UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-K
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 20152018
OR
oTRANSITION 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)

oceaneeringlogo10k2018.jpg
Delaware95-2628227
(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)
Registrant's telephone number, including area code: (713) 329-4500
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered
Common Stock, $0.25 par valueNew 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. 
   þ  Yes    o  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.    o   Yes     þ   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.    þ  Yes    o  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).     þ  Yes    o  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.    þo   Yes    oþ  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
þ 
Accelerated filero
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting companyo
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).    
o Yes    þ  No
Aggregate market value of the voting stock held by nonaffiliates of the registrant computed by reference to the closing price of $46.59$25.46 of the Common Stock on the New York Stock Exchange as of June 30, 2015,29, 2018, the last business day of the registrant's most recently completed second quarter: $4.5$2.5 billion
Number of shares of Common Stock outstanding at February 12, 2016: 97,850,854.22, 2019: 98,838,122.
Documents Incorporated by Reference:
Portions of the proxy statement relating to the registrant's 20162019 annual meeting of shareholders, to be filed on or before April 29, 201630, 2019 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.

Table of Contents

Oceaneering International, Inc.
Form 10-K
Table of Contents
 
Part I
   
Item 1.  
Business
  
Cautionary Statement Concerning Forward-Looking Statements
   
Executive Officers of the Registrant
Item 1A.  
Risk Factors
Item 1B.  
Unresolved Staff Comments
Item 2.  
Properties
Item 3.  
Legal Proceedings
Item 4.  
Mine Safety Disclosures
   
   
Part II
  
Item 5.  
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.  
Selected Financial Data
Item 7.  
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.  
Quantitative and Qualitative Disclosures About Market Risk
Item 8.  
Financial Statements and Supplementary Data
Item 9.  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.  
Controls and Procedures
Item 9B.  
Other Information
   
Part III
  
Item 10.  
Directors, Executive Officers and Corporate Governance
Item 11.  
Executive Compensation
Item 12.  
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.  
Certain Relationships and Related Transactions, and Director Independence
Item 14.  
Principal Accounting Fees and Services
   
Part IV
  
Item 15.  
Exhibits, Financial Statement Schedules
 
Signatures
 
Index to Financial Statements and Schedules
   
Report of Independent Registered Public Accounting Firm
   
Consolidated Balance Sheets
   
Consolidated Statements of IncomeOperations
  
Consolidated Statements of Comprehensive Income (Loss)
   
Consolidated Statements of Cash Flows
   
Consolidated Statements of Shareholders' Equity

   
Notes to Consolidated Financial Statements
   
Selected Quarterly Financial Data (unaudited)
 
Exhibit Index


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PART I
 
Item 1.Business.
GENERAL DEVELOPMENT OF BUSINESS
Oceaneering International, Inc. is a global oilfield provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications.industry. Oceaneering also serves the offshore renewables, 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 deepwater technology. We believe we are one of the world's largest underwater services contractors. The services and products we provide to the oil and gasenergy industry include remotely operated vehicles, specialty subsea hardware, engineering and project management, subsea intervention services, including manned diving, survey and positioning services, seabed preparation and asset integrity and nondestructive testing services. Our foreign operations, principally in the North Sea, Africa, Brazil, Australia and Asia, accounted for approximately 57%50% of our revenue, or $1.8$1.0 billion, for the year ended December 31, 2015.2018.
Our business 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 ("Oilfield"Energy Services and Products") and all other services and products provided to non-energy industries ("Advanced Technologies"). Our four business segments within the OilfieldEnergy Services and Products 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.Energy Services and Products. The primary focus of our OilfieldEnergy Services and Products business over the last several years has been toward increasing our asset base and capabilities for providing services and products for deepwater 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; and
a U.S.-based international provider of survey and positioning services.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;
a majority interest in an Azerbaijani company that supports the provision of ROV and diving services in the Caspian Sea region; and
a U.K. company that builds and operates tools for seabed preparation, route clearance and trenching for the installation of submarine cables and pipelines.
ROVs. We provide ROVs, which are tethered submersible vehicles remotely operated from the surface, to customers in the oil and gasenergy 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. Should sufficient market demand and access to component parts exist,In 2018, we believe we are capable of manufacturing over 50 ROVs per year. In 2015, we manufactured and added 16six ROVs to our fleet and retired 36.ten. Our work-class ROV fleet size was 315275 at December 31, 2015, 3362018, 279 at December 31, 20142017 and 304280 at December 31, 2013.2016. We have decreased our ROV fleet size over the last four years as a result of lower market demand.
Subsea Products. We manufacture a varietyOur Subsea Products segment consists of specialty subsea oilfield products. These encompasstwo 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, and subsea work systems and installation and workover control systems, ("IWOCS"),which we design and subsea hardware.
While most of our products are sold, we also rent tooling and provide IWOCS and subsea service work systemsbuild but operate as a service, including hydrate remediation, well stimulation, dredging and decommissioning.service.

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We provide various types of subsea umbilicals through our Umbilical Solutions division.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. We

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 an umbilical plant in Brazil with limited steel tube capability, a plant in Scotland capable of producing steel tube umbilicals, and a U.S. facility with additional capacity and the capability to perform a wide variety of producing steel tube umbilicals. We continue to invest in our plants to meet the requirements of the deepwater operations of our customers.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, diving, maintenance and repair services, principally in the U.S. Gulf of Mexico and offshore Africa,Angola and India, utilizing a fleet consisting of two owned and six long-termone chartered dynamically positioned deepwater vessels with integrated high-specification work-class ROVs onboard, and four 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 coiled tubingequipment or umbilicals required to bring subsea well completions into production (tie-back to production facilities). In 2015, we expandedWith our Subsea Projects service offerings through the acquisitionacquisitions of C & C Technologies, Inc. ("C&C"), as in 2015 and Ecosse Subsea Limited ("Ecosse") in 2018, further described below, we provide survey services and route clearance and trenching services.

We previously had several deepwater vessels under long-term charter. The last of our long term charters expired in March 2018. With the current market conditions, our philosophy is to attempt to charter vessels for specific projects on a back-to-back basis with the vessel owners. This generally minimizes our contract exposure by closely matching our obligations with our revenue. Unless indicated otherwise, each of the chartered vessels discussed below.
In 2012, we charteredbelow is a deepwater multiservice subsea support vessel the Ocean Intervention III, for two years, with extension options for up to three additional years, and which we have extended to January 2017. We have also chartered an additional deepwater vessel, the Olympic Intervention IV, for an initial term of five years, which began in the third quarter of 2008, and which we have extended to July 2016. We outfitted each of these deepwater vessels with two of our high-specification work-class ROVs, and we have been utilizing these vessels to perform subsea hardware installation and inspection, maintenance and repair projects, and to conduct well intervention services in the U.S. Gulf of Mexico and offshore Angola. ROVs.

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 101to January 2017. However, in early 2016, the customer exercised its right, under the field support vessel services contract, between us and the customer for work offshore Angola, 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 are expected to bewere reimbursed by the customer. Following the release of the vessel, we intend to redeliverredelivered 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 was extended through January 2019 and subsequently renewed under a new contract through January 2022, we have been supplyingare continuing to supply project management and engineering and the chartered vessels equipped with high-specification work-class ROVs.services. We also provide ROV tooling and asset integrity services and installation and workover control system services. We have also provided other charteredas requested by the customer. Chartered vessels and a barge on an as-requested basis frombarges are provided to the customer.customer upon request.

In March 2013, we commenced a five-year bareboat charter for a Jones Act-compliant multi-servicemultiservice support vessel, thatthe Ocean Alliance, we arehave been using in the U.S. Gulf of Mexico. We have outfitted the vessel, which we have renamed the Ocean Alliance, with two of our high-specification work-class ROVs. In January 2015, we commenced a two-year multi-service vessel time charter agreementcontract with a customer for the use of the Ocean Alliancewhich expired in January 2017. We returned the Ocean Alliance to the vessel owner in the first quarter of 2018 and continue to market the vessel, now renamed Cade Candies, for spot market work in the U.S. Gulf of Mexico.Mexico on a back-to-back basis with the owner.
In December 2013, we commenced a three-year charter for the Normand Flower, a multi-servicemultiservice subsea marine support vessel. We have made modifications to the vessel including reconfiguration to accommodate two of our high-specification work-class ROVs. We anticipate we will continue to useand used the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. We have optionsIn December 2016, we declined our option to extend the charter for up to three additional years.and the vessel was released.
In November 2015, we commenced a two-year charter for the use of the Island Pride, a multi-servicemultiservice subsea marine support vessel. We have modified the vessel to enhance its service capabilities, including a reconfiguration to accommodate two of our high-specification work-class ROVs. We are usingused 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. We have optionsIn November 2017, that field services contract expired and we declined our option to extend the charter for up to two additional years.vessel charter.

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We also charter or lease dynamically positioned vessels on a short-term basis.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 expect to take delivery of that vessel in the latter part offirst quarter and place the fourthvessel into service in the second quarter of 2016.2019. We intend for the vessel to be U.S.-flaggedU.S. flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to haveThe vessel has 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 withmoonpool, and two of our high specification 4,000 meter work-class ROVs. The vessel willis also be equipped with a satellite communications system capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the vessel will be used to augment our ability to provide subsea intervention services in the ultra-deep waters of the U.S. Gulf of Mexico. These services are required to perform inspection, maintenance and repair projects and hardware installations.

In 2015, we acquired C&C, now known as Oceaneering Survey Services, for approximately $224 million. C&COur survey business is a global provider of ocean-bottom mapping services, in deepwater utilizing customized autonomous underwater vehicles, and provides marine construction surveys for both surface and subsea assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels. C&CIt 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 March 2018, we acquired Ecosse for approximately $68 million. Ecosse builds and operates seabed preparation, route clearance and trenching tools for submarine cables and pipelines on an integrated basis that includes vessels, ROVs and survey services.  Enabling technologies acquired in the transaction include Ecosse's modular seabed system, capable of completing the entire trenching work scope (route preparation, boulder clearance, trenching and backfill), and its newly developed trenching system. These systems primarily serve the shallow water offshore renewables market.
Asset Integrity. 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.
In December 2011, we purchased a Norwegian-based provider of inspection, maintenance, subsea engineering and field operations services, principally to the oil and gas industry.
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 providessegment consists of two business units: (1) government; and (2) commercial. Government services and products include engineering services and related manufacturing in defense and space exploration activities, principally to the U.S. Department of Defense, NASAGovernment agencies and itstheir prime contractors,contractors. Our commercial business unit offers a turnkey solution that includes program management, engineering design, fabrication/assembly and installation to the commercial theme park industry.
FINANCIAL INFORMATION ABOUT SEGMENTS
For financial information about our business segments, please see the tables in Note 7industry and mobile robotics solutions including automated guided vehicle technology to a variety of the Notes to Consolidated Financial Statements in this report, which present revenue, income from operations, depreciation and amortization expense capital expenditures for 2015, 2014 and 2013, and identifiable assets, property and equipment and goodwill by business segment as of December 31, 2015 and 2014.industries.
DESCRIPTION OF BUSINESS
OilfieldEnergy Services and Products
Our OilfieldEnergy Services and Products 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 gasenergy 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-

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classWork-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, 2015,2018, we owned 315275 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 55%62% market share.share at the end of 2018.
ROV revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2015$807,723
 27%
20141,069,022
 29%
2013981,728
 30%
ROV revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2018$394,801
 21%
2017393,655
 21%
2016522,121
 23%

Subsea Products. We construct a variety of specialty subsea hardware to ISO 9001 quality requirements.and provide related services. These products include:

various types of subsea umbilicals utilizing steel tubes and thermoplastic hoses, and steel tubes, along with termination assemblies;
tooling, ROV tooling and subsea work packages;
production control equipment;
installation and workover control systems;systems ("IWOCS");
riserless light well intervention services
clamp connectors;
pipeline connector and repair systems;
subsea and topside control valves; and
subsea chemical injection valves.
We market these products under the trade names Oceaneering Deepwater Technical Solutions (DTS), Oceaneering Intervention Engineering, Oceaneering IWOCS, Oceaneering Umbilical Solutions, Oceaneering Grayloc, Oceaneering Pipeline Connection & Repair Systems (PCRS), Oceaneering Rotator, Oceaneering NCA, Oceaneering Mechanica and Oceaneering GTO..
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 linkinterface between an ROV and permanently installed equipment located on the sea floor. SubseaRiserless light well intervention services, IWOCS and subsea work packages facilitate well and associated equipment intervention for the purposes of flow remediation and well stimulation.

Subsea Products revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2015$959,714
 31%
20141,238,746
 34%
20131,027,792
 31%
Subsea Products revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2018$515,000
 27%
2017625,513
 33%
2016692,030
 30%
Subsea Projects. We perform subsea oilfield hardware installation and inspection, maintenance and repair services. We provide seabed preparation, route clearance and trenching services for submarine cables in renewable energy markets. We service deepwateroffshore 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 two owned and six chartered multiservice deepwater 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 provide ocean-bottom mapping services in deepwater, utilizing customized autonomous underwater vehicles and marine construction surveys for both surface and subsea assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels.

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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 four 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 survey services and route clearance and trenching services.
Subsea Projects revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2015$604,484
 20%
2014588,572
 16%
2013509,440
 15%
Subsea Projects revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2018$329,163
 17%
2017291,993
 15%
2016472,979
 21%
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 includesinclude 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: 
Amount Percent of Total Revenue
 (in thousands)  
2015$372,957
 12%
2014500,237
 14%
2013481,919
 15%
Asset Integrity revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2018$253,886
 13%
2017236,778
 12%
2016275,397
 12%
Advanced Technologies
Our Advanced Technologies segment provides engineering services and products principallymanufacturing to the U.S. Department of Defense, NASA and its contractors,major government contractors. We also provide integrated mobile robotic system solutions to domestic and the commercialinternational theme park industry.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 oursegment's largest customer in this segment,is the U.S. Navy, for whom we perform work primarily

engineering services, prototype design building services and repair and maintenance services on submarines and surface ships and submarines.ships.
We provide support for the U.S. Navy, including underwater operations, data analysis, development of ocean-related computer software, and 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, offshore structuresships. We support space exploration and moorings. We providetechnology 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.
For commercial markets, we provide engineering services and we manufacture patented motion-based “dark ride” vehicle systems and innovative customized robotic and mechanical solutions to the commercial theme park industry. For automotive manufacturers and retail warehousing markets, we develop, implement and maintain innovative, turnkey logistic solutions based on automated guided vehicle technology. Our commercial-related products and services are sold into both domestic and international markets.
Advanced Technologies revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2015$317,876
 10%
2014263,047
 7%
2013286,140
 9%
Advanced Technologies revenue: 
Amount Percent of Total Revenue
 (in thousands)  
2018$416,632
 22%
2017373,568
 19%
2016309,076
 14%

MARKETING
Oilfield.Energy Services and Products. 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.

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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 OilfieldEnergy Services and Products 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. Some dayrate contracts provide for revision of the specified dayrates in the event of material changes in the cost of labor or specified items. Sales contractsContracts for our productsproduct sales are generally for a fixed price.
Advanced Technologies. We market our marineengineered products and services primarily to U.S. Government agencies and related engineering services to government agencies, majortheir prime contractors in defense contractors, NASA and NASA contractors,space exploration activities, and to domestic and international theme park operators, automotive manufacturers and other commercial customers outside the energy sector.retail warehousing.
Major Customers. Our top five customers in 2015, 20142018, 2017 and 20132016 accounted for 38%39%, 40% and 40%43%, respectively, of our consolidated revenue. AllIn 2018, 2017 and 2016, four of our top five customers were oil and gas exploration and production companies served by our OilfieldEnergy Services and Products business segments.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. During each of 2015, 2014 and 2013,2018, revenue from one customer, Royal Dutch Shell, accounted for 10% of our total consolidated annual revenue and in

each of 2017 and 2016, revenue from another customer, BP plc and subsidiaries, accounted for 12%and 18%, respectively, of our total consolidated annual revenue.
WhileAlthough 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. WhileCurrently, we are experiencing limited steel tube availability, due to several large project requirements, coupled with suppliers having reduced capacity during the industry downturn. We believe we have experienced some level of difficultysecured sufficient steel tubes to satisfy existing backlog and anticipated orders to be produced 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 we2019. We believe the situation is unlikelytemporary and will resolve itself as the industry returns to recur in the near future. Additionally, the availability of certain grades of aramid fibers, which we use in the manufacture of our thermoplastic umbilicals, has been limited from time to time due to demand for military use. Presently, we are not experiencing such a shortage, and we do not anticipate a shortage in the foreseeable future.more normal run rate.
COMPETITION
Our businesses operate in highly competitive industry segments.
OilfieldEnergy Services and Products
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 exploration and development market.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

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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 gasenergy related operations. At December 31, 2015,2018, we owned 315275 work-class ROVs, and we estimate that this represented approximately 31%25% 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 low 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 low oil pricemarket environment.
Subsea Products. There are many competitors offering specialized products.products and services. We are one of several companies that compete on a worldwide basis for the provision of thermoplastic and steel tube subseaand thermoplastic 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 from two owned and six charteredthe North Sea, 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. Our survey and positioning services, along with our seabed preparation, route clearance and trenching services, operate in a

similar competitive environment. 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.
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 generally has generally not been seasonal.

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The amounts of backlog orders we believed to be firm as of December 31, 20152018 and 20142017 were as follows (in millions):
 
As of December 31, 2015 As of December 31, 2014As of December 31, 2018 As of December 31, 2017
Total 1 + yr* Total 1 + yr*Total 1+ yr* Total 1+ yr*
Oilfield       
Energy Services and Products       
ROVs$890
 $459
 $1,415
 $738
$497
 $219
 $432
 $198
Subsea Products652
 189
 690
 105
332
 96
 276
 50
Subsea Projects376
 46
 362
 33
76
 7
 153
 38
Asset Integrity427
 211
 533
 346
248
52
87
 301
 111
Total Oilfield2,345
 905
 3,000
 1,222
Total Energy Services and Products1,153
 409
 1,162
 397
Advanced Technologies170
 39
 167
 8
312
 51
 218
 47
Total$2,515
 $944
 $3,167
 $1,230
$1,465
 $460
 $1,380
 $444
     

 *    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 a number ofnumerous U.S. and foreign patents and have numerous 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.

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:

operating from and around offshore drilling, production and marine facilities;
national preference for local equipment and personnel;
marine vessel safety;
protection of the environment;
workplace health and safety;
taxation of earnings;data privacy;
taxation;
license requirements for exportation of our equipment and technology; and
currency conversion and repatriation.
In addition, our OilfieldEnergy Services and Products business primarily depends on the demand for our productsservices and servicesproducts 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

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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.

Our quality management systems are registered as being in conformance with ISO 9001:20002015 and cover:

all our OilfieldEnergy Services and Products services and products and services 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 Indonesia;Asia;
our Asset Integrity operations in the Western Hemisphere, the Middle East, Australia, the United States and Abu Dhabi;Indonesia;
our Subsea Projects operations, except for shallow water diving;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 20002015 edition emphasizes customer satisfaction, risk assessment and continual improvement.
EMPLOYEES
As of December 31, 2015,2018, we had approximately 11,0008,600 employees. Our workforce varies seasonally and peaks during the second and third quarters. We consider our relations with our employees to be satisfactory.

