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we have referred to under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” in Part I of our annual report on Form 10-K for the year ended December 31, 2021. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.

The following discussion should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2021.

Overview of our Results and Guidance

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

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During the first quarter of 2022, we utilized $81 million of cash in operating activities, primarily due to an increase in working capital associated with accounts receivable reflecting higher project milestones and customers payments in the fourth quarter of 2021 that were not replicated in the first quarter of 2022, along with cash utilized in the first quarter of 2022 for increased operating costs as we prepare for higher expected activity levels in the remainder of 2022 and payments for accrued employee incentive payments related to attainment of specific performance goals in prior periods. In addition, $19 million of cash was used for maintenance and growth capital expenditures. These items were the largest contributors to our $100 million cash reduction during the first quarter of 2022.
We believe market conditions continue to be supportive of a robust ramp-up in activity and pricing improvements, beginning in the second quarter of 2022 and continuing for the remainder of the year. In the second quarter of 2022, we expect significantly higher activity levels and operating results improvement in our Subsea Robotics and OPG segments, increased activity levels and operating results improvement in our Integrity Management & Digital Solutions (“IMDS”) and ADTech segments, and higher activity levels in our Manufactured Products segment. Unallocated Expenses are expected to average in the mid-$30 million range.
Results of Operations

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

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

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

We had operating income (losses) of $(1.0) million, $14 million and $(13) million in the three-month periods ended March 31, 2022, March 31, 2021 and December 31, 2021, respectively. Included in our operating income (losses) for the three months ended March 31, 2021 were charges of $1.3 million for other costs we recognized as we adapted our geographic footprint and staffing levels to the conditions of the markets we serve. Included in our operating income (losses) for the three months ended December 31, 2021 were charges of $30 million primarily due to the net loss related to the termination of a number of entertainment ride systems contracts with the financially embattled developer, China Evergrande Group and its affiliated companies (collectively, “Evergrande”). Charges included in the three months ended March 31, 2021 and December 31, 2021 are summarized as follows:

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

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

Energy Services and Products

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

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

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

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

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

For the three-month period ended March 31, 2022, days on hire were lower when compared to the immediately preceding quarter, due to typical lower seasonal activity. Fleet utilization was to 53% in the three-month period ended March 31, 2022 as compared to 55% and 53% for the three-month periods ended December 31, 2021 and March 31, 2021, respectively. We retired four of our conventional work-class ROV systems and replaced them with three upgraded conventional work-class ROV systems and one IsurusTM work-class ROV system (which is capable of operating in high-current conditions and is ideal for renewables projects and high-speed surveys) during the three months ended March 31, 2022, resulting in a total of 250 ROVs in our ROV fleet as of both March 31, 2022 and March 31, 2021.

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

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

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

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

subsea installation and mechanical and hydraulic intervention, including riserless light well intervention
(“RLWI”) services and inspection, maintenance and repair (“IMR”) services, utilizing owned and chartered vessels;
installation and workover control systems (“IWOCS”) and ROV workover control systems (“RWOCS”);
project management and engineering; and<