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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 2015, 2014 and 2013 and long-lived assets as of December 31, 2015 and 2014 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 beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:


factors affecting the level of activity in the energy industry, including worldwide demand for and prices of oil and gas;
changes in, or our ability to comply with, government regulations, including those relating tonatural gas, oil and natural gas production growth and the environment;
the continued availabilitysupply and demand 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;offshore drilling rigs;
decisions about offshore developments to be made by oil and gas exploration, development and production companies;
decisions about offshore developments to be made by offshore renewables companies;
the use of subsea completions and our ability to capture associated market share;
general economic and business conditions and industry trends;
the strength of the industry segments in which we are involved;
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 as a result of the availability, terms and deployment of capital;
the consequences of significant changes in currency exchange rates;
the volatility and uncertainties of credit markets;
changes in tax laws, regulations and interpretation by taxing authorities;

changes in, or our ability to comply with, other laws and governmental regulations, including those relating to the environment;
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Tablethe continued availability of Contentsqualified personnel;

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;
the highly competitive nature of our businesses;
adverse outcomes from legal or regulatory proceedings;
the risks associated with integrating businesses we acquire;
the risks associated with the use of complex information technology systems, including cybersecurity risks and the risks associated with failures to protect data privacy in accordance with applicable legal requirements and contractual provisions binding upon us;
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.

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.


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EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers. The following information relates to our executive officers as of February 17, 2016:22, 2019:
 
NAME  AGE POSITION 
OFFICER
SINCE
 
EMPLOYEE
SINCE
 AGE POSITION EXECUTIVE
OFFICER
SINCE		 EMPLOYEE
SINCE
M. Kevin McEvoy 65
 Chief Executive Officer and Director 1990 1979
Roderick A. Larson 49
 President 2012 2012 52 President and Chief Executive Officer and Director 2012 2012
Clyde W. Hewlett 61
 Chief Operating Officer 2004 1988 64 Chief Operating Officer 2011 1988
Marvin J. Migura 65
 Senior Vice President 1995 1995
Alan R. Curtis 50
 Senior Vice President and Chief Financial Officer 2014 1995 53 Senior Vice President and Chief Financial Officer 2015 1995
David K. Lawrence 59 Senior Vice President, General Counsel and Secretary 2012 2005
Stephen P. Barrett 61 Senior Vice President, Business Development 2015 2015
W. Cardon Gerner 61
 Senior Vice President and Chief Accounting Officer 2006 2006 64 Senior Vice President and Chief Accounting Officer 2006 2006
David K. Lawrence 56
 Senior Vice President, General Counsel and Secretary 2012 2005
William J. Boyle 58 Senior Vice President, Asset Integrity 2016 2016
Philip G. Beierl 60 Senior Vice President, Advanced Technologies 2018 2005
Martin J. McDonald 52
 Senior Vice President, Remotely Operated Vehicles 2016 1989 55 Senior Vice President, Remotely Operated Vehicles 2015 1989
Stephen P. Barrett 58
 Senior Vice President, Subsea Products 2015 2015
Kevin F. Kerins 61
 Senior Vice President, Underwater Vehicle Technologies 2006 1978
Knut Eriksen 65
 Senior Vice President, Business Development 2010 2010
Eric A. Silva 59 Senior Vice President, Operations Support 2017 2014
 
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.
M. Kevin McEvoy, Chief Executive Officer, joined Oceaneering in 1984 when we acquired Solus Ocean Systems, Inc. Since 1984, he has held various senior management positions in each of our operating groups. He was appointed a Vice President in 1990, a Senior Vice President in 1998, Executive Vice President in 2006 and to the additional office of Chief Operating Officer in February 2010, and became President and Chief Executive Officer and a director of Oceaneering in May 2011.
Roderick A. Larson joined Oceaneering in May 2012 as Senior Vice President and Chief Operating Officer, and became President in February 2015.2015 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. 
Marvin J. Migura, Senior Vice President, joined Oceaneering in 1995 as Senior Vice President and Chief Financial Officer and was appointed Executive Vice President in May 2011. Effective December 31, 2015, he relinquished his position as Executive Vice President and will continue to serve as a Senior Vice President, reporting to Chief Executive Officer M. Kevin McEvoy, and intends to remain a part of the executive management team at least through the end of 2016. From 1975 to 1994, he held various financial positions with Zapata Corporation, then a diversified energy services company, most recently as Senior Vice President and Chief Financial Officer from 1987 to 1994.


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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.

David K. Lawrence, Senior Vice President, General Counsel and Secretary, joined Oceaneering in 2005 as Assistant General Counsel. He iswas 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.

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 a Certified Public Accountantvariety of engineering, sales and Charteredmarketing, and general management roles, most recently as Global Management Accountant.Subsea Services Director from 2013 to 2015.
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.

David K. Lawrence,William J. Boyle, Senior Vice President, General Counsel and Secretary,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.

Philip G. Beierl, Senior Vice President, Advanced Technologies joined Oceaneering in 2005. Before joining Oceaneering in 2005, he served as Assistanta U.S. Navy diving and salvage officer for over 25 years. He served and held leadership positions in the Oceaneering Technologies unit, most recently as its Vice President and General Counsel.Manager from August 2014. He was appointed Associate General Counsel effective January 2011,as Vice President, General Counsel and SecretaryAdvanced Technologies in January 20122018 and then to his current position in February 2014. He has over 20 years experience as in-house counsel in the oilfield products and services industry and manufacturing.May 2018.

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.

Stephen P. Barrett,Eric A. Silva, Senior Vice President, Subsea Products,Operations Support joined Oceaneering in July 2015,February 2014 as Chief Information Officer and is responsible for Oceaneering's manufactured products and integrated solutions businesses.  Prior to joining Oceaneering, he served at FMC Technologies beginning in 1982, progressing through 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.
Kevin F. Kerins, Senior Vice President, Underwater Vehicle Technologies, joined Oceaneering in 1978. Since 1978, he has held a variety of positions of responsibility in ROV operations, marketing and administration in various geographic locations.President. He was appointed Vice President, Eastern Region ROVs in 2003, Vice President and General Manager, ROVs in 2006, Senior Vice President, ROVs in 2009 and to his current position effective January 2016.
Knut Eriksen joined Oceaneering in April 2010 as Senior Vice President, Subsea Products and was appointed to his current position in January 2014. He has over 30 years experienceAugust 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 oilfield products and services industry, including serving as SeniorChief Information Officer at El Paso Corporation from 2010 to May 2012. Prior to such time, he was Vice President Global Executionof Information Technology of LyondellBasell Industries N.V. (formerly LyondellBasell Industries AF S.C.A.) from 2006December 2007 to 2009 with NATCO Group Inc., which2010, and was acquired by Cameron International Corporation. The majority of his business experience is in deepwater engineering and offshore projects, and he previously held positions such asVice President of Engineering for Aker Maritime and Senior Vice President and headInformation Technology of Aker Kvaerner's Gulf of Mexico Deepwater Business Unit, both of which are now part of Aker Solutions ASA.Lyondell Chemical Company from 2002 to 2007.  



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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 beginning of the currently ongoing, substantialgeneral decline in the price of oil from mid 2014, many oil and gas companies made significant reductions in their capital expenditures in 2015 and have announced further reductions in their capitaloperating expenditures, budgets for 2016, which are adversely impacting demand for the productsservices and servicesproducts provided by our OilfieldEnergy Services and Products 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 OilfieldEnergy Services and Products 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;energy; 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. In addition, theThe U.S. government is requiringrequires 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.


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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 57%50% of our consolidated revenue in 2015.2018. 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 particularly Nigeria, 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 2015,2018, we generated approximately 22%13% from our operations in Africa.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 revenuesrevenue and earnings.
There can be no assurance that the revenuesrevenue 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 low oil pricemarket environment.

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Reductions in our backlog due to cancellation by a customer or for other reasons would adversely affect, potentially to a material extent, the revenuesrevenue 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, revenuesrevenue 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 revenuesrevenue as reflected in our backlog. In early 2016, a customer (a unit of BP plc) exercised its right, under the field support services contract between us and the customer for work offshore Angola, 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 are expected to be reimbursed by the customer. Following the release of the vessel, we intend to redeliver it to the vessel owner. If we experience significant additional 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 primarilyprincipally 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 revenuesrevenue 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

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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

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 productservice and serviceproduct 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 productservice and serviceproduct 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 revenuesrevenue from new productservice and serviceproduct investments for a number of years, if at all. Moreover, new productsservices and servicesproducts may not be profitable, and, even if they are profitable, our operating margins from new productsservices and servicesproducts may not be as high as the margins we have experienced historically.

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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.revenue.
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

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 productsservices and services.products. This factor is significant to our segments' operations, particularly in the segments within our OilfieldEnergy Services and Products 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.
OurWe 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.
In some instances, we have augmented our technology base by licensing the proprietary intellectual property of third parties. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms.
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,

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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.
Our operations (both onshore and offshore) are highly dependent on information technology systems.systems, including systems that collect, organize, store or use personal data. Threats to our information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. In addition, breaches to our systems or third-party systems utilized by us 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 employee 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.
In addition, the regulatory environment surrounding data privacy and protection is evolving and can be subject to significant change. New laws and regulations relating to data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation and recent legislation and regulations adopted in various U.S. jurisdictions, pose complex compliance challenges and may result in increased costs, and any failure to comply with those laws and regulations (or contractual provisions requiring similar compliance), including as a result of security and privacy breaches, could result in negative publicity and significant penalties or other liabilities. Additionally, if we acquire an entity that has violated or is not in compliance with applicable data privacy and protection laws or regulations (or contractual provisions), we may experience similar adverse consequences.
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.

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Regulations related to “conflict minerals” could adversely impact our business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as conflict minerals, originating from the Democratic Republic of Congo and adjoining countries (collectively, the “Covered Countries”). The term “conflict minerals” encompasses tantalum, tin, tungsten (and their ores) and gold. These minerals can be found in a vast array of products, including ROVs, umbilicals and other products we manufacture.

In August 2012, pursuant to the Dodd-Frank Act, the SEC adopted annual disclosure and reporting requirements applicable to any company that files periodic public reports with the SEC, if any conflict minerals are necessary to the functionality or production of a product manufactured, or contracted to be manufactured, by that company. These requirements require us to conduct reasonable country-of-origin inquiries to determine if we know or have reason to believe that any conflict minerals necessary to the functionality or production of our manufactured products may have originated from any of the Covered Countries. If we are not able to determine that such conflict minerals did not originate from any of the Covered Countries or conclude that there is no reason to believe that such conflict minerals may have originated in any of the Covered Countries, we would be required to perform supply chain due diligence on members of our supply chain to determine, among other things, whether such conflict minerals financed or benefited armed groups. Annual reporting requirements, requiring us to describe our reasonable country-of-origin inquiries, our due diligence measures, the results of those activities and our related determinations, became applicable beginning in May 2014.

Because we have a highly complex, multi-layered supply chain, we may incur significant costs to comply with these requirements. In addition, these requirements could adversely affect the sourcing, supply and pricing of materials, including components, used in our products. We can provide no assurance that our suppliers (or suppliers to our suppliers) will be able or willing to provide all requested information or to take other steps necessary to ensure that no conflict minerals financing or benefiting armed groups are included in materials or components supplied to us for our manufacturing purposes. As there may be only a limited number of suppliers offering materials or components certified as “conflict free,” we cannot be sure that we will be able to obtain necessary materials or components from those suppliers in sufficient quantities or at competitive prices. We may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals necessary to the functionality or production of our manufactured products through the procedures we may implement. Also, we may encounter challenges to satisfy customers that may require all of the components of products purchased by them to be certified as conflict free. If we are not able to meet customer certification requirements, customers may choose to disqualify us as a supplier. In addition, since the applicability of the conflict minerals requirements is limited to companies that file periodic reports with the SEC, not all of our competitors will need to comply with these requirements unless they are imposed by customers. As a result, those competitors may have cost and other advantages over us.
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.

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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 future 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 could impact our results of operations beginning in the period issued. Although we have reflected the effects of the Tax Act in our financial statements, regulatory guidance continues to be issued by the U.S. tax authorities. Any changes in the interpretation of the Tax Act as a result of such future regulatory guidance, which could materially affect our tax obligations and effective tax rate, will be recorded in the period that current or future proposed regulations become law.
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.


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.use and adequate for our current operations. 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.Energy Services and Products. In general, our OilfieldEnergy Services and Products 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

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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 – OilfieldEnergy Services and Products – 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, The 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 ofFor information regarding legal proceedings, see the then-current membersdiscussion under the caption "Litigation" in Note 7, "Commitments and Contingencies," of our board of directors (John R. Huff, T. Jay Collins, Jerold J. DesRoche, D. Michael Hughes, Harris J. Pappas, Paul B. Murphy and M. Kevin McEvoy) and one of our former directors (David S. Hooker), as defendants, and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of our board of directors relatingNotes to nonexecutive director compensation. The plaintiff is seeking relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ fees and other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief on September 5, 2014, asserting that the complaint failed to state a claim on which relief could be granted, and further that the plaintiff did not comply with procedural requirements necessary to allow him to commence litigation against certain directors on our behalf. The court has not yet ruled on that motion. In any event, our company is only a nominal defendantConsolidated Financial Statements included in this litigation, andreport, which discussion we do not expect the resolution ofincorporate by reference into this matter to have a material adverse effect on our results of operations, cash flows or financial position.Item.

Various other actions and claims are pending against us, most of which are covered by insurance. Although we cannot predict the ultimate outcome of these matters, we believe the ultimate liability, if any, that may result from these other actions and claims will not materially affect our results of operations, cash flows or financial position.

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.
Item 4.Mine Safety Disclosures.
Not applicable.

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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 2015 a certification of our Chief Executive Officer regarding compliance with the Exchange's corporate governance listing standards. We 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.Our company Web site address is www.oceaneering.com
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):
 2015 2014
  
High Low High Low
For the quarter ended:       
March 31$59.37
 $48.37
 $79.13
 $66.00
June 3059.65
 46.05
 78.13
 68.96
September 3046.86
 37.00
 79.05
 62.86
December 3148.11
 36.87
 72.19
 56.58

On February 12, 2016,22, 2019, there were 398577 holders of record of our common stock. On that date, the closing sales price, as quoted on the New York Stock Exchange, was $27.12.$15.80. In 2015,2017, we declared quarterly cash dividends of $0.27 per share in each quarter. In 2014, we declared quarterly cash dividends of $0.22$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 quarterly dividends to be paid in the fourth quarter and $0.27 per share in each of the second, third and fourth quarters. It is our intent to2017 or during 2018. Although we will continue to payreview our dividend position on a quarterly basis, we do not anticipate our Board reinstating a quarterly cash dividend; however, payment of futuredividend until we see a significant improvement in our market outlook and projected free cash dividends will be at the discretion of our board of directors in accordance with applicable law, after taking into account various factors, including our financial condition, earnings, capital requirements, legal requirements, regulatory constraints, industry practice and any other factors that our board of directors believes are relevant.flow.

In February 2010,December 2014, our Board of Directors approved a program to repurchase up to 12 million shares of our common stock. Through December 31, 2014 under that program, we repurchased the 12 million shares of our common stock for $677 million.

In December 2014, following completion of the February 2010 program, our Board of Directors approved a new share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and other relevant factors. The timing and amount of any repurchases will be determined by management based on its evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury stock for future use. The new program does not obligate us to repurchase any particular number of shares. Under the new program, we had repurchased 2.0 million shares of our common stock for $100 million through December 31, 2015. We didhave not repurchaserepurchased any shares duringunder the fourth quarter ofprogram since December 31, 2015.


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EQUITY COMPENSATION PLAN INFORMATION
The following presents equity compensation plan information as of December 31, 2015:2018:
 
Plan Category
Number
Plan Category 
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)
Equity compensation plans approved by security holders 1,443,897
 N/A 2,178,923
Equity compensation plans not approved by security holders —
 N/A —
Total 1,443,897
 N/A 2,178,923

In the table above, the 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)
Equity compensation plans approved by security holders—
N/A1,567,855
Equity compensation plans not approved by security holders—
N/A—
Total—
N/A1,567,855
We had no outstanding options, warrants orand rights atshown as of December 31, 2015.2018 are restricted stock units and shares of restricted stock granted under our 2010 incentive plan, as amended.
At December 31, 2015,2018, there were: (1) no shares of Oceaneering common stock under equity compensation plans not approved by security holders available for grant; and (2) 1,567,8552,178,923 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." in Note 9 of Notes to Consolidated Financial Statements included in this report.


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, 2013 through December 31, 2018. 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, 2013; and (2) any Oceaneering dividends are reinvested. The shareholder return shown is not necessarily indicative of future performance.
a2018stockperfgrapha01.jpg
25
  December 31,
  2013 2014 2015 2016 2017 2018
             
Oceaneering 100.00
 75.68
 49.38
 38.40
 29.30
 16.77
             
S&P 500 100.00
 113.69
 115.26
 129.05
 157.22
 150.33
             
PHLX Oil Service Sector 100.00
 76.23
 58.40
 69.49
 57.54
 31.52
             
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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, Year Ended December 31,
(in thousands, except per share amounts) 2015 2014 2013 2012 2011 2018 2017 2016 2015 2014
Revenue $3,062,754
 $3,659,624
 $3,287,019
 $2,782,604
 $2,192,663
 $1,909,482
 $1,921,507
 $2,271,603
 $3,062,754
 $3,659,624
Cost of services and products 2,457,325
 2,800,423
 2,521,483
 2,154,746
 1,683,904
 1,780,256
 1,726,897
 1,992,376
 2,457,325
 2,800,423
Gross margin 605,429
 859,201
 765,536
 627,858
 508,759
 129,226
 194,610
 279,227
 605,429
 859,201
Selling, general and administrative expense 231,619
 230,871
 220,420
 199,261
 173,928
 198,259
 183,954
 208,463
 231,619
 230,871
Income from operations $373,810
 $628,330
 $545,116
 $428,597
 $334,831
Net income $231,011
 $428,329
 $371,500
 $289,017
 $235,658
Goodwill impairment 76,449
 —
 —
 —
 —
Income (loss) from operations $(145,482) $10,656
 $70,764
 $373,810
 $628,330
Net income (loss) $(212,327) $166,398
 $24,586
 $231,011
 $428,329
Cash dividends declared per Share $1.08
 $1.03
 $0.84
 $0.69
 $0.45
 $—
 $0.45
 $0.96
 $1.08
 $1.03
Diluted earnings per share $2.34
 $4.00
 $3.42
 $2.66
 $2.16
Diluted earnings (loss) per share $(2.16) $1.68
 $0.25
 $2.34
 $4.00
Depreciation and amortization $241,235
 $229,779
 $202,228
 $176,483
 $151,227
 $293,590
 $213,519
 $250,247
 $241,235
 $229,779
Capital expenditures, including business acquisitions $423,988
 $426,671
 $393,590
 $309,858
 $526,645
 $178,038
 $104,958
 $142,513
 $423,988
 $426,671
Other Financial Data:
 As of December 31, As of December 31,
(dollars in thousands) 2015 2014 2013 2012 2011 2018 2017 2016 2015 2014
Working capital ratio 2.46
 2.52
 1.97
 1.95
 1.96
 2.52
 2.72
 2.48
 2.46
 2.52
Working capital $901,537
 $1,034,413
 $706,187
 $585,805
 $482,747
 $750,148
 $751,605
 $754,231
 $901,537
 $1,034,413
Total assets $3,429,536
 $3,504,940
 $3,128,500
 $2,768,118
 $2,400,544
 $2,824,998
 $3,023,950
 $3,130,315
 $3,429,536
 $3,504,940
Long-term debt $795,836
 $743,469
 $—
 $94,000
 $120,000
 $786,580
 $792,312
 $793,058
 $795,836
 $743,469
Shareholders' equity $1,578,734
 $1,657,471
 $2,043,440
 $1,815,460
 $1,557,962
 $1,409,235
 $1,659,164
 $1,516,643
 $1,578,734
 $1,657,471
Goodwill as a percentage of Shareholders' equity 27% 20% 17% 20% 21% 29% 27% 29% 27% 20%

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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 20162019 earnings per shareresults 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 deepwater oilfieldenergy services and products as a result of the factors we specify in "Overview" and "Results of Operations" below;
our backlog;
projections relating to floating rig demand and subsea tree installations;
the adequacy of our liquidity, cash flows and capital resources to support our operations and internally generated growth initiatives;
our projected capital expenditures for 20162019;
our plans for future operations (including planned additions to add ROVs toand retirements from our fleet;
remotely operated vehicle ("ROV") fleet, our intentions relating tointent regarding the new multiservice subsea support vessel scheduled for deliveryto be placed into service in 2016;the second quarter of 2019 and other capital expenditures);
our ability and intent to redeem Angolan bonds and repatriate cash;
our expectations regarding deferredanticipation of a discrete tax assets and our belief that our goodwill will not be impaired duringitem in the first quarter of 20162019;
the adequacy of our accruals for uninsured expected liabilities from workers' compensation, maritime employer's liability and general liability claims;
our belief that our total unrecognized tax benefits will not significantly increase or decrease in the next 12 months;
our anticipated tax rates and underlying assumptions;
our expectations regarding shares repurchased under our share repurchase plan;
our backlog;expectations regarding the implementation of new accounting standards and related policies, procedures and controls;
our expectations about our ROV fleet utilization in the future; 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 STATEMENTSCautionary Statement Concerning Forward-Looking Statements" and "Risk Factors""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 2015, 20142018, 2017 and 2013.2016.
 Year Ended December 31, Year Ended December 31,
(dollars in thousands) 2015 2014 2013 2018 2017 2016
Revenue $3,062,754
 $3,659,624
 $3,287,019
 $1,909,482
 $1,921,507
 $2,271,603
Gross Margin 605,429
 859,201
 765,536
 129,226
 194,610
 279,227
Gross Margin % 20% 23% 23% 7 % 10% 12%
Operating Income 373,810
 628,330
 545,116
Operating Income % 12% 17% 17%
Net Income 231,011
 428,329
 371,500
Operating Income (Loss) (145,482) 10,656
 70,764
Operating Income (Loss) % (8)% 1% 3%
Net Income (Loss) (212,327) 166,398
 24,586

Our business depends substantially depends on the level of spending on offshore developments by our customers in the oil and gasenergy industry. During 2015,2018, we generated approximately 90%78% of our revenue, and 98% of our operating income before Unallocated Expenses, from services and products

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we providedprovide to the oilenergy industry. The full year of 2018 unfolded as we expected, with increased levels of energy services and gas industry. In 2015,products activity being more than offset by

lower pricing for our energy services and products. Overall, our 2018 revenue decreased by 16%,approximated our 2017 revenue, with the larger percentage decreases occurringincreases in our ROV, Subsea Products andProjects, Asset Integrity and Advance Technologies segments, which all decreasedoffset by a substantial decrease in our Subsea Products segment.
In 2018, on a consolidated level, we had a net loss of $212 million, or diluted loss of $2.16 per share, compared to net income of $166 million, or diluted earnings of $1.68 per share, in 2017. The $378 million decrease from lower oilfield activity2017 net income was primarily attributable to income taxes. In 2018, we had income tax expense of $26 million, due primarily to discrete tax expense adjustments, and in general2017, we had an income tax benefit of $184 million, due primarily to a $189 million tax benefit resulting from the declining crude oil prices from mid 2014 throughDecember 2017 enactment of U.S. tax reform legislation commonly referred to as the date2017 Tax Cuts and Jobs Act (the "Tax Act"). Year-over-year, our change in tax expense (benefit) represented $210 million of this report. During 2015,the previously mentioned decrease in net income.

Additionally, we undertook initiativeshad an operating loss of $145 million in 2018 compared to alignoperating income of $11 million in 2017. For 2018, our operationsrevenue was essentially flat with current2017 as we experienced increased levels of offshore energy activities, however, competitive pressures resulted in lower pricing for our services and anticipated declining activity and pricing levels. These initiatives required us to reduceproducts in our workforce, incur unusual expenses, and make certain accounting adjustments.
The $231 million consolidated net income we earned in 2015 was 46% less than the $428 million we earned in 2014, and the $2.34 earnings per diluted share was the lowest we made since 2011. The $197 million decrease from 2014 net income was attributableenergy related segments. Due to lower profit contributions from all of our energy services and products businesses, operating segments,results decreased $156 million from 2017. The declines in profitability were most notably:notably in:

our ROVSubsea Projects segment, which had a $12896 million lessdecrease in the operating incomeresults on $26137 million less revenue;higher revenue, with a pre-tax goodwill impairment of $76 million in 2018, largely resulting from the protracted downturn in survey and vessel activity;
our Subsea Products segment, which had a $10640 million lessdecrease in operating income on $279111 million less revenue; and
our Asset IntegrityROV segment, which had a $3721 million lessdecrease in operating income on $127 million lessrelatively flat revenue.

In 2015,2018, we invested in the following capital projects:initiatives:

additions of$100 million to add capabilities in our Subsea Projects segment, including anthe acquisition of a survey and positioning companyEcosse Subsea Limited ("Ecosse") for $22468 million and $43 million related tothe continued construction of a new subsea support vessel, Ocean Evolution, scheduled for delivery in 2016;to be placed into service during the second quarter of 2019;
additions of and upgrades
$46 million to upgrade our work-class ROVs; and
expenditures
$25 million to add capabilities in our Subsea Products segment, including growth of our tooling and installation and workover control systems capabilities.segment.

In 2015, we exited the business of manufacturing subsea blow out preventer ("BOP") control systems.

We expect our 2016 diluted earnings per share2019 operating results to improve year-over-year based on increased activity across all of our segments. Apart from seasonality, we view pricing and margins in the current market to be less than the $2.34relatively stable. Operationally, we made in 2015. With our limited market visibility resulting from the uncertain energy market, we are not providing earnings per share guidance for 2016. We anticipate lower global demand for deepwater drilling, field development, and inspection, maintenance and repair activities due to the current and anticipated low oil price environment, which has led to spending cuts from our customers and pricing pressure. Compared to 2015, in 2016 we are forecasting decreases in eachall of our oilfield operating business segments, most notably:

ROVs on lower service demandwith the exception of Asset Integrity, to support drilling and vessel-based projects and reduced revenue per day;
generate improved yearly results, with the largest increase in profitability occurring in Subsea Products and Advanced Technologies, beginning in the second quarter. Our 2019 forecast is based on lower demand to support field development projects;the expectation of higher overall activity and stabilized pricing within our energy segments, modest activity improvement within our government businesses and improved performance in our commercial businesses.
Subsea Projects on lower deepwater vessel demand and diving activity offshore Angola.
We use our ROVs to provide drilling support, vessel-based inspection, maintenance and repair, subsea hardware installation, construction, and pipeline inspection services to customers in the oil and gasenergy industry. The largest percentageMost of our ROVs hashave 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.
2015 2014 20132018 2017 2016
Average number of floating rigs under contract241 280 275148 150 177
ROV days on hire (in thousands)84 98 9252 47 60
ROV utilization69% 83% 85%51% 46% 53%


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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 2015,2018 there were 309244 floating drilling rigs in operation or available for work throughout the world, with 216146 of those rigs under contract. Of the 216146 rigs under contract, 137 are contracted through37 have contract terms expiring during the endfirst six months of 2016. Recent industry forecasts of floating2019. The offshore rig demand point to an expectation that demandcount in 2016 will decline in the range of 15% to 20%, and that a further decline in demand in 2017 is probable. We anticipate that recently announced cuts in our customers' 2016 capital spending budgets will adversely affect our ROV demand.2018 was relatively stable, at approximately 148 rigs.

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 Quest Offshore Resources, Inc.Wood MacKenzie in November 2015,December 2018, there will be 287254 subsea tree installations in 2016, down2019, compared to 275 in 2018, 274 in 2017 and 280 in 2016. As many as 25 projects in water depths greater than 400 meters are expected to reach "final investment decision" in 2019, up from 308less then 10 in 2015, 3282018.

Below the operating income line, we expect:

a loss on our equity investment in 2014 and 330 in 2013. Subsea tree installations are forecast to decline to 273 in 2017. However,Medusa Spar LLC, due to depreciation more than offsetting cash earnings;
increased interest expense as a result of a full year of payments on the recent declines$300 million of Senior Notes we issued in February 2018 and higher floating interest rates, and less than a full year of capitalized interest on the Ocean Evolution; and
lower foreign currency exchange losses as a result of lower cash balances in the priceAngolan kwanza.

In 2019, our income tax payments, estimated to total $25 million, are expected to relate to taxes incurred in countries that impose tax on the basis of crude oil,in-country revenue, without regard to the profitability of such operations. At this time, we believe some scheduled future subsea tree installations maydo not foresee realizing a current-year tax benefit from our projected consolidated pre-tax loss, so any discussion of an estimated effective tax rate would not be delayed.meaningful.
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.Effective January 1, 2018, we adopted Accounting Standard Update ("ASU") 2014-09, "Revenue from Contracts with Customers," which implemented Accounting Standards Codification Topic 606 ("ASC 606"). We have used the modified retrospective method applied to those contracts that were not completed as of January 1, 2018, and have utilized the practical expedient to reflect the effect on contract modifications in the aggregate. The cumulative effect of applying ASC 606 has been recognized as an adjustment to retained earnings as of January 1, 2018. The comparative information with respect to prior periods has not been retrospectively restated and continues to be reported under the accounting standards in effect for those periods.

All of our revenue is realized through contracts with customers. We recognize our revenue according to the type of contract involved.type. On a daily basis, we recognize service revenue underover time for contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly. We use the input method to faithfully depict revenue recognition, 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. We have used the

expedient available to recognize revenue when the billing corresponds to the value realized by the customer where appropriate.

We account for significant fixed-price contracts, which we enter into mainly inrelating to our Subsea Products segment, and to a lesser extent in our Subsea Projects and Advanced Technologies segments, by recognizing revenue over time using thean input, cost-to-cost measurement percentage-of-completion method. In 2015,We use the input cost-to-cost method to faithfully depict revenue recognition. This commonly used method allows appropriate calculation of progress on our contracts. A performance obligation is satisfied as we accounted for 16%create a product on behalf of the customer over the life of the contract. The remainder of our revenue usingis recognized at the percentage-of-completion method. 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 determining whetherour service-based business lines, which principally charge on a contract should be accountedday rate basis for services provided, there is no significant impact in the pattern of revenue and profit recognition as a result of implementation of ASC 606. In our product-based business lines, there are impacts on the pattern of our revenue and profit recognition in our contracts using the percentage-of-completion method, we consider whether:as a result of the requirement to exclude uninstalled materials and significant inefficiencies from the measure of progress. This occurs in our Subsea Products segment.

We apply judgment in the customer provides specifications for the constructiondetermination and allocation 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 astransaction price to the enforceable rights regarding the goods or services to be provided, consideration to be receivedperformance obligations, and the manner and termssubsequent recognition 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 percentagethe facts and circumstances 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.each contract. We routinely review estimates related to our contracts and, where 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. In prior years, we have recorded adjustments to earnings as a result of revisions to contract estimates. Although we are continually strivingWe strive to accurately estimate our contract costs and profitability accurately. However, there could be significant adjustments to overall contract costs could be significant in the future, periods.due to changes in facts and circumstances.

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TableIn general, our payment terms consist of Contents

We recognizethose services billed regularly as provided and those products delivered at a point in time, which are invoiced after the remainderperformance 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 our revenue when persuasive evidencerecognition. Our payment terms generally do not provide financing of an arrangement exists, delivery has occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.contracts to customers, nor do we receive financing from customers as a result of these terms.
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.
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. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities and acts by governments and courts.
In our annual evaluation of goodwill, forwe perform a qualitative or quantitative impairment test. Under the qualitative approach, if we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessingamount, we are required to perform the totalityquantitative analysis to determine the fair value for the reporting unit. Thereafter, we compare the fair value of events or circumstances,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.
The fair value of all our reporting units in our 2017 quantitative analysis exceeded their respective carrying amounts by a significant margin with the exception of one reporting unit, Subsea Projects, the fair value of which only exceeded its carrying value by approximately 20%. Our Subsea Projects reporting unit had the largest balance of goodwill and newer goodwill that would be subject to impairment if business conditions deteriorated subsequent to the acquisitions generating the goodwill.
In our 2018 annual goodwill evaluation, we determineperformed a qualitative assessment for our Subsea Projects reporting unit. Due to the protracted downturn in survey and vessel activity, we determined that it iswas more likely than not that the fair value was less than the carrying value. As a result, we determined that a quantitative assessment was necessary for our Subsea Projects reporting unit.
In our 2018 quantitative analysis for the Subsea Projects reporting unit, we estimated the fair value by weighing the results from the income approach and the market approach. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates and comparable multiples of similar companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. Based on this quantitative test, we determined that the fair value for Subsea Projects was less than its carrying value and, as a result, we recorded a pre-tax goodwill impairment loss of $76 million in the Subsea Project reporting unit. The goodwill impairment was included as a component of "Income (Loss) From Operations" in our Consolidated Statement of Operations for the year ended December 31, 2018. For the remaining reporting units, qualitative assessments were performed and we concluded that it was more likely than not that the fair value of athe reporting unit exceeds itswas more than the carrying amount, performing the two-step impairment test is unnecessary. However, if we conclude otherwise, then we are required to perform the first step of the two-step impairment test. We estimate fair value of the reporting units using both an income approach, which considers a discounted cash flow model, and a market approach. Reductions in estimates of our future cash flows or adverse changes in market comparable information may result in goodwill impairments in the future.
For reporting units with goodwill, we do not believe our goodwill will be impaired during 2016.
Loss Contingencies. We self-insure for workers' compensation, maritime employer's liability and comprehensive general liability claims to levels we consider financially prudent, and beyond the self-insurance level of exposure we carry insurance, which can be by occurrence or in the aggregate. We determine the level of accruals for claims exposure by reviewing our historical experience and current year claim activity. We do not record accruals on a present-value basis. We review larger claims with insurance adjusters and establish specific reserves for known liabilities. We establish an additional reserve for incidents incurred but not reported to us for each year using our estimates and based on prior experience. We believe we have established adequate accruals for uninsured expected liabilities arising from those obligations. However, it is possible that future earnings could be affected by changes in our estimates relating to these matters.
We are involved in various claims and actions against us, most of which are covered by insurance. Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate liability, if any, that may result from those claims and actions will not materially affect our results of operations, cash flows or financial position.

unit.
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. DeterminationThe determination of taxable income in any jurisdiction requires the interpretation of the related tax laws. We are at risk that a taxing authority's final determination of our tax liabilities may differ from our interpretation. Our effective tax rate may fluctuate from year to year, as our operations are conducted in different taxing jurisdictions, the amount of pre-tax income fluctuates the amounts of foreign income we anticipate will be repatriated and our estimates regarding the realizability of items such as foreign tax credits may change. We consider $641 million of unremitted earnings of our foreign subsidiaries to be indefinitely reinvested. We believe we have the ability to indefinitely

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reinvest these foreign earnings based on our expectations of profitability for our U.S. operations over the long term, our significant U.S. liquidity, and the amount of unremitted earnings of our foreign subsidiaries not considered indefinitely reinvested, for which we have provided deferred income taxes.

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. We currently have no valuation allowances. While 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 provideProvisions for valuation allowances for our deferred tax assets. These provisions for valuation allowances would impact our income tax provision in the period in which such adjustments are identified and recorded.

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 statement of operations. 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 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 and 2018, we recorded a tax deficiency in the first quarter and, under this new standard, we recognized it as a discrete item in our statement of operations rather than in additional paid-in capital. We also expect a tax deficiency in the first quarter of 2019, which will be recognized as a discrete item in our statement of operations.

As further discussed in Note 4, "Income Taxes," of our Notes to Consolidated Financial Statements included in this report, 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 continue to finalize 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 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 have collected additional information to complete our assessment of the impacts of these changes on our operations and recorded income tax assets and liabilities as of December 31, 2018.
For a summary of our major accounting policies and a discussion of recently adopted accounting standards, please see Note 1 of our Notes to our Consolidated Financial Statements.Statements included in this report.
Liquidity and Capital Resources

We consider our liquidity and capital resources adequate to support our operations and any growth initiatives. At December 31, 2015,2018, we had working capital of $902$750 million, including cash and cash equivalents of $385$354 million. Additionally, we had $500 million available through our revolving credit facility under a credit agreement (as amended,further described below.

In November 2014, we completed the "Credit Agreement"public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "2024 Senior Notes"), which is. We pay interest on the 2024 Senior Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to expiremature on October 25, 2020.November 15, 2024.

In February 2018, we completed the public offering of $300 million aggregate principal amount of 6.000% Senior Notes due 2028 (the "2028 Senior Notes"). We pay interest on the 2028 Senior Notes on February 1 and August 1 of each year. The 2028 Senior Notes are scheduled to mature on February 1, 2028.

We may redeem some or all of the 2024 Senior Notes and the 2028 Senior Notes (collectively, the "Senior Notes") at specified redemption prices. We used the net proceeds from the 2028 Senior Notes to repay our term loan indebtedness described further below.

In October 2014, we entered into a credit agreement (as amended, the Credit Agreement"Credit Agreement") with a group of banks to replace our prior principal credit agreement.banks. The Credit Agreement providesinitially provided for a $300 million three-year term loan (the "Term Loan Facility") and a $500 million five-year revolving credit

facility (the "Revolving Credit Facility"). Subject to certain conditions, the aggregate commitments under the Revolving Credit Facility may be increased toby up to $800$300 million at any time upon agreement between us and existing or additional lenders. Borrowings under the Revolving Credit Facility and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of theThe Credit Agreement and pursuant to its terms,also provided for a $300 million term loan, which we repaid all amounts outstanding under,in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and terminated, the prior credit agreement.cash on hand.

In November 2015,February 2018, we entered into an Agreement and Amendment No. 1 to Credit Agreement (the "Amendment") 4 to the Credit Agreement. The Agreement ("Amendment No. 4"). Amendment No. 4 amended the Credit Agreement to, (1) replace the maximum leverage ratio financial covenant with a new financial covenant restricting the maximum total capitalization ratio (defined in the Amendment to be the ratio of consolidated debt to total capitalization) to 55% and (2)among other things, extend the maturitiesmaturity of the Term Loan Facility and the Revolving Credit Facility by one year each, to October 27, 2018 and OctoberJanuary 25, 2020, respectively,2023 with the extending Lenders, which represent 93.75%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, 20192021, and thereafter $468.75$450 million until OctoberJanuary 25, 2020, and (b) the outstanding term loan advances pursuant to the Term Loan Facility will be $300 million until October 27, 2017 and thereafter $281.25 million until October 27, 2018.2023.

Borrowings under the Revolving Credit AgreementFacility 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 initially based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the ratings of our senior unsecured debt by 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% for borrowings under the Revolving Credit Facility and

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from 0% to 0.500% for borrowings under the Term Loan Facility;; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for borrowings under the Term Loan Facility.. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) 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 enter into transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum adjusted total capitalization ratioCapitalization Ratio (as defined in the Credit Agreement) of 55% as noted above.. The Credit Agreement includes customary events of default and associated remedies. As of December 31, 2015,2018, we were in compliance with all the covenants set forth in the Credit Agreement.

In November 2014, we completedWe have two interest rate swaps in place on a total of $200 million of the public offering of $500 million aggregate principal amount of 4.650%2024 Senior Notes duefor the period to November 2024. See Note 7 of Notes to Consolidated Financial Statements included in this report for a description of these interest rate swaps.

We incurred $6.9 million and $4.2 million of issuance costs related to the 2024 (the "Senior Notes"). We pay interest onSenior Notes and the 2028 Senior Notes, respectively, and $2.6 million of new loan costs, including costs of the amendments prior to Amendment No. 4, related to the Credit Agreement. The costs, net of accumulated amortization, are included as a reduction of Long-term debt in our Consolidated Balance Sheet, as it pertains to the Senior Notes, on May 15 and November 15 of each year, beginning on May 15, 2015. The Senior Notesin Other non-current assets as it pertains to the Credit Agreement. We are scheduledamortizing these costs to mature on November 15, 2024. We may redeem some or all ofInterest expense through the maturity date for the Senior Notes at specified redemption prices. We usedand to January 2023 for the net proceeds from the offering for general corporate purposes, including funding the acquisition described below, other capital expenditures and repurchases of shares of our common stock.Credit Agreement.

Our maximum outstanding indebtedness during 20152018 under the Credit Agreement and the Senior Notes was $800 million, and our total interest costs, including commitment fees, were $25.4$45 million.

Our capital expenditures, including business acquisitions, for 2015, 20142018, 2017 and 20132016 were $424$178 million, $427105 million and $394$143 million, respectively. Our capital expenditures in 20152018 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$46 million in deepwater utilizing customized autonomous underwater vehicles and provides marine construction surveys for both surface and subsea assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C also provides land and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow water conventional geophysical surveys in the U.S. Gulf of Mexico. In addition to the C&C acquisition, our capital expenditures in 2015 included: $58 million for upgrading and expanding our ROV fleet; $69segment, $25 million in our Subsea Products segment principally for growth of our tooling and installation and workover control systems capabilities; and $52$100 million in our Subsea Projects segment, including $43 million related to a new subsea support vessel scheduled for delivery in 2016.segment. Our capital expenditures in 2014 included: $1892018 included the acquisition of Ecosse for approximately $68 million in our Subsea Projects segment. Ecosse builds and operates seabed preparation, route clearance and trenching tools for upgradingsubmarine cables and expandingpipelines on an integrated basis that includes vessels, ROVs and survey services.  Enabling technologies acquired in the transaction include Ecosse's modular seabed system, capable of completing the entire trenching

work scope (route preparation, boulder clearance, trenching and backfill), and its newly developed trenching system. These systems primarily serve the shallow water offshore renewables market.

Our capital expenditures in 2017 included $40 million in our ROV fleet; $113segment, $28 million in our Subsea Products segment principally for growth of our tooling and installation and workover control systems capabilities, expansion of our Houston manufacturing facilities and establishment of manufacturing capabilities in Angola; and $92$30 million in our Subsea Projects segment, including $40 million related to a new subsea support vessel scheduled for delivery in 2016.segment. Our capital expenditures in 2013 included $2262016 included: $50 million for upgrading and expandingin our ROV fleet and $103segment; $57 million in our Subsea Products segment principally to increase the capabilities ofand $26 million in our umbilical plants in the U.S. and Scotland and to expand our rental and service tooling hardware offerings.Subsea Projects segment.

For 2016,2019, we expect our capital expenditures to be in the range of $150$105 million to $200$125 million, exclusive of business acquisitions. This estimate includes $42approximately $40 million to $50 million of maintenance capital expenditures and $65 million to $75 million of growth capital expenditures, including the purchase of equipment needed to support the Brazil drill pipe riser contract awarded in 2018 and the final payments to complete the Jones Act vessel Ocean Evolution in our Subsea Projects segment. We expect to place the Ocean Evolution into service during the second quarter of 2019.
Our capital expenditures during 2018, 2017 and 2016 included $46 million, $40 million and $50 million, respectively, in our ROV segment, principally for upgrades to completeour ROV fleet and to replace certain units we retired and for facilities infrastructure to support our ROV fleet. We currently plan to add new ROVs only to meet contractual commitments. We added six, seven and six ROVs to our fleet and retired ten, eight and 41 units during 2018, 2017 and 2016, respectively, resulting in a total of 275 work-class systems in our fleet at December 31, 2018. Over the new-buildpast 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 long-term charters expired in March 2018. With the current market conditions, our philosophy is to attempt to charter vessels for specific projects on a back-to-back basis with the vessel owners. This generally minimizes our contract exposure by closely matching our obligations with our revenue. 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.

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 was extended through January 2022, we are continuing to supply project management and engineering services. We also provide ROV tooling and asset integrity services as requested by the customer. Chartered vessels and barges are provided to the customer upon request.
In March 2013, we commenced a five-year bareboat charter for a Jones Act-compliant multiservice support vessel, the Ocean EvolutionAlliance, scheduled for deliverywe have been using in the latter partU.S. Gulf of Mexico. In January 2015, we commenced a two-year contract with a customer for the use of the fourthOcean Alliance, which expired in January 2017. We returned the Ocean Alliance to the vessel owner in the first quarter of 2016. 2018 and continue to market the vessel, now renamed the Cade Candies, for spot market work in the U.S. Gulf of Mexico on a back-to-back basis with the owner.
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.
During the third quarter of 2013, we signed an agreement with a shipyard for the construction of a subsea support vessel, to be named the Ocean Evolution. We expect to take delivery in the first quarter and place the vessel into service in the second quarter of 2019. We intend for the vessel to be U.S.-flaggedU.S. flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to haveThe vessel has 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 withmoonpool, and two of our high specification 4,000 meter work-class

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ROVs. The vessel willis 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 2015, 2014 and 2013 included $58 million, $189 million and $226 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 16, 49 and 26 ROVs to our fleet and retired 36, 17 and 10 units during 2015, 2014 and 2013, respectively, and transferred one to our Advanced Technologies segment in each of 2015 and2013, resulting in a total of 315 work-class systems in the fleet at December 31, 2015. We retired a greater number of ROVs in 2015 than in 2014 or 2013 due to market conditions and outlook.
In 2012, we chartered a deepwater vessel, the Ocean Intervention III, for two years, with extension options for up to three additional years, and which we have extended to January 2017. We have also chartered an additional deepwater vessel, the Olympic Intervention IV, for an initial term of five years, which began in the third quarter of 2008, and which we have extended to July 2016. We outfitted each of these deepwater vessels with two of our high-specification work-class ROVs, and we have been utilizing these vessels to perform subsea hardware installation and inspection, maintenance and repair projects, and to conduct well intervention services in the U.S. Gulf of Mexico and offshore Angola. In 2012, we moved the Ocean Intervention III to Angola and also chartered the Bourbon Oceanteam 101 to work on a three-year field support 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 services contract between us and the customer for work offshore Angola, 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 are expected to be reimbursed by the customer. Following the release of the vessel, we intend to redeliver it to the vessel supplier. Under the field support services contract, we have been supplying project management, engineering and the chartered vessels equipped with high-specification work-class ROVs. We also provide ROV tooling, asset integrity services and installation and workover control system services. We have also provided other chartered vessels and a barge on an as-requested basis from the customer.
In March 2013, we commenced a five-year charter for a Jones Act-compliant multi-service support vessel that we are using in the U.S. Gulf of Mexico. We have outfitted the vessel, which we have renamed the Ocean Alliance, with two of our high-specification work-class ROVs. In January 2015, we commenced a two-year multi-service vessel time charter agreement with a customer for the use of the Ocean Alliance in the U.S. Gulf of Mexico.
In December 2013, we commenced a three-year charter for the Normand Flower, a multi-service subsea marine support vessel. We have made modifications to the vessel, including reconfiguration to accommodate two of our high-specification work-class ROVs. We anticipate we will continue to use the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. We have options to extend the charter for up to three additional years.
In November 2015, we commenced a two-year charter for the use of the Island Pride, a multi-service subsea marine support vessel. We have modified the vessel to enhance its service capabilities, including a reconfiguration to accommodate two of our high-specification work-class ROVs. We are using 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. We have options to extend the charter for up to two additional years.
As indicated above, the charter terms for two of our vessels expire in 2016, unless we choose to exercise an existing option or we negotiate new extension terms.
We also charter or lease dynamically positioned vessels on a short-term basis.

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Our principal source of cash from operating activities is our net income (loss), adjusted for the non-cash expenses of depreciation and amortization, deferred income taxes and noncash compensation under our restricted stock plans. Our $560$37 million, $722$136 million and $531$339 million of cash provided from operating activities in 2015, 20142018, 2017 and 2013,2016, respectively, were affected by cash increases/increases (decreases) of $179of: (1) $(87) million, $(8)$13 million and $(102)$123 million, respectively, of changes in accounts receivable, $59receivable; (2) $(12) million, $66 million and $(111)$18 million, respectively, of changes in inventoryinventory; and $(45)(3) $29 million, $(44)$(76) million and $128$(115) million, respectively, of changes in accounts payable and accrued liabilities. The decrease in cash related to accounts receivable in 2018 reflected higher business levels in the fourth quarter of 2018, as compared to the fourth quarter of 2017, along with timing of customer payments. The increase in cash related to changes in current liabilities in 2018 reflected timing of vendor payments. In 2015,each of 2017 and 2016, our accounts receivable, inventory and accounts payable and accrued liabilities all decreased as a result of lower revenue and activity in general.general from the immediately preceding year. The 20152016 decrease in inventory includedwas in addition to write-downs totaling $26$30 million in our ROV and Subsea Products segments discussed below. In 2014, our inventory decreased as a result of the use of inventory in progressing and completing projects that had been in our Subsea Products backlog at December 31, 2013 and our expectation of lower Subsea Products demand in 2015 as compared to 2014. In 2013, the increases in accounts receivable and accounts payable and accrued liabilities reflect the increase in our revenue in 2013. The increase in inventory in 2013 is consistent with the increase in our backlog over 2012.segments.
In 2015,2018, we used $99 million in net investing activities. We used $109 million to purchase property and equipment, $68 million for the acquisition of Ecosse and $10 million for the purchase of Angolan central bank bonds indexed to the U.S. dollar. These outlays were partially offset by $70 million of proceeds received from maturities and redemptions of Angola bonds and $15 million of proceeds received from the sale of a cost method investment. In 2017, we used a net of $437$112 million in investing activities, with $424$105 million used to fund the capital expenditures and business acquisitions described above.and $11 million used to purchase Angolan central bank bonds indexed to the U.S. dollar. In 2014,2016, we used a net of $419$169 million in investing activities, with $427$143 million used to fund the capital expenditures and business acquisitions, described above. In 2013, we used a net of $378 million in investing activities, with $394and $39 million used to fundpurchase Angolan central bank bonds indexed to the capital expenditures and business acquisitions described above.U.S. dollar.
In 2015,2018, we used $157 million in financing activities. We borrowed $50 million, repurchased 2 million shares for $100 million and paid cash dividends of $106 million. In 2014, we generated $45 million in financing activities. We borrowed $742 million, net of associated expenses and debt discount, repurchased 8.9 million shares for $590 million and paid cash dividends of $110 million. In 2013, we used $180$6 million in financing activities, principallywith $300 million for a repayment against our revolving creditof the term loan facility, substantially offset by $296 million of $94the proceeds received from the issuance of the 2028 Senior Notes, net of issuance costs. In 2017, we used $46 million andin financing activities, primarily for the payment$44 million of cash dividends we paid. In 2016, we used $96 million in financing activities, primarily for the $94 million of $91 million.cash dividends we paid.
In February 2010,December 2014, our Board of Directors approved a program to repurchase up to 12 million shares of our common stock. In 2014, we completed the purchase of the shares authorized under that program by repurchasing the remaining 8.9 million shares for $590 million. The total cost for the repurchase of the 12 million shares of our common stock was $677 million.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and other relevant factors. The timing and amount of any repurchases will be determined by management based on its evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury stock for future use. The new program does not obligate us to repurchase any particular number of shares. We account for the shares we hold in treasury under

the cost method, at average cost. Through December 31, 2015 under the new program, we repurchased 2 million shares of our common stock for $100 million. We have not repurchased any shares under the program since December 31, 2015.
As of December 31, 2015,2018, we retained 13.012.3 million of the shares we had repurchased.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, 20152018 relate primarily to our net investments in, including long-term loans to, our foreign subsidiaries. A stronger U.S. dollar against the U.K. pound sterling, and the Norwegian kroner and Brazilian real would result in lower operating income. See Item 7A – "Quantitative and Qualitative Disclosures About Market Risk."

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Results of Operations
Additional information on our business segments is shown in Note 78 of the Notes to Consolidated Financial Statements included in this report.
Oilfield.Energy Services and Products. The table that follows sets out revenue and profitability for the business segments within our OilfieldEnergy Services and Products 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.

 Year Ended December 31, Year Ended December 31,
(dollars in thousands) 2015 2014 2013 2018 2017 2016
Remotely Operated Vehicles            
Revenue $807,723
 $1,069,022
 $981,728
 $394,801
 $393,655
 $522,121
Gross Margin 227,330
 361,466
 328,031
 32,652
 50,937
 59,038
Gross Margin % 28% 34% 33% 8 % 13% 11%
Operating Income 192,514
 320,550
 281,973
 1,641
 22,366
 25,193
Operating Income % 24% 30% 29% — % 6% 5%
Days available 121,944
 117,882
 108,201
 101,464
 101,951
 112,588
Days utilized 83,838
 98,302
 91,618
 52,084
 47,282
 59,963
Utilization % 69% 83% 85% 51 % 46% 53%
Subsea Products            
Revenue 959,714
 1,238,746
 1,027,792
 515,000
 625,513
 692,030
Gross Margin 257,755
 364,760
 311,206
 59,984
 97,086
 140,275
Gross Margin % 27% 29% 30% 12 % 16% 20%
Operating Income 175,585
 281,239
 231,050
 5,614
 45,539
 75,938
Operating Income % 18% 23% 22% 1 % 7% 11%
Backlog at end of period 652,000
 690,000
 906,000
 332,000
 276,000
 431,000
Subsea Projects            
Revenue 604,484
 588,572
 509,440
 329,163
 291,993
 472,979
Gross Margin 114,672
 124,418
 108,758
 9,596
 25,021
 51,392
Gross Margin % 19% 21% 21% 3 % 9% 11%
Operating Income 92,034
 107,852
 93,865
Operating Income % 15% 18% 18%
Operating Income (Loss) (86,008) 10,279
 34,476
Operating Income (Loss)% (26)% 4% 7%
Asset Integrity            
Revenue 372,957
 500,237
 481,919
 253,886
 236,778
 275,397
Gross Margin 47,342
 87,236
 81,856
 34,995
 37,382
 41,458
Gross Margin % 13% 17% 17% 14 % 16% 15%
Operating Income 18,235
 55,469
 55,243
 8,660
 11,231
 7,551
Operating Income % 5% 11% 11% 3 % 5% 3%
Total Oilfield      
Total Energy Services and Products      
Revenue $2,744,878
 $3,396,577
 $3,000,879
 $1,492,850
 $1,547,939
 $1,962,527
Gross Margin 647,099
 937,880
 829,851
 137,227
 210,426
 292,163
Gross Margin % 24% 28% 28% 9 % 14% 15%
Operating Income 478,368
 765,110
 662,131
Operating Income % 17% 23% 22%
Operating Income (Loss) (70,093) 89,415
 143,158
Operating Income (Loss)% (5)% 6% 7%
      
      
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

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work. In 2015, as a result of declining market conditions, we began building fewer ROVs, primarily to meet contractual commitments. 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 16, 49six, seven and 26six ROVs in 2015, 20142018, 2017 and 2013,2016, respectively, while retiring 6359 units over the three-year period and transferring two to our Advanced Technologies segment over that period. Our ROV fleet size was 315275 at December 31, 2015, 3362018, 279 at December 31, 20142017 and 304280 at December 31, 2013.2016. We have decreased our ROV fleet size over the last four years in response to lower market demand.


For 2015,the year ended December 31, 2018, our ROV revenue and operating income declined on revenue that was relatively flat compared to 2017, due to lower average dayrates and higher costs, slightly offset by increased days-on-hire. Lower dayrates resulted from 2014 fromthe continued competitive market conditions for offshore drilling and production driven by lower demand for drill support serviceslevels of offshore drilling activity. Higher costs were due to shorter duration of the contracts and a reduction in average revenue per day across all our geographic areas of operation. ROV days on hire decreased by 15%additional costs associated with mobilizations and revenue per day on hire decreased 11%. In 2015work performed to reactivate the systems that had previously been idle.

For the year ended December 31, 2017, our ROV operating income declined slightly compared to 2016, on a revenue decline of 25%. Revenue declined on fewer days-on-hire and lower average dayrates, both as a result of the continued decline in market conditions for offshore drilling and production. ROV revenue in 2017 also included a $7.3 million sale of accessory equipment that was integrated into a customer's rigs. Our 2016 operating results included $41 million of charges, which consisted of: (1) $25.2 million for a reserve for excess inventory, (2) $10.8 million for the retirement of 39 ROVs, (3) $3.8 million of restructuring expenses and (4) $1.2 million of bad debt expenses. These 2016 charges were reflected in our cost of services and products, included inventory write-downs of $15.7 million, restructuring expenses of $7.2 million and ROV retirements resulting in write-offs of $2.9 million. The inventory write downs were due to excess inventory, which we do not anticipate using given current and forecast market conditions. The restructuring expensesexcept for the charges related to severance costs for incurred and designated future workforce reductions and costs associated with closing excess facilities. The write-offsbad debts, which were necessitated as a result of our retiring an unusually large number of ROVsreflected in 2015 due to market prospects for these vehicles.

For 2014, our ROV revenue and operating income improved over 2013 from higher demand, particularly offshore Africa and in the U.S. Gulf of Mexico. ROV days on hire increased by 7% and revenue per day on hire increased 1%.

In 2013, our ROV general and administrative expenses included a charge of $3.3 million to record an allowance for doubtful accounts related to a customer in Brazil that filed for restructuring under Brazilian bankruptcy law.our financial statements.

We anticipate ROV operating income to decreaseFor ROVs in 2016 as a result of decreases in average revenue per day2019, we expect improved results based on hire and the number ofincreased days on hire, for both drilling supportminor shifts in geographic mix and vessel-based services, attributable to the market conditions described under "Overview" above.generally stable pricing, while dealing with continued mobilization and make-ready challenges. We normally expecthistorically have expected to retire, on average, 4% to 5% of our fleet on an annual basis, although we retired a greater number in 20152016 due to market conditions.conditions and we retired a lower number in each of 2018 and 2017 as a result of the reduced existing fleet size. Our overall ROV fleet utilization is expected to be in the mid 50% range for 2019.

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:

  Year Ended December 31,
  2018 2017 2016
Manufactured Products 55% 64% 65%
       
Service and Rental 45% 36% 35%


For the year ended December 31, 2018, our Subsea Products operating results decreased from 2017 across both business units, due to lower umbilical-related backlog from the beginning of the year as a result of lower demand for our manufactured products and reduced activity in our service and rental business attributable to progress completed on a significant custom-engineered project during 2017, a significant decline in Asia and Australia market activity, start-up costs pertaining to our light well intervention equipment, as well as the write-offs of certain obsolete equipment.

For the year ended December 31, 2017, our Subsea Products revenue and operating income and margin were lower in 2015 than in 2014decreased from 2016 across both business units, but most notably due to lower demandpricing of service and pricing for tooling and subsea hardware and lower umbilical plant throughput. 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 incurredrental. Our 2016 results included the following charges:

$8.78.2 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 restructuring expenses;
$6.6 million of a non-current asset reserve; and
$4.8 million for an allowanceallowances for bad debts.

In our financial statements, thesethe charges incurred in 2016 are reflected in our cost of services and products, except for the charge forcharges related to the allowanceallowances for bad debts, which isare 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 relates to a customer who has filed for bankruptcy and is unable to pay for a built umbilical.

Subsea Products revenue, operating income and margin were higher in 2014 than in 2013 from increased demand across our major product lines, led by tooling and umbilicals. Subsea Products revenue, operating income and margin were higher in 2013 than in 2012 from increased demand across our major product lines, principally for subsea hardware used in offshore field developments and for clamp connector systems.

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We anticipate our Subsea Products segment operating income in 20162019 to improve as a result of securing good order intake in 2018 and anticipated awards in early 2019, driving increased throughput within our manufactured products business unit, and higher activity levels and contribution from the services and rental business unit. With increased overall activity and better absorption of our fixed costs, we anticipate that our operating income margin will be lower than in 2015 on a decline in pricing, reduced umbilical plant throughput and reduced demand for subsea hardware.the mid-single digit range. Our Subsea Products backlog was $652$332 million at December 31, 2015,2018, approximately 6% lower20%, higher than it was at December 31, 2014.2017. The backlog decreaseincrease from 20142017 was principallylargely attributable to an increase in toolingorder intake for our service and subsea hardware.rental offerings.

Our Subsea Projects operating income declined slightly during 2015 on slightly higher revenue. The relatively better performanceresults for the year ended December 31, 2018 were lower compared to the other oilfield segments was aided by an increase in international manned diving operations. The decline in operating income was2017, due to lower deepwatera goodwill impairment charge largely resulting from the protracted downturn in survey and vessel activity, reduced project activity and market pricing offshorediving work in Angola and the write-offs of obsolete equipment and intangible assets associated with exiting the land survey business. These results were partially offset by increased diving and deepwater activity in the U.S. Gulf of Mexico.

Our 2014For the year ended December 31, 2017, our Subsea Projects revenue and operating income for Subsea Projects was higher thandecreased from 2016, as a result of generally lower vessel demand and pricing, and the release in 2013 on increased deepwater vessel service activity, including work associated withMay 2016 of the Bourbon Evolution 803Oceanteam 101, awhich was previously deployed under the field support vessel we chartered on a short-term basis during 2014. We also commenced diving services offshore Angola in 2014. For 2016, we anticipate lower operating income resulting from lower deepwater demand and diving activitycontract offshore Angola.

In 2015,2019, our Subsea Projects segment is expected to generate better results with improvements in survey and renewables work, modestly offset by reduced international and Gulf of Mexico vessel activity. Vessel dayrates remain very competitive but appear to have stabilized. We expect to place the Ocean Evolution into service during the second quarter of 2019.

For the year ended December 31, 2018, compared to 2017, Asset Integrity's operating income decreased due to lower contract pricing for the purpose of contracts retention.
For the year ended December 31, 2017, Asset Integrity operating income declined precipitouslyimproved from the 2016 on lower global demandrevenue, as we benefited from restructuring efforts we made in prior periods. Our 2016 operating results included bad debt expense of $5.0 million, which was reflected in selling, general and pricing for inspection services. Asset Integrity results in 2015 includeadministrative expense, and $1.4 million of restructuring charges, of $6.4 millionwhich were reflected in our cost of services and products. Our Asset Integrity results in 2014 were fairly comparable to those of 2013.
We anticipate our 20162019 operating incomeresults for Asset Integrity to be lower than in 2015 on continued lower global demand and pricing.relatively flat compared to 2018, as contract pricing remains extremely competitive.
Advanced Technologies. The table that follows sets out revenue and profitability for this segment.
 Year Ended December 31, Year Ended December 31,
(dollars in thousands) 2015 2014 2013 2018 2017 2016
Revenue $317,876
 $263,047
 $286,140
 $416,632
 $373,568
 $309,076
Gross Margin 30,034
 32,410
 44,576
 58,959
 44,421
 33,784
Gross Margin % 9% 12% 16% 14% 12% 11%
Operating Income 9,689
 13,230
 24,954
 33,920
 22,039
 11,809
Operating Income % 3% 5% 9% 8% 6% 4%

Our Advanced Technologies segment consists of two business units: (1) government; and (2) commercial. Government services and products include engineering and related manufacturing in defense and space exploration activities. Our commercial business unit offers a turnkey solution that includes program management, engineering design, fabrication/assembly and installation to the commercial theme park industry and mobile robotics solutions including automated guided vehicle technology to a variety of industries. The following table presents revenue from government and commercial, as their respective percentages of total Advanced Technologies revenue:


  Year Ended December 31,
  2018 2017 2016
Government 67% 74% 78%
       
Commercial 33% 26% 22%

For the year ended December 31, 2018, compared to 2017, our Advanced Technologies segment achieved record operating income, due to steady growth in our government business and a significant increase in activity in our commercial business, specifically entertainment.

For the year ended December 31, 2017, compared to 2016, Advanced Technologies operating income for 2015 was lower than thathigher, from improved volume of 2014 due to execution issues on commercial theme park projects. Advanced Technologies operating income for 2014 was lower than that of 2013 on decreased activity on commercial theme parkpark-related projects and vessel maintenance work for the U.S. Navy, and lower margins on the theme park work we did perform. in our entertainment business.

We project an improvement in our Advanced Technologies operating incomeresults in 2016,2019 to increase, due to the expected resolution of execution issues on commercial theme park projects that hamperedcontinued high demand and activity levels in our resultsentertainment business, improvements in 2015our automated guided vehicle operations, and 2014, and increased activity.modest growth in our government-related units.
Unallocated Expenses. Our unallocated expenses, i.e., those not associated with a specific business segment, within gross margin consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses. Our unallocated expenses within operating income consist of those within gross margin plus general and administrative expenses related to corporate functions.
The table that follows sets out our unallocated expenses.
 Year Ended December 31, Year Ended December 31,
(dollars in thousands) 2015 2014 2013 2018 2017 2016
Gross margin expenses $(71,704) $(111,089) $(108,891) $(66,960) $(60,237) $(46,720)
% of revenue 2% 3% 3% 4% 3% 2%
Operating expenses (114,247) (150,010) (141,969) (109,309) (100,798) (84,203)
% of revenue 4% 4% 4% 6% 5% 4%
Our unallocated expenses have trended withfor the amounts of our incentive compensation expenses. Our unallocated gross margin and operating expenses decreased in 2015,year ended December 31, 2018 increased compared to 2017, primarily due to lower compensationhigher expenses related to the expected annual bonusesinformation technology and valuation ofincentive compensation from our performance units awarded underand bonuses.

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our incentive plan. We expect higher incentive plan compensation expenses in 2016, as 2015 included downward revisions of estimatedOur 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 outstanding underand bonuses.
We anticipate Unallocated Expenses in 2019 to increase due to the expectation for higher projected short- and long-term performance based incentive plan.compensation expense. Our Unallocated Expenses have been running at decreased levels over the last few years, as our financial results have not achieved performance targets, primarily due to the prolonged downturn in the offshore oilfield
markets we serve. Based on an expected increase in offshore activities, a more stable pricing
environment, realized benefits from ongoing cost and performance initiatives, and continued growth in our Advanced Technologies segment, we expect to achieve higher performance targets for 2019, as well as over the longer-term. Therefore, as we re-establish accruals for our annual and long-term incentive compensation programs, Unallocated Expenses are expected to be approximately $140 million during 2019.
Other. The table that follows sets forth our financial statement items below the operating income line.

 Year Ended December 31, Year Ended December 31,
(dollars in thousands) 2015 2014 2013 2018 2017 2016
Interest income $607
 $293
 $554
 $9,962
 $7,355
 $3,900
Interest expense, net of amounts capitalized (25,050) (4,708) (2,194) (37,742) (27,817) (25,318)
Equity earnings (loss) of unconsolidated affiliates 2,230
 (51) 133
 (3,783) (1,983) 244
Other income (expense), net (15,336) (387) (1,273) (8,788) (6,055) (6,244)
Provision for income taxes 105,250
 195,148
 170,836
Provision (benefit) for income taxes 26,494
 (184,242) 18,760

Interest income increased in 2018 from 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 2015 over 2014 from higher average debt levels. Interest expense increased in 20142018 compared to 2013 on2017 due to higher average debt levels, including borrowingsinterest rate from the 2028 Senior Notes issued in February 2018 replacing our Term Loan and higher interest rates from our interest rate swaps, partially offset by an increase in our capitalized interest. We capitalized $7.3 million, $4.6 million and $3.7 million of interest in 2018, 2017 and 2016, respectively, associated with the new-build vessel, the Ocean Evolution, described under "Liquidity and Capital Resources" above. We capitalized $2.4 million and $0.7 million of interest in 2015 and 2014, respectively, associated with the new-build vessel described under "Liquidity and Capital Resources" above. We did not capitalize any interest in 2013.
Included in other income (expenses)(expense), net are foreign currency transaction gains/(losses)losses of $(15.4)$18 million, $(0.5)$5.2 million and $0.1$4.8 million for 2015, 20142018, 2017 and 2013,2016, respectively. The losses in 20152018 and 2016 primarily related to Angola, which devalued its currency by 24% during 2015. In January 2016, Angola devalued its currency by an additional 13%.46% in 2018 and 18% in 2016. We estimate we willdid not incur a foreignsignificant currency transaction loss of approximately $6 millionlosses in the first quarter of 2016 as a result of the effect of this devaluation.any one currency in 2017. We likely wouldcould incur further foreign currency exchange losses in Angola if further currency devaluations occur. However, in 2019, we expect lower foreign currency exchange losses, due to lower cash balances in Angolan kwanza.
OurIn 2018, Other income (expense), net also included a pre-tax gain of $9.3 million resulting from the sale of our cost method investment in ASV Global, LLC in September 2018. The total consideration from the sale was $15 million, which is subject to final working capital adjustments and customary holdbacks. In 2016, other income (expense), net also includes curtailment costs of $1.1 million related to a defined benefit plan for employees in Norway.
On December 22, 2017, the Tax Act was enacted, most notably reducing the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, and creating a quasi-territorial tax system with a one-time mandatory transition tax on applicable previously-deferred foreign earnings of foreign subsidiaries. In 2018, based on regulations issued by the U.S. Department of the Treasury and additional accounting analysis, we reflected the effects of the Tax Act in our financial statements to include a tax impact of $8.8 million related to the one-time mandatory transition tax. As regulatory guidance continues to be issued by the U.S. tax authorities, any difference in the interpretation of the Tax Act resulting from final or newly issued regulations will be recorded in the period that current or future proposed regulations become law. In 2017, as a result of the Tax Act, we estimated and recorded a $189 million non-cash benefit in the fourth quarter of 2017, making the effective tax rate including foreign, statefor 2017 not meaningful. Various components of the Tax Act contributed to the $189 million non-cash benefit. At December 31, 2017, we remeasured our deferred tax assets and local taxes, was 31.3%, 31.3%, and 31.5% for 2015, 2014 and 2013, respectively, which included a combination of expiring statutes of limitations andliabilities to reflect the resolution of uncertain tax positions of $1.3 million, $0.9 million and $0.7 million, respectively, related to certain liabilities for uncertain tax positions we recordedreduction in prior years. The primary difference between our effective tax rates and the U.S. federal statutorycorporate income tax rate offrom 35% reflects our intent to indefinitely reinvest21%, resulting in a provisional $23 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 million decrease in income tax expense for the year ended December 31, 2017. The transition tax and resulting quasi-territorial type tax regime impacts the utilization of our international operations. Therefore, we are no longer providingremaining foreign tax credits, resulting in a provisional valuation allowance of $56 million against such deferred tax assets and a corresponding increase to income tax expense for U.S. taxes on a portion of our foreign earnings. We anticipate no material change to our effective tax rate in 2016.the year ended December 31, 2017.

Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by SEC rules.

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Contractual Obligations
At December 31, 2015,2018, we had payments due under contractual obligations as follows:
 
(dollars in thousands)
Payments due by periodPayments due by period
Total 2016 2017-2018 2019-2020 After 2020Total 2019 2020-2021 2022-2023 After 2023
Long-term Debt$800,000
 $—
 $300,000
 $—
 $500,000
$800,000
 $—
 $—
 $—
 $800,000
Vessel Charters137,925
 97,579
 40,346
 —
 —
Other Operating Leases180,266
 25,924
 38,891
 29,067
 86,384
387,751
 35,064
 61,230
 55,296
 236,161
Purchase Obligations242,683
 241,426
 1,000
 237
 20
299,117
 282,646
 15,262
 402
 807
Other Long-term Obligations reflected on our Balance Sheet under GAAP64,641
 1,554
 3,257
 3,411
 56,419
58,419
 1,567
 2,359
 1,601
 52,892
TOTAL$1,425,515
 $366,483
 $383,494
 $32,715
 $642,823
$1,545,287
 $319,277
 $78,851
 $57,299
 $1,089,860
The vessel charter obligations in the table above do not include any optional extension periods.
At December 31, 2015,2018, we had outstanding purchase order commitments totaling $243$299 million, including approximately $42$10 million for the construction of athe new subsea support vessel, the Ocean Evolution, scheduled to be placed into service during the second quarter of 2019.
We previously had several deepwater vessels under long-term charter. The last of our long-term charters expired in March 2018. With the current market conditions, our philosophy is to attempt to charter vessels for delivery in 2016.specific projects on a back-to-back basis with the vessel owners. This generally minimizes our contract exposure by closely matching our obligations with our revenue.

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 $5.1$3.2 million and $5.7$3.9 million at December 31, 20152018 and 2014,2017, respectively.
Effects of Inflation and Changing Prices
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, using historical U.S. dollar accounting, or historical cost. Statements based on historical cost, however, do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the dollar, especially during times of significant and continued inflation.
In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts. Our success in achieving price escalation clauses has become more challenging, due to the protracted downturn and over-capacity in the energy market in which we compete. 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.

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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. WeExcept 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. We currentlyWhen we have one interest rate swap in place on $100 milliona significant amount of the Senior Notes. See Note 6 of Notes to Consolidated Financial Statements included in this report for a description of this interest rate swap. Weborrowings, we typically manage our exposure to interest rate changes through the use of a combination of fixed- and floating-rate debt. See Note 57 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 severalmost of our international operations is the applicable local currency. A stronger U.S. dollar against the U.K. pound sterling, and 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 shareholders' equity section of our Consolidated Balance Sheets. We recorded net adjustments of $(119)$(47) million, $(129)$11 million and $(71)$(6) million to our equity accounts in 2015, 20142018, 2017 and 2013,2016, respectively. Negative adjustments reflect the net impact of the strengthening of the U.S. dollar against various foreign currencies for locations where the functional currency is not the U.S. dollar. Conversely, positive adjustments reflect the effect of a weakening U.S. dollar.
We recorded foreign currency transaction gains (losses)losses of $(15.4)$18 million, $(0.5)$5.2 million and $0.1$4.8 million thatfor 2018, 2017 and 2016, respectively. Those losses are included in Other income (expense), net in our Consolidated Statements of IncomeOperations in those respective periods. Since the second quarter of 2015, 2014the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has been declining, with the exception of the exchange rate being 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 $19 million, $0.1 million and 2013,$7.3 million in 2018, 2017 and 2016, respectively. The currency transaction losses in 2015Angola are related primarily relate to Angola, which devalued its currency by 24% during 2015. In January 2015,the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Angola devalued its currency by an additional 13%. We estimate46% and 18% in 2018 and 2016, respectively. Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process from mid-2015 to 2017, causing our kwanza cash balances to increase during that period of time. However, beginning in 2018, the Angolan central bank has allowed us to repatriate cash from Angola. During 2018, we will incur a foreign currency transaction losswere able to repatriate $74 million of cash from Angola.
As of December 31, 2018 and December 31, 2017, we had the equivalent of approximately $6$9.3 million and $27 million of kwanza cash balances, respectively, in Angola, reflected on our balance sheet. The decrease in kwanza cash balances in 2018 was mainly attributable to the repatriation of cash from Angola and cash used in our Angolan operations.
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. In 2018, we received a total of $70 million proceeds from maturities and redemptions of Angola bonds and reinvested $10 million of the proceeds in similar assets. We previously believed the chance of selling the bonds before maturity and repatriating cash out of Angola was remote. Our intention was to hold the bonds to maturity, and to reinvest funds from maturing bonds in similar long-term

assets. Because we intend to sell the bonds if we are able to repatriate the proceeds, we changed our accounting for these bonds from held-to-maturity securities to available-for-sale securities.
We estimated the fair market value of the Angolan bonds to be $10 million at December 31, 2018 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 first quarterfair value hierarchy under U.S. GAAP. As of 2016 as a resultDecember 31, 2018, we have not recorded the difference between the fair market value and carrying amount of the effectoutstanding bonds through the Consolidated Statement of this devaluation. We likely would incur further foreign currency exchange lossesComprehensive Income (Loss) due to the insignificant difference between the fair market value and the carrying amount of the bonds.
As of December 31, 2018, we classified $10 million of bonds due to mature in Angola if further currency devaluations occur.2023 as Other current assets on our Consolidated Balance Sheet because we intend to sell these bonds to meet the needs of current operations in Angola.

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.

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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, 20152018 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, 20152018 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 – 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, 2015.2018.
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.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors and Shareholders of Oceaneering International, Inc.

Opinion on Internal Control over Financial Reporting
We have audited theOceaneering International, Inc. and subsidiaries' internal control over financial reporting of Oceaneering International, Inc. and Subsidiaries (the "Company") as of December 31, 2015,2018, based on criteria established in Internal Control – 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, 2018 and 2017, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and our report dated February 28, 2019 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 offor the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Overover Financial Reporting. Our responsibility is to express an opinion on the company'sCompany'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 Public Company Accounting Oversight Board (United States).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.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, cash flows, and shareholders' equity for each of the three years in the period ended December 31, 2015, and our report dated February 19, 2016 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Houston, Texas
/s/ ERNST & YOUNG LLP
February 19, 201628, 2019 


Item 9B.    Other Information.
None.

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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 April 29, 2016,30, 2019, relating to our 20162019 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 "Director Compensation""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.


43
Table of Contents

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 IncomeOperations
(iv)Consolidated Statements of Comprehensive Income (Loss)
(v)Consolidated Statements of Cash Flows
(vi)Consolidated Statements of Shareholders' 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:


    Registration or File Number Form of Report Report Date Exhibit Number
*3.01
Restated Certificate of Incorporation 1-10945 10-K Dec. 2000 3.01
*3.02
Certificate of Amendment to Restated Certificate of Incorporation 1-10945 8-K May 2008 3.1
*3.03
Certificate of Amendment to Restated Certificate of Incorporation 1-10945 8-K May 2014 3.1
*3.04
Amended and Restated Bylaws 1-10945 8-K Aug. 2015 3.1
*4.01
Specimen of Common Stock Certificate 1-10945 10-K Mar. 1993 4(a)
*4.02
Credit Agreement, dated as of October 27, 2014, by and among Oceaneering International, Inc., Wells Fargo Bank, National Association, as administrative agent and swing line lender, and certain lenders party thereto 1-10945 8-K Oct. 2014 4.1
*4.03
Agreement and amendment No. 1 to Credit Agreement 1-10945 8-K Nov. 2015 4.1
*4.04
Indenture dated, November 21, 2014, between Oceaneering International, Inc. and Wells Fargo Bank, National Association, as Trustee, relating to senior debt securities of Oceaneering International, Inc.
 1-10945 8-K Nov. 2014 4.1
*4.05
First Supplemental Indenture, dated 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). 1-10945 8-K Nov. 2014 4.2
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.
Exhibit Index

44
Table of Contents



  Registration or File Number Form of Report Report Date Exhibit Number
*10.01
Oceaneering International, Inc. Retirement Investment Plan, Amended and Restated effective January 1, 2013 1-10945 10-Q June 2014 10.01
3.01
Restated Certificate of Incorporation
 1-10945 10-K Dec. 2000 3.1
*10.02+First Amendment to the Oceaneering Retirement Investment Plan, effective June 1, 2014 1-10945 10-K Dec. 2014 10.02
3.02
Certificate of Amendment to Restated Certificate of Incorporation
 1-10945 8-K May 2008 3.1
*10.03+Second Amendment to the Oceaneering Retirement Investment Plan, effective January 1, 2015 1-10945 10-K Dec. 2014 10.35
3.03
Certificate of Amendment to Restated Certificate of Incorporation
 1-10945 8-K May 2014 3.1
*10.04+Oceaneering Retirement Investment Plan Trust Agreement effective December 31, 2013 1-10945 10-K Dec. 2014 10.13
3.04
Amended and Restated Bylaws
 1-10945 8-K Aug. 2015 3.1
*10.05+Amended and Restated Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff 1-10945 8-K Dec. 2006 10.1
4.01
Specimen of Common Stock Certificate
 1-10945 10-Q Sep. 2018 4.3
*10.06+Modification to Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff 1-10945 8-K Dec. 2008 10.9
4.02
Credit Agreement, dated as of October 27, 2014, by and among Oceaneering International, Inc., Wells Fargo Bank, National Association, as administrative agent and swing line lender, and certain lenders party thereto
 1-10945 8-K Oct. 2014 4.1
*10.07+Trust Agreement dated as of May 12, 2006 between Oceaneering and United Trust Company, National Association 1-10945 8-K May 2006 10.2
4.03
Agreement and Amendment No. 1 to Credit Agreement
 1-10945 8-K Nov. 2015 4.1
*10.08+First Amendment to Trust Agreement dated as of May 12, 2006 between Oceaneering International, Inc. and Bank of America National Association, as successor trustee 1-10945 8-K Dec. 2008 10.10
4.04
Agreement and Amendment No. 2 to Credit Agreement
 1-10945 8-K Nov. 2016 4.1
*10.09+Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2009 1-10945 8-K Dec. 2008 10.5
4.05
Agreement and Amendment No. 3 to Credit Agreement
 1-10945 8-K June 2017 4.1
*10.10+Amended and Restated Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2000 (for Internal Revenue Code Section 409A-grandfathered benefits) 1-10945 8-K Dec. 2008 10.6
4.06
Agreement and Amendment No. 4 to Credit Agreement
 1-10945 8-K Feb. 2018 4.1
*10.11+Change-of-Control Agreements dated as of November 16, 2001 between Oceaneering and M. Kevin McEvoy and Marvin J. Migura 1-10945 10-K Dec. 2001 10.06
4.07
Indenture dated, November 21, 2014, between Oceaneering International, Inc. and Wells Fargo Bank, National Association, as Trustee, relating to senior debt securities of Oceaneering International, Inc.
 1-10945 8-K Nov. 2014 4.1
*10.12+Form of First Amendment to Change-of-Control Agreement with M. Kevin McEvoy and Marvin J. Migura 1-10945 8-K Dec. 2008 10.7
*10.13+Form of Change-of-Control Agreement and Annex for Roderick A. Larson 1-10945 8-K Aug. 2015 10.3
*10.14+Form of Change-of-Control Agreement 1-10945 8-K May 2011 10.5
*10.15+Form of Indemnification Agreement 1-10945 8-K May 2011 10.4
*10.16+2010 Incentive Plan 333-166612 S-8 May 2010 4.6
*10.17+Amended and Restated 2010 Incentive Plan 1-10945 DEF 14A Apr. 2015 Appendix A
*10.18+Form of 2013 Employee Restricted Stock Unit Agreement for Executive Officers 1-10945 8-K Feb. 2013 10.1
*10.19+Form of 2013 Chairman Restricted Stock Unit Agreement for John R. Huff 1-10945 8-K Feb. 2013 10.3
*10.20+Form of 2013 Performance Unit Agreement for Executive Officers 1-10945 8-K Feb. 2013 10.2
*10.21+Form of 2013 Chairman Performance Unit Agreement for John R. Huff 1-10945 8-K Feb. 2013 10.4

45
Table of Contents



*4.08
First Supplemental Indenture, dated 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)
 1-10945 8-K Nov. 2014 4.2
*4.09
Second Supplemental Indenture, dated 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)
 1-10945 8-K Feb. 2018 4.2
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.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.
*10.22+2013 Performance Award: Goals and Measures, relating to the form of 2013 Performance Unit Agreement for its executive officers and 2013 Chairman Performance Unit Agreement 1-10945 8-K Feb. 2013 10.5
10.01+
Amended and Restated Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff
 1-10945 8-K Dec. 2006 10.1
*10.23+Form of 2013 Nonemployee Director Restricted Stock Agreement for T. Jay Collins, Jerold J. DesRoche, D. Michael Hughes, Paul B. Murphy, Jr. and Harris J. Pappas 1-10945 8-K Feb. 2013 10.6
10.02+
Modification to Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff
 1-10945 8-K Dec. 2008 10.9
*10.24+Oceaneering International, Inc. 2014 Annual Bonus Award Program Summary 1-10945 8-K Feb. 2015 10.6
10.03+
Trust Agreement dated as of May 12, 2006 between Oceaneering and United Trust Company, National Association (the "Huff Trust Agreement")
 1-10945 8-K May 2006 10.2
*10.25+Form of 2014 Employee Restricted Stock Unit Agreement for Executive Officers 1-10945 8-K Feb. 2014 10.1
10.04+
First Amendment to Huff Trust Agreement dated as of May 12, 2006 between Oceaneering International, Inc. and Bank of America National Association, as successor trustee
 1-10945 8-K Dec. 2008 10.10
*10.26+Form of 2014 Chairman Restricted Stock Unit Agreement for Mr. Huff 1-10945 8-K Feb. 2014 10.3
10.05+
Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2009
 1-10945 8-K Dec. 2008 10.5
*10.27+Form of 2014 Performance Unit Agreement for Executive Officers 1-10945 8-K Feb. 2014 10.2
10.06+
Amended and Restated Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2000 (for Internal Revenue Code Section 409A-grandfathered benefits)
 1-10945 8-K Dec. 2008 10.6
*10.28+Form of 2014 Chairman Performance Unit Agreement for Mr. Huff 1-10945 8-K Feb. 2014 10.4
10.07+
Form of Change-of-Control Agreement and Annex for Roderick A. Larson
 1-10945 8-K Aug. 2015 10.3
*10.29+2014 Performance Award: Goals and Measures, relating to the form of 2014 Performance Unit Agreement for its executive officers and 2014 Chairman Performance Unit Agreement 1-10945 8-K Feb. 2014 10.5
10.08+
Form of Change-of-Control Agreement
 1-10945 8-K May 2011 10.5
*10.30+Form of 2014 Nonemployee Director Restricted Stock Agreement for Messrs. Collins, DesRoche, Hughes, Murphy and Pappas 1-10945 8-K Feb. 2014 10.6
10.09+
Form of Indemnification Agreement
 1-10945 8-K May 2011 10.4
*10.31+Oceaneering International, Inc. 2015 Annual Bonus Award Program Summary 1-10945 8-K Feb. 2015 10.7
10.10+
2010 Incentive Plan
 333-166612 S-8 May 2010 4.6
*10.32+Form of 2015 Restricted Stock Unit Agreement 1-10945 8-K Feb. 2015 10.1
10.11+
Amended and Restated 2010 Incentive Plan
 1-10945 DEF 14A Apr. 2015 Appendix A
*10.33+Form of 2015 Performance Unit Agreement 1-10945 8-K Feb. 2015 10.2
10.12+
Second Amended and Restated 2010 Incentive Plan
 1-10945 DEF 14A Mar. 2017 Appendix A
*10.34+2015 Performance Award: Goals and Measures, relating to the form of 2015 Performance Unit Agreement 1-10945 8-K Feb. 2015 10.3
10.13+
Form of 2016 Restricted Stock Unit Agreement
 1-10945 8-K Feb. 2016 10.1
*10.35+Form of 2015 Nonemployee Director Restricted Stock Agreement for Messrs. Collins, Huff, Hughes, Murphy and Pappas 1-10945 8-K Feb. 2015 10.4
10.14+
Form of 2016 Performance Unit Agreement
 1-10945 8-K Feb. 2016 10.2
*10.36+Form of 2015 Nonemployee Director Restricted Stock Agreement for Mr. DesRoche 1-10945 8-K Feb. 2015 10.5
10.15+
Form of 2016 Performance Award: Goals and Measures, relating to the form of 2016 Performance Unit Agreement
 1-10945 8-K Feb. 2016 10.3
12.01
Computation of Ratio of Earnings to Fixed Charges  
21.01
Subsidiaries of Oceaneering  
23.01
Consent of Independent Registered Public Accounting Firm  
31.01
Rule 13a – 14(a)/15d – 14(a) certification of principal executive officer  
31.02
Rule 13a – 14(a)/15d – 14(a) certification of principal financial officer  
32.01
Section 1350 certification of principal executive officer  
32.02
Section 1350 certification of principal financial officer  
101.INS
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
*10.16+
Form of 2016 Nonemployee Director Restricted Stock Agreement
 1-10945 8-K Feb. 2016 10.4
*10.17+
2016 Annual Cash Bonus Award Program Summary
 1-10945 8-K Feb. 2016 10.5

46
Table of Contents


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.
*10.18+
Form of 2017 Performance Unit Agreement, including 2017 Performance Award: Goals and Measures
 1-10945 8-K Feb. 2017 10.1
*10.19+
Form of 2017 Restricted Stock Unit Agreement
 1-10945 8-K Feb. 2017 10.2
*10.20+
Form of 2017 Nonemployee Director Restricted Stock Agreement
 1-10945 8-K Feb. 2017 10.3
*10.21+
Form of 2017 Nonemployee Director Restricted Stock Agreement for Mr. Hughes
 1-10945 8-K Feb. 2017 10.4
*10.22+
2017 Nonemployee Director Restricted Stock Agreement for Mr. McEvoy
 1-10945 8-K May 2017 10.3
*10.23+
2017 Annual Cash Bonus Award Program Summary
 1-10945 8-K Feb. 2017 10.5
*10.24+
Supplemental 2017 Performance Unit Agreement for Mr. Larson
 1-10945 8-K May 2017 10.1
*10.25+
Supplemental 2017 Restricted Stock Unit Agreement for Mr. Larson
 1-10945 8-K May 2017 10.2
*10.26+
Retention Agreement dated February 24, 2017 for Mr. Gerner

 1-10945 8-K Feb. 2017 10.6
*10.27+
Form of 2018 Performance Unit Agreement, including 2018 Performance Award: Goals and Measures
 1-10945 8-K Mar. 2018 10.1
*10.28+
Form of 2018 Restricted Stock Unit Agreement
 1-10945 8-K Mar. 2018 10.2
*10.29+
Form of 2018 Nonemployee Director Restricted Stock Agreement
 1-10945 8-K Mar. 2018 10.3
*10.30+
2018 Annual Cash Bonus Award Program Summary
 1-10945 8-K Mar. 2018 10.4
 10.31+
Oceaneering International, Inc. Retirement Investment Plan, amended and restated with effective January 1, 2019
  
 10.32+
Change of Control Plan and Form of Participation Agreement
  
 10.33+
Second Amendment to Huff Trust Agreement dated as of May 12, 2006 between Oceaneering International, Inc. and Evercore Trust Company, National Association, as successor trustee
  
 10.34+
Third Amendment to Huff Trust Agreement dated as of May 12, 2006 between Oceaneering International, Inc. and Newport Trust Company, as successor trustee
  
 10.35+
Oceaneering Retirement Investment Plan Trust Agreement with Fidelity Management Trust Company effective January 1, 2019
  
 21.01
Subsidiaries of Oceaneering
  
 23.01
Consent of Independent Registered Public Accounting Firm
  
 31.01
Rule 13a – 14(a)/15d – 14(a) certification of principal executive officer
  
 31.02
Rule 13a – 14(a)/15d – 14(a) certification of principal financial officer
  
 32.01
Section 1350 certification of principal executive officer
  
 32.02
Section 1350 certification of principal financial officer
  
 101.INS
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.  


47
Table of Contents

SIGNATURES
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.
 
   OCEANEERING INTERNATIONAL, INC.
    
Date:February 19, 201628, 2019By:
/S/ M. KEVIN MCEVOY
RODERICK A.LARSON
    M. Kevin McEvoyRoderick 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 TitleDate
/S/ M. KEVIN MCEVOYRODERICK A. LARSON Chief Executive Officer and DirectorFebruary 19, 201628, 2019
M. Kevin McEvoyRoderick A. Larson (Principal Executive Officer) 
    
/S/ ALAN R. CURTIS Senior Vice President and Chief Financial OfficerFebruary 19, 201628, 2019
Alan R. Curtis (Principal Financial Officer) 
    
/S/ W. CARDON GERNER Senior Vice President and Chief Accounting OfficerFebruary 19, 201628, 2019
W. Cardon Gerner (Principal Accounting Officer) 
    
/S/ JOHN R. HUFF Chairman of the BoardFebruary 19, 201628, 2019
John R. Huff
/S/ WILLIAM B. BERRYDirectorFebruary 28, 2019
William B. Berry   
    
/S/ T. JAY COLLINS DirectorFebruary 19, 201628, 2019
T. Jay Collins   
    
/S/ D. MICHAEL HUGHESDEANNA L. GOODWIN DirectorFebruary 19, 201628, 2019
D. Michael HughesDeanna L. Goodwin
/S/ M. KEVIN MCEVOYDirectorFebruary 28, 2019
M. Kevin McEvoy   
    
/S/ PAUL B. MURPHY, JR. DirectorFebruary 19, 201628, 2019
Paul B. Murphy, Jr.   
    
/S/ HARRIS J. PAPPASJON ERIK REINHARDSEN DirectorFebruary 19, 201628, 2019
Harris J. Pappas Jon Erik Reinhardsen   
    
/S/ STEVEN A. WEBSTER DirectorFebruary 19, 201628, 2019
Steven A. Webster   
    


48
Table of Contents

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements
 
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of IncomeOperations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
 
Summary of Major Accounting Policies
Revenue
 
Selected Balance Sheet Information
 
Income Taxes
 
Selected Income Statement Information
 
Debt
 
Commitments and Contingencies
 
Operations by Business Segment and Geographic Area
 
Employee Benefit Plans
Selected Quarterly Financial Data (unaudited)
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.


49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors and Shareholders of Oceaneering International, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Oceaneering International, Inc. and Subsidiariessubsidiaries (the "Company")Company) as of December 31, 20152018 and 2014,2017, and the related consolidated statements of income,operations, comprehensive income (loss), equity and cash flows and shareholders' equity for each of the three years in the period ended December 31, 2015. 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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, 2019 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 thesethe 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 Public Company Accounting Oversight Board (United States).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. An audit includesmisstatement, 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 supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2016 expressed an unqualified opinion thereon.
 
/s/ ERNST & YOUNG LLP 
/s/ ERNST & YOUNG LLP
We have served as the Company's auditor since 2002.
Houston, Texas  
February 19, 201628, 2019  


50

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
 December 31,
December 31,
(in thousands, except share data) 2015 2014
2018
2017
ASSETS    



Current Assets:    



Cash and cash equivalents $385,235
 $430,714

$354,259

$430,316
Accounts receivable, net of allowances for doubtful accounts of $5,893 and $137 612,785
 778,372
Accounts receivable, net of allowances for doubtful accounts of $7,116 and $6,217
625,086

476,903
Inventory 328,453
 375,588

194,507

215,282
Other current assets 191,020
 128,876

71,037

64,901
Total Current Assets 1,517,493
 1,713,550

1,244,889

1,187,402
Property and Equipment, at cost 2,772,580
 2,660,788

2,837,587

2,815,579
Less accumulated depreciation 1,505,849
 1,354,966

1,872,917

1,751,375
Net Property and Equipment 1,266,731
 1,305,822

964,670

1,064,204
Other Assets:    



Goodwill 426,872
 331,474

413,121

455,599
Other non-current assets 218,440
 154,094

202,318

316,745
Total Other Assets 645,312
 485,568

615,439

772,344
Total Assets $3,429,536
 $3,504,940

$2,824,998

$3,023,950
LIABILITIES AND SHAREHOLDERS' EQUITY    
LIABILITIES AND EQUITY



Current Liabilities:    



Accounts payable $118,277
 $123,688

$102,636

$85,539
Accrued liabilities 477,284
 490,260

392,105

350,258
Income taxes payable 20,395
 65,189
Total Current Liabilities 615,956
 679,137

494,741

435,797
Long-term Debt 795,836
 743,469

786,580

792,312
Other Long-term Liabilities 439,010
 424,863

128,379

131,323
Commitments and Contingencies 
 




Shareholders' Equity:    
Equity:



Common Stock, par value $0.25 per share; 360,000,000 shares authorized; 110,834,088 shares issued 27,709
 27,709

27,709

27,709
Additional paid-in capital 230,179
 229,640

220,421

225,125
Treasury stock; 12,984,829 and 11,220,682 shares, at cost (743,577) (656,917)
Treasury stock; 12,294,873 and 12,554,714 shares, at cost
(704,066)
(718,946)
Retained earnings 2,364,786
 2,240,229

2,204,548

2,417,412
Accumulated other comprehensive income (300,363) (183,190)
Total Shareholders' Equity 1,578,734
 1,657,471
Total Liabilities and Shareholders' Equity $3,429,536
 $3,504,940
Accumulated other comprehensive loss
(339,377)
(292,136)
Oceaneering Shareholders' Equity
1,409,235

1,659,164
Noncontrolling Interest
6,063

5,354
Total Equity
1,415,298

1,664,518
Total Liabilities and Equity
$2,824,998

$3,023,950
The accompanying Notes are an integral part of these Consolidated Financial Statements.


51

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
 
 Year Ended December 31,
Year Ended December 31,
(in thousands, except per share data)(in thousands, except per share data) 2015 2014 2013(in thousands, except per share data)
2018
2017
2016
RevenueRevenue $3,062,754
 $3,659,624
 $3,287,019
Revenue
$1,909,482

$1,921,507

$2,271,603
Cost of services and productsCost of services and products 2,457,325
 2,800,423
 2,521,483
Cost of services and products
1,780,256

1,726,897

1,992,376
Gross Margin 605,429
 859,201
 765,536
Gross Margin
129,226

194,610

279,227
Selling, general and administrative expenseSelling, general and administrative expense 231,619
 230,871
 220,420
Selling, general and administrative expense
198,259

183,954

208,463
Goodwill impairmentGoodwill impairment 76,449
 —
 —
Income from Operations 373,810
 628,330
 545,116
Income (Loss) From Operations
(145,482)
10,656

70,764
Interest incomeInterest income 607
 293
 554
Interest income
9,962

7,355

3,900
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized (25,050) (4,708) (2,194)Interest expense, net of amounts capitalized
(37,742)
(27,817)
(25,318)
Equity earnings (losses) of unconsolidated affiliatesEquity earnings (losses) of unconsolidated affiliates 2,230
 (51) 133
Equity earnings (losses) of unconsolidated affiliates
(3,783)
(1,983)
244
Other income (expense), netOther income (expense), net (15,336) (387) (1,273)Other income (expense), net
(8,788)
(6,055)
(6,244)
Income before Income Taxes 336,261
 623,477
 542,336
Income (Loss) Before Income Taxes
(185,833)
(17,844)
43,346
Provision for income taxes 105,250
 195,148
 170,836
Provision (benefit) for income taxesProvision (benefit) for income taxes
26,494

(184,242)
18,760
Net Income $231,011
 $428,329
 $371,500
Net Income (Loss)
$(212,327)
$166,398

$24,586
Cash dividends declared per Share $1.08
 $1.03
 $0.84
Basic Earnings per Share $2.35
 $4.02
 $3.43
Weighted average basic shares outstanding 98,417
 106,593
 108,158
Diluted Earnings per Share $2.34
 $4.00
 $3.42
Weighted average diluted shares outstanding 98,808
 107,091
 108,731
      
Weighted average shares outstandingWeighted average shares outstanding
     

Basic
98,496
 98,238
 98,035
Diluted 98,496
 98,764
 98,424
Earnings (loss) per shareEarnings (loss) per share      
Basic $(2.16) $1.69
 $0.25

Diluted
$(2.16) $1.68
 $0.25
Cash dividends declared per shareCash dividends declared per share $—
 $0.45
 $0.96
The accompanying Notes are an integral part of these Consolidated Financial Statements.


52

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

 Year Ended December 31,
Year Ended December 31,
(in thousands)(in thousands)
2018
2017
2016
 2015 2014 2013





      
Net Income $231,011
 $428,329
 $371,500
Net Income (Loss)Net Income (Loss)
$(212,327) $166,398
 $24,586
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:      Other comprehensive income (loss), net of tax:





Foreign currency translation (118,705) (128,666) (71,282)Foreign currency translation
(47,026)
10,723

(5,559)
Pension-related adjustments 1,531
 (1,947) 859
Pension-related adjustments
(215)
(195)
3,258
Other comprehensive income (loss)Other comprehensive income (loss) (117,174) (130,613) (70,423)Other comprehensive income (loss)
(47,241)
10,528

(2,301)
Comprehensive Income $113,837
 $297,716
 $301,077
Comprehensive Income (Loss)Comprehensive Income (Loss)
$(259,568)
$176,926

$22,285



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


53

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Cash Flows from Operating Activities:            
Net income $231,011
 $428,329
 $371,500
Net income (loss) $(212,327) $166,398
 $24,586
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization 241,235
 229,779
 202,228
Deferred income tax provision 29,090
 70,717
 51,800
Net loss (gain) on dispositions of property and equipment 4,917
 (1,165) 450
Depreciation and amortization, including goodwill impairment 293,590
 213,519
 250,247
Deferred income tax provision (benefit) 11,912
 (235,013) 98
Inventory write-downs —
 —
 30,490
Net loss (gain) on dispositions of property and equipment and cost method investment (8,215) 216
 387
Noncash compensation 17,289
 20,034
 19,380
 11,620
 11,518
 14,687
Distributions from unconsolidated affiliates greater than earnings —
 —
 878
Excluding the effects of acquisitions, increase (decrease) in cash from:            
Accounts receivable 178,796
 (8,482) (101,912) (86,724) 13,144
 123,036
Inventory 59,182
 66,327
 (110,508) (12,485) 65,502
 17,833
Other operating assets (65,786) (11,197) (22,380) 13,587
 (38,163) 53,946
Currency translation effect on working capital, excluding cash (30,228) (21,603) (12,114) (4,369) 8,017
 (9,183)
Accounts payable and accrued liabilities (44,783) (43,507) 128,297
 28,505
 (76,309) (115,212)
Income taxes payable (45,943) (15,639) 2,435
 (2,537) (5,499) (38,985)
Other operating liabilities (14,372) 8,169
 1,370
 4,010
 13,148
 (12,491)
Total adjustments to net income 329,397
 293,433
 159,924
Total adjustments to net income (loss) 248,894
 (29,920) 314,853
Net Cash Provided by Operating Activities 560,408
 721,762
 531,424
 36,567
 136,478
 339,439
Cash Flows from Investing Activities:            
Purchases of property and equipment (199,970) (386,883) (382,531) (109,467) (93,680) (112,392)
Business acquisitions, net of cash acquired (224,018) (39,788) (11,059) (68,571) (11,278) (30,121)
Other investments (19,531) —
 —
Proceeds from maturities and redemption of investments in Angola bonds 69,789
 —
 —
Purchase of Angola bonds (10,236) (10,777) (39,130)
Distributions of capital from unconsolidated affiliates 5,963
 4,772
 4,279
 2,372
 2,556
 6,470
Dispositions of property and equipment and equity investment 376
 2,427
 11,666
Proceeds from sale of property and equipment and cost method investment 17,239
 938
 3,417
Other investing activities 32
 206
 2,285
Net Cash Used in Investing Activities (437,180) (419,472) (377,645) (98,842) (112,035) (169,471)
Cash Flows from Financing Activities:            
Net proceeds of 4.65% Senior Notes, net of issuance costs —
 493,125
 —
Net proceeds (payments) of bank credit facilities, net of new loan costs 49,665
 248,429
 (93,739)
Excess tax benefits from employee benefit plans 247
 3,932
 4,279
Net proceeds from issuance of 6.000% Senior Notes, net of issuance costs 295,816
 —
 —
Repayment of term loan facility (300,000) —
 —
Cash dividends (106,454) (109,742) (90,885) —
 (44,220) (94,138)
Purchases of treasury stock (100,459) (590,384) —
Net Cash Provided by (Used in) Financing Activities (157,001) 45,360
 (180,345)
Other financing activities (1,444) (1,702) (1,921)
Net Cash Used in Financing Activities (5,628) (45,922) (96,059)
Effect of exchange rates on cash (11,706) (8,366) (2,553) (8,154) 1,602
 (8,951)
Net Increase (Decrease) in Cash and Cash Equivalents (45,479) 339,284
 (29,119) (76,057) (19,877) 64,958
Cash and Cash Equivalents—Beginning of Period 430,714
 91,430
 120,549
 430,316
 450,193
 385,235
Cash and Cash Equivalents—End of Period $385,235
 $430,714
 $91,430
 $354,259
 $430,316
 $450,193

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


54

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
           Accumulated Other
Comprehensive Income  (Loss)		  




 
 
Accumulated Other
Comprehensive Income  (Loss)

    
 Common Stock Issued 
Additional
Paid-in
Capital
Treasury
Stock
 
Retained
Earnings
 Currency
Translation
Adjustments		 Pension  
Common Stock
Additional
Paid-in
Capital		Treasury
Stock
Retained
Earnings
Currency
Translation
Adjustments
Pension
Oceaneering Shareholders' Equity Noncontrolling Interest Total Equity
(in thousands) Shares Amount Total 

 
Balance, December 31, 2012
110,834
 $27,709
 $212,940
 $(84,062) $1,641,027
 $21,138
 $(3,292) $1,815,460
Net Income —
 —
 —
 —
 371,500
 —
 —
 371,500
Other Comprehensive Income —
 —
 —
 —
 —
 (71,282) 859
 (70,423)
Balance, December 31, 2015
$27,709

$230,179

$(743,577)
$2,364,786

$(297,515)
$(2,848)
$1,578,734
 $—
 $1,578,734
Net income
—

—

—

24,586

—

—

24,586
 —
 24,586
Other comprehensive income (loss)
—

—

—

—

(5,559) 3,258

(2,301) —
 (2,301)
Restricted stock unit activity —
 —
 6,447
 7,062
 —
 —
 —
 13,509

—

2,338

10,428

—

—

—

12,766
 —
 12,766
Restricted stock activity —
 —
 (1,264) 1,264
 —
 —
 —
 —

—

(1,947)
1,947

—

—

—

—
 —
 —
Tax benefits from employee benefit plans —
 —
 4,279
 —
 —
 —
 —
 4,279

—

(3,004)
—

—

—

—

(3,004) —
 (3,004)
Cash dividends —
 —
 —
 —
 (90,885) —
 —
 (90,885)
—

—

—

(94,138)
—

—

(94,138) —
 (94,138)
Balance, December 31, 2013
110,834
 27,709
 222,402
 (75,736) 1,921,642
 (50,144) (2,433) 2,043,440
Net Income —
 —
 —
 —
 428,329
 —
 —
 428,329
Other Comprehensive Income —
 —
 —
 —
 —
 (128,666) (1,947) (130,613)
Balance, December 31, 2016
27,709

227,566

(731,202)
2,295,234

(303,074)
410

1,516,643
 —
 1,516,643
Net income
—

—

—

166,398

—
 —

166,398
 —
 166,398
Other comprehensive income (loss)
—

—

—

—

10,723
 (195)
10,528
 —
 10,528
Restricted stock unit activity —
 —
 4,311
 8,198
 —
 —
 —
 12,509

—

480

9,335

—

—

—

9,815
 —
 9,815
Restricted stock activity —
 —
 (1,005) 1,005
 —
 —
 —
 —

—

(2,921)
2,921

—

—

—

—
 —
 —
Tax benefits from employee benefit plans —
 —
 3,932
 —
 —
 —
 —
 3,932
Cash dividends —
 —
 —
 —
 (109,742) —
 —
 (109,742)
—

—

—

(44,220)
—

—

(44,220) —
 (44,220)
Treasury stock purchases, 8,900,000 shares
—
 —
 —
 (590,384) —
 —
 —
 (590,384)
Balance, December 31, 2014 110,834
 27,709
 229,640
 (656,917) 2,240,229
 (178,810) (4,380) 1,657,471
Net Income —
 —
 —
 —
 231,011
 —
 —
 231,011
Other Comprehensive Income —
 —
 —
 —
 —
 (118,705) 1,531
 (117,174)
Non controlling interest acquired
—

—

—

—

—

—

—
 5,354
 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
Cumulative effect of ASC 606 adoption —
 —
 —
 (537) —
 —
 (537) —
 (537)
Net loss
—

—

—

(212,327)
—

—

(212,327) —
 (212,327)
Other comprehensive income (loss)
—

—

—

—

(47,026)
(215)
(47,241) —
 (47,241)
Restricted stock unit activity —
 —
 2,164
 11,928
 —
 —
 —
 14,092

—

(753)
10,929

—

—

—

10,176
 —
 10,176
Restricted stock activity —
 —
 (1,871) 1,871
 —
 —
 —
 —

—

(3,951)
3,951

—

—

—

—
 —
 —
Tax benefits from employee benefit plans —
 —
 247
 —
 —
 —
 —
 247
Cash dividends —
 —
 —
 —
 (106,454) —
 —
 (106,454)
Treasury stock purchases, 2,000,000 shares —
 —
 —
 (100,459) —
 —
 —
 (100,459)
Balance, December 31, 2015 110,834
 $27,709
 $230,180
 $(743,577) $2,364,786
 $(297,515) $(2,849) $1,578,734
Noncontrolling interest —
 —
 —
 —
 —
 —
 —
 709
 709
Balance, December 31, 2018
$27,709

$220,421

$(704,066)
$2,204,548

$(339,377)
$—

$1,409,235
 $6,063
 $1,415,298
                




















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


55
Table of Contents

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. ("Oceaneering", "we" or "us") 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.
Reclassifications. Certain amounts from prior periods have been reclassified to conform with the current year presentation.
Accounts Receivable – Allowances for Doubtful Accounts. We determine the need for allowances for doubtful accounts using the specific identification method. We generally do not generally require collateral from our customers.
Inventory. Inventory is valued at the lower of cost or market.net realizable value. We determine cost using the weighted-average method. During the second quarter of 2015,2016, we recorded an inventory write-downwrite-downs totaling $30.5 million for excess inventory of $9$25.2 million uponin our decision to cease manufacturing subsea blow out preventer ("BOP") control systems. In the fourth quarter of 2015, we recorded an inventory write-down of $16.0ROV segment and $5.3 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.our Subsea Products segment.
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 2025 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 10eight years. Amortization expense on intangible assets was $7.8$17 million, $6.6$10.2 million and $5.2$10.2 million in 2015, 20142018, 2017 and 2013,2016, respectively. 2018 amortization expense included a $3.5 million write-off of intangible assets associated with exiting the land survey business.
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 $2.4$7.3 million, $4.6 million and $0.7$3.7 million of interest in 20152018, 2017 and 2014, respectively and no interest in 2013.2016, 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.

56

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 amountamounts of the assetassets 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 costestimated 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.
Business Acquisitions. We account for business combinations using the acquisition method of accounting, with the acquisition priceprices being allocated to the assets acquired and liabilities assumed based on their fair values at the daterespective dates of acquisition.

In March 2018, we acquired Ecosse Subsea Limited ("Ecosse") for $68 million in cash. Headquartered in Aberdeen, Scotland, Ecosse builds and operates tools for seabed preparation, route clearance and trenching for the installation of submarine cables and pipelines. These services are offered on an integrated basis that includes vessels, ROVs and survey services. We made several smaller acquisitions duringhave accounted for this acquisition by allocating the periods presented, nonepurchase price to the assets acquired and liabilities assumed based on their estimated fair values as of which were material.

the date of acquisition. This purchase price allocation is preliminary and is subject to change upon completion of our valuation procedures. We have included Ecosse’s operations in our consolidated financial statements starting from the date of closing and its operating results are reflected in our Subsea Projects segment.
In April 2015,August 2017, we completedacquired a 60% controlling ownership interest in Dalgidj LLC ("Dalgidj") for approximately $12.4 million. In connection with the acquisitionpurchase of C & C Technologies, Inc. ("C&C"). C&Cthe equity interest, we advanced Dalgidj $6.4 million to pay off certain of its indebtedness. Dalgidj is a global provider of ocean-bottom mapping services in deepwater utilizing customized autonomous underwater vehiclesan Azerbaijan company that provides office and provides marine construction surveysyard facilities for both surfacewarehousing, logistics and subsea assets, as well as satellite-based positioning services for drilling rigsadministration to foreign 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 surveyslocal companies in the U.S. Gulf of Mexico. The acquisition price of approximately $224 million was paidCaspian Sea basin.  Dalgidj also owns a 49% interest in cash.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. 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 itsDalgidj's operating results are reflectedincluded in our Subsea Projects segment.segment, and its activity subsequent to the date of acquisition was not significant.

We made several other smaller acquisitions during the periods presented, none of which were material.

Dispositions. In September 2018, we consummated the sale of our cost method investment in ASV Global, LLC for $15 million. The acquisitiontotal consideration is subject to final working capital adjustments and customary holdbacks. The sale resulted in a pre-tax gain of C&C did not have a material effect on$9.3 million, which is reflected in Other income (expense), net in our operating results, cash flows from operations or financial position.Consolidated Statement of Operations for the year ended December 31, 2018.
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 first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we are required to perform the quantitative analysis to determine the fair value for the reporting unit. Thereafter, we 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.
The fair value of our reporting units in our 2017 quantitative analysis exceeded their respective carrying amounts. In our 2018 annual goodwill evaluation, we performed a qualitative assessment for our Subsea Projects reporting unit. Due to the protracted downturn in survey and vessel activity, we determined that it was more likely than not the fair value was less than the carrying amount. If, after assessingAs a result, we determined that a quantitative assessment was necessary for our Subsea Projects reporting unit.
In our 2018 quantitative analysis for the totalitySubsea Projects reporting unit, we estimated the fair value by weighing the results from the income approach and the market approach. These valuation approaches consider a number of events or circumstances,factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates and comparable multiples of similar companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. Based on this quantitative test, we determinedetermined that the fair value for Subsea Projects was less than the carrying value and, as a result, we recorded a pre-tax goodwill impairment loss of $76 million in the Subsea Project reporting unit. The goodwill impairment was included as a component of "Income (Loss) From Operations" in our Consolidated Statement of Operations for the year ended December 31, 2018. For the remaining reporting units, qualitative assessments were performed and we concluded that it iswas more likely than not that the fair value of athe reporting unit exceeds itswas more than the carrying amount, performing the two-step impairment test is unnecessary. However, if we conclude otherwise, then we are required to perform the first stepvalue of the two-step impairment test. We testedreporting unit.
Besides the goodwill attributable to each of our reporting units for impairment as of December 31, 2015 and 2014 and concluded that there was no impairment. The onlydiscussed above, the 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 7.8.

Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standard Update ("ASU") 2014-09, "Revenue from Contracts with Customers," which implemented Accounting Standards Codification Topic 606 ("ASC 606"). We have used the modified retrospective method applied to those contracts that were not completed as of January 1, 2018, and have utilized the practical expedient available under ASC 606 to reflect the effect on contract modifications in the aggregate. The cumulative effect of applying ASC 606 has been recognized as an adjustment to retained earnings as of January 1, 2018. The comparative information with respect to prior periods has not been retrospectively restated and continues to be reported under the accounting standards in effect for those periods.

The cumulative effect of the changes made to our Consolidated Balance Sheet as of January 1, 2018 for the adoption of ASC 606 was as follows:
(in thousands) Dec 31, 2017 Adjustments Due to ASC 606 Jan 1, 2018 Under ASC 606
Assets      
 Accounts receivable $476,903
 $(163,963) $312,940
 Contract assets —
 171,956
 171,956
     Total accounts receivable 476,903
 7,993
 484,896
 Inventory 215,282
 (34,187) 181,095
Liabilities      
 Accrued liabilities 350,258
 (63,045) 287,213
 Contract liabilities —
 37,590
 37,590
     Total accrued liabilities 350,258
 (25,455) 324,803
 Other long-term liabilities 131,323
 (202) 131,121
Equity      
 Retained earnings 2,417,412
 (537) 2,416,875


The adoption of ASU 2014-09 did not have a material impact on our consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the year ended December 31, 2018.

All of our revenue is realized through contracts with customers. We recognize our revenue according to the type of contract involved.type. On a daily basis, we recognize service revenue underover time for contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly. We use the input method to faithfully depict revenue recognition, 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. We have used the expedient available to recognize revenue when the billing corresponds to the value realized by the customer where appropriate.


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We account for significant fixed-price contracts, which we enter into mainly inrelating to our Subsea Products segment, and to a lesser extent in our Subsea Projects and Advanced Technologies segments, by recognizing revenue over time using thean input, cost-to-cost measurement percentage-of-completion method. In 2015,We use the input cost-to-cost method to faithfully depict revenue recognition. This commonly used method allows appropriate calculation of progress on our contracts. A performance obligation is satisfied as we accounted for 16%create a product on behalf of the customer over the life of the contract. The remainder of our revenue usingis recognized at the percentage-of-completion method. 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 determining whetherour service-based business lines, which principally charge on a contract should be accountedday rate basis for services provided, there is no significant impact in the pattern of revenue and profit recognition as a result of implementation of ASC 606. In our product-based business lines, we expect impacts on the pattern of our revenue and profit recognition in our contracts using the percentage-of-completion method, we consider whether:as a result of the requirement to exclude uninstalled materials and significant inefficiencies from the measure of progress. This is most likely to occur in our Subsea Products segment.

We apply judgment in the customer provides specifications for the constructiondetermination and allocation 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 astransaction price to the enforceable rights regarding the goods or services to be provided, consideration to be receivedperformance obligations, and the manner and termssubsequent recognition 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 percentagethe facts and circumstances 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.each contract. We routinely review estimates related to our contracts and, where 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. In prior years, we have recorded adjustments to earnings as a result of revisions to contract estimates. Although we are continually strivingWe strive to accurately estimate our contract costs and profitability accurately. However, there could be significant adjustments to overall contract costs could be significant in the future, periods.due to changes in facts and circumstances.
We recognize
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 remainderperformance 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 our revenue when persuasive evidencerecognition. Our payment terms generally do not provide financing of an arrangement exists, delivery has occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.
Revenue in Excesscontracts to customers, nor do we receive financing from customers as a result of Amounts Billed is classified as accounts receivable and relates to recoverable costs and accrued profits on contracts in progress. Billings in Excess of Revenue Recognized on uncompleted contracts are classified in accrued liabilities.
Revenue in Excess of Amounts Billed on uncompleted fixed-price contracts accounted for using the percentage-of-completion method is summarized as follows:
  December 31,
(in thousands) 2015 2014
Revenue recognized $694,690
 $368,888
Less: Billings to customers (649,550) (312,968)
Revenue in excess of amounts billed $45,140
 $55,920
these terms.

Billings in Excess of Revenue RecognizedPlease see Note 2 — "Revenue" — for more information on uncompleted fixed-priceour revenue from contracts accounted for using the percentage-of-completion method are summarized as follows:with customers.
  December 31,
(in thousands) 2015 2014
Amounts billed to customers $302,904
 $196,501
Less: Revenue recognized (190,812) (109,547)
Billings in excess of revenue recognized $112,092
 $86,954

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 8.9.

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Income Taxes. We provide income taxes at appropriate tax rates in accordance with our interpretation of the respective tax laws and regulations after review and consultation with our internal tax department, tax advisors and, in some cases, legal counsel in various jurisdictions. We provide for deferred income taxes for differences between carrying amounts of assets and liabilities for financial and tax reporting purposes. We provide for deferred U.S. income taxes on foreign income only to the extent such income is not indefinitely reinvested in foreign entities. We provide a valuation allowance against deferred tax assets when it is more likely than not that the asset will not be realized.
We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that we believe is greater than 50% 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 4.

Foreign Currency Translation. The functional currency for severalmost 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 (loss) as a component of shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Income.Operations. We recorded $(15.4)$18 million, $(0.5)$5.2 million and $0.1$4.8 million of foreign currency transaction gains (losses)losses in 2015, 20142018, 2017 and 2013,2016, respectively, and those amounts are included as a component of Other income (expense), net.net in our Consolidated Statement of Operations for the year ended December 31, 2018.
Earnings per Share. For each year presented, the only difference between our annual calculated weighted average basic and diluted number of shares outstanding is the effect of outstanding restricted stock units.

Repurchase Plans.Plan. In February 2010,December 2014, our Board of Directors approved a program to repurchase up to 12 million shares of our common stock. In 2014, we completed the purchase of the shares authorized under that program by repurchasing the remaining 8.9 million shares for $590 million. The total cost for the repurchase of the 12 million shares of our common stock was $677 million.
In December 2014, following completion of the February 2010 program, our Board of Directors approved a new share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. The December 2014 program calls for the repurchases to be made in the open market, or in privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and other relevant factors. The timing and amount of any repurchases will be determined by management based on its evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury stock for future use. The new program does not obligate us to repurchase any particular number of shares. We account for the shares we hold in treasury under the cost method, at average cost. Under the new program, we had repurchased 2 million shares of our common stock for $100 million through December 31, 2015. We account for thehave not repurchased any shares we hold in treasury under the cost method, at average cost.program since December 31, 2015.
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 (loss) 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 67 for information relative to the interest rate swapswaps we have had in effect since 2014. During the year ended December 31, 2013, we had no derivative instruments in effect.


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New Accounting Standards. Standards. In May 2014,January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 us 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 the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information. We are currently evaluating the requirements of ASU 2014-09 and have not yet determined its impact on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs." This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for our financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted, and we adopted this update in the second quarter of 2015 and reclassified prior period amounts to conform with the new presentation.
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 is effective for our inventories beginning January 1, 2017. We do not anticipate that this update will have a material impact on our consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16,No. 2016-01, "Business Combinations"Financial Instruments -Simplifying the Accounting for Measurement-Period Adjustments." This update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The update requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The update requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for our financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We do not anticipate that this update will have a material impact on our consolidated financial statements.
In November 2015, , the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes." Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. The Update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for our financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Earlier application is permitted. We do not anticipate that this update will have a material impact on our consolidated financial statements.

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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
provides an expedient for the valuation and impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. Whenvalue and impairment - when a qualitative assessment indicates that an impairment exists, an entity is required to measure the investment at fair value;value.
eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet;
requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments;
requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and
clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.
ASU No. 2016-01 will bewas effective for us beginning on January 1, 2018. We are currently assessing2018, and we have utilized the expedient for valuing equity investments without readily determinable fair values. This update has not had a material impact of these requirements on our consolidated financial statements.

Effective January 1, 2019, we will adopt ASU 2018-011, an amendment to ASU 2016-02 "Leases" (collectively, the "New Leases Standard") that (1) requires lessees to recognize a right to use asset and a lease liability for virtually all leases, and (2) updates previous accounting standards for lessors to align certain requirements with the updates to lessee accounting standards and the revenue recognition accounting standards. In a recent update, targeted improvements were made that provide for (1) an optional new transition method for adoption that results in initial recognition of a cumulative effect adjustment to retained earnings in the year of adoption and (2) a practical expedient for lessors, under certain circumstances, to combine the lease and non-lease components of revenue for presentation purposes. We expect to elect the new optional transition method of adoption. For some of our contracts that could contain a lease component, we expect to apply the practical expedient and recognize revenue based on the service component, which we have determined is the predominant component of our contracts.

We are finalizing our evaluation of the impacts that the adoption of this accounting guidance will have on the consolidated financial statements, and future disclosures.

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Tableexpect a material impact on our Consolidated Balance Sheet as additional right of Contentsuse assets and lease liabilities will be recognized upon adoption. We do not expect a material impact on our Consolidated Statement of Operations, Equity and Cash Flows from the adoption of the New Leases Standard.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other than Inventory." Previously, U.S. GAAP generally prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset was sold to an outside party. The amendments in this update 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 were effective for us beginning January 1, 2018. This ASU has not had 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 will become effective for us beginning January 1, 2019, and early adoption is permitted. We do not anticipate that this ASU will have a material effect on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, "Compensation - Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting."  This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees.  The amendments in this ASU will become effective for us beginning January 1, 2019, and early adoption is permitted. We do not anticipate that this ASU will have a material effect on our consolidated financial statements.



2.SELECTED BALANCE SHEET INFORMATION

2. Revenue

Revenue By Category

The following table presents Revenue disaggregated by business segment, geographical region, and timing of transfer of goods or services.
    Year Ended December 31,
(in thousands) 2018 2017 2016
Business Segment:      
 Energy Services and Products      
  Remotely Operated Vehicles $394,801
 $393,655
 $522,121
  Subsea Products 515,000
 625,513
 692,030
  Subsea Projects 329,163
 291,993
 472,979
  Asset Integrity 253,886
 236,778
 275,397
 Total Energy Services and Products 1,492,850
 1,547,939
 1,962,527
 Advanced Technologies 416,632
 373,568
 309,076
  Total $1,909,482
 $1,921,507
 $2,271,603
Geographic Operating Areas:      
 Foreign:      
  Africa $239,959
 $256,198
 $486,615
  United Kingdom 203,391
 236,177
 304,635
  Norway 185,552
 178,712
 166,180
  Asia and Australia 163,843
 193,865
 196,679
  Brazil 64,004
 42,607
 73,280
  Other 103,548
 81,364
 66,870
 Total Foreign 960,297
 988,923
 1,294,259
 United States 949,185
 932,584
 977,344
Total $1,909,482
 $1,921,507
 $2,271,603
    Dec 31, 2018
 
Timing of Transfer of Goods or Services:   
 Revenue recognized over time $1,762,103
 
 Revenue recognized at a point in time 147,379
 
Total $1,909,482
 

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, other milestones are achieved after revenue is recognized resulting in a Contract asset.

The following table provides information about Contract assets, and Contract liabilities from contracts with customers.
(in thousands) Dec 31, 2018 Jan 1, 2018
Contract assets $256,201
 $171,956
Contract liabilities 85,172
 37,590

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.

During the year ended December 31, 2018, Contract assets increased by $84 million from its opening balance due to the revenue recognition of $1.9 billion exceeding amounts billed of $1.8 billion. Contract liabilities increased $48 million from its opening balance, due to deferrals of milestone payments and billings totaling $77 million less revenue recognition of $29 million. There were no cancellations, impairments or other significant impacts in the period that relate to other categories of explanation.

Performance Obligations

As of December 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was $292 million. We expect to recognize revenue of $229 million over the next twelve months.

The aggregate amount of transaction price allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2018 are noted above. 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.

Due to the nature of our service contracts in our Remotely Operated Vehicle, Subsea Projects, Asset Integrity and Advanced Technologies 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 Subsea Products and Advanced Technologies segments, we have long-term contracts that extend beyond one year, and these make up the majority of the balance reported. 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 that 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 year ended December 31, 2018, which was associated with performance obligations completed or partially completed in prior periods was not significant.

As of December 31, 2018, there was no outstanding liability balance 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 a material right. 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 service or product, customer and regional geography involved.

Costs to Obtain or Fulfill a Contract

In line with the available 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 was no balance or amortization of Costs to obtain a contract in the current reporting period.

Costs to fulfill a contract primarily consist of certain mobilization costs incurred to provide services or products to our customers. These costs are deferred and amortized over the period of contract performance. The closing balance of Costs to fulfill a contract as of December 31, 2018 was $13 million, with $6.5 million of amortization for the year ended December 31, 2018. No impairment costs were recognized.

3. SELECTED BALANCE SHEET INFORMATION
The following is information regarding selected balance sheet accounts:
 
 December 31, December 31,
(in thousands)(in thousands) 2015 2014(in thousands) 2018 2017
Inventory:Inventory:    Inventory:    
Remotely operated vehicle parts and components $163,539
 $207,885
Remotely operated vehicle parts and components $108,939
 $97,313
Other inventory, primarily raw materials 164,914
 167,703
Other inventory, primarily raw materials 85,568
 117,969
Total $328,453
 $375,588
Total $194,507
 $215,282
        
Other Current Assets:    
Other current assets:Other current assets:    
Deferred income taxes $57,337
 $49,809
Prepaid expenses 60,858
 64,901
Prepaid expenses 133,683
 79,067
Angola bonds 10,179
 —
Total $191,020
 $128,876
Total 71,037
 64,901
        
Other Non-Current Assets:Other Non-Current Assets:    Other Non-Current Assets:    
Intangible assets, net $79,995
 $85,293
Angola bonds —
 68,280
Intangible assets, net $93,701
 $60,895
Cash surrender value of life insurance policies 51,131
 54,987
Cash surrender value of life insurance policies 55,924
 53,653
Investment in unconsolidated affiliates 39,333
 49,094
Investment in unconsolidated affiliates 49,144
 32,624
Deferred income taxes —
 24,633
Other 19,671
 6,922
Other 31,859
 34,458
Total $218,440
 $154,094
Total $202,318
 $316,745
        
Accrued Liabilities:Accrued Liabilities:    Accrued Liabilities:    
Payroll and related costs $161,228
 $209,481
Payroll and related costs $114,676
 $101,989
Accrued job costs 79,857
 79,894
Accrued job costs 62,281
 58,823
Deferred revenue 157,042
 116,936
Deferred revenue 85,172
 63,040
Other 79,157
 83,949
Income taxes payable 34,954
 30,589
Total $477,284
 $490,260
Other 95,022
 95,817
    Total $392,105
 $350,258
    
Other Long-Term Liabilities:Other Long-Term Liabilities:    Other Long-Term Liabilities:    
Deferred income taxes $353,181
 $322,758
Deferred income taxes $18,243
 $42,040
Supplemental Executive Retirement Plan 46,931
 45,423
Supplemental Executive Retirement Plan 42,992
 45,037
Long-Term Incentive Plan 15,650
 29,482
Long-Term Incentive Plan 8,076
 4,348
Accrued post-employment benefit obligations 7,511
 11,349
Accrued post-employment benefit obligations 3,239
 3,352
Other 15,737
 15,851
Uncertain tax positions 17,903
 5,566
Total $439,010
 $424,863
Tax Act transition tax due after one year 7,813
 —
Other 30,113
 30,980
Total $128,379
 $131,323


4. INCOME TAXES
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TableIn December 2017, the United States enacted the Tax Act, which included a number of Contentschanges 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% to 21% for tax years beginning after December 31, 2017, and the creation of a quasi-territorial tax system with a one‑time mandatory transition 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 interest expense and repeal of the domestic manufacturing deduction. In the period ended December 31, 2017, we recorded a provisional net tax benefit associated with the Tax Act and related matters of $189 million.


3.INCOME TAXES
The provisional amounts recorded in 2017 related to the transition tax, remeasurement of deferred taxes, our reassessment of permanently reinvested earnings, valuation allowances, and actions taken in anticipation of the Tax Act were finalized and a net expense of $23 million was recorded during 2018. Although we have completed our accounting on the effect of the Tax Act in our financial statements, regulatory guidance continues to be issued by the tax authorities. Any changes in the interpretation of the Tax Act as a result of such future regulatory guidance, which could materially affect our tax obligations and effective tax rate, will be recorded in the period that current or future proposed regulations become law.  

Our provisions (benefit) for income taxes and our cash taxes paid are as follows:
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Current:            
Domestic $11,028
 $17,856
 $45,468
 $(1,564) $13,390
 $(6,899)
Foreign 65,132
 106,575
 73,568
 16,146
 37,381
 25,561
Total current 76,160
 124,431
 119,036
 14,582
 50,771
 18,662
Deferred:            
Domestic 40,284
 73,520
 56,115
 (22,905) (213,200) (8,617)
Foreign (11,194) (2,803) (4,315) 34,817
 (21,813) 8,715
Total deferred 29,090
 70,717
 51,800
 11,912
 (235,013) 98
Total provision for income taxes $105,250
 $195,148
 $170,836
Total provision (benefit) for income taxes $26,494
 $(184,242) $18,760
Cash taxes paid $119,591
 $139,724
 $113,760
 $29,737
 $43,347
 $75,819
The components of income (loss) before income taxes are as follows:
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Domestic $51,018
 $110,800
 $68,066
 $(132,138) $(93,053) $(180,132)
Foreign 285,243
 512,677
 474,270
 (53,695) 75,209
 223,478
Income before income taxes $336,261
 $623,477
 $542,336
Income (loss) before income taxes $(185,833) $(17,844) $43,346
As of December 31, 20152018 and 2014,2017, our worldwide deferred tax assets, liabilities and net deferred tax liabilities were as follows: 

 December 31, December 31,
(in thousands) 2015 2014 2018 2017
Deferred tax assets:        
Deferred compensation $46,973
 $50,829
 $13,684
 $22,325
Deferred income 18,787
 16,305
 2,381
 2,015
Accrued expenses 12,624
 9,235
 13,683
 11,652
Net operating loss and other carryforwards 189,644
 222,065
Other 55,547
 27,808
 4,601
 2,203
Gross deferred tax assets 133,931
 104,177
 223,993
 260,260
Valuation allowance —
 —
Valuation allowances (203,040) (206,586)
Total deferred tax assets $133,931
 $104,177
 $20,953
 $53,674
Deferred tax liabilities:        
Property and equipment $126,079
 $128,958
 $36,850
 $65,366
Unremitted foreign earnings not considered indefinitely reinvested 296,018
 238,133
Basis difference in equity investments 7,678
 8,947
 2,346
 5,715
Other —
 1,088
Total deferred tax liabilities $429,775
 $377,126
 $39,196
 $71,081
Net deferred income tax liability $295,844
 $272,949
 $18,243
 $17,407

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Our net deferred tax liability is reflected within our balance sheet as follows: 
 December 31, December 31,
(in thousands) 2015 2014 2018 2017
Deferred tax liabilities $353,181
 $322,758
 $18,243
 $42,040
Current deferred tax assets (57,337) (49,809)
Long-term deferred tax assets —
 (24,633)
Net deferred income tax liability $295,844
 $272,949
 $18,243
 $17,407

At December 31, 2015,2018, we had approximately $40$781 million of foreign tax creditsnet operating and $9.6 million ofother loss carryforwards that were generated in various worldwide jurisdictions. We have no U.S. net operating losses available to reduce future payments of U.S. federal income taxes. The tax creditscarryforwards include $711 million that do not expire commencing in 2024, and the net$70 million that will expire from 2019 through 2028. We have recorded a total valuation allowance of $203 million on foreign operating losses expire commencing in 2032. We believeand tax credit carryforwards as well as other deferred tax assets as our management believes that it is more likely than not that all ourthese deferred tax assets are realizable. will not be realized.

A reconciliation of our beginning and ending amounts of valuation allowances is as follows:
  Year Ended December 31,
(in thousands) 2018 2017 2016
Balance at beginning of year $(206,586) $(4,200) $—
Increase due principally to foreign net operating losses (38,415) (146,360) (4,200)
Increase due to tax credit carryforwards generated in foreign operations (14,065) (56,026) —
Reduction due to utilization of foreign tax credits generated in prior year 56,026
 —
 —
Balance at end of year $(203,040) $(206,586) $(4,200)

The utilization of the foreign tax credits generated in the prior year was as a result of the mandatory repatriation requirements of the Tax Act.

Reconciliations between the actual provision for income taxes (benefit) on continuing operations and that computed by applying the United StatesU.S. statutory rate of 21% for 2018 and 35% for 2017 and 2016 to income before income taxes were as follows:

  Year Ended December 31,
  2015 2014 2013
United States statutory rate 35.0 % 35.0 % 35.0 %
State and local taxes —
 0.1
 0.2
Foreign tax rate differential (2.5) (2.6) (3.7)
Other items, net (1.2) (1.2) —
Total effective tax rate 31.3 % 31.3 % 31.5 %

We consider $641 million of unremitted earnings of our foreign subsidiaries to be indefinitely reinvested. It is not practical for us to compute the amount of additional U.S. tax that would be due on this amount. We have provided deferred income taxes on the foreign earnings not considered indefinitely reinvested.
  Year Ended December 31,
(in thousands) 2018 2017 2016
Income tax provision (benefit) at the U.S. statutory rate $(39,025) $(6,245) $15,171
Tax Act - earnings subject to tax-free repatriation —
 (222,019) —
Tax Act - net mandatory repatriation tax 8,790
 —
 —
Tax Act - remeasure of net U.S. deferred tax liabilities —
 (23,124) —
Valuation allowances 38,415
 89,217
 4,200
Foreign tax rate differential 475
 (21,163) (1,766)
Stock compensation 2,135
 3,112
 —
Uncertain tax positions 12,644
 (836) 680
Other items, net 3,060
 (3,184) 475
Total provision (benefit) for income taxes $26,494
 $(184,242) $18,760

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 $(0.9) million, $(0.4)$1.7 million and $1.7$0.6 million in 2015, 20142018 and 2013,2017, respectively, for penalties and interest on uncertain tax positions, which brought our total liabilities for penalties and interest on uncertain tax positions to $2.0$4.3 million and $2.9$2.6 million on our balance sheets at December 31, 20152018 and 2014,2017, 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 unrecognizeduncertain tax benefits,positions, not including associated foreign tax credits and penalties and interest, is as follows:
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Beginning of year $5,575
 $7,168
 $5,140
Balance at beginning of year $5,339
 $6,330
 $5,245
Additions based on tax positions related to the current year 260
 432
 100
 445
 1,213
 1,999
Reductions for expiration of statutes of limitations (1,649) (1,572) (1,225) (260) (650) (1,028)
Additions based on tax positions related to prior years 1,059
 254
 3,490
Additions (reductions) based on tax positions related to prior years 10,540
 314
 114
Reductions based on tax positions related to prior years —
 (707) (337) —
 (962) —
Settlements —
 —
 —
 (1,093) (906) —
Balance at end of year $5,245
 $5,575
 $7,168
 $14,971
 $5,339
 $6,330

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TableWe believe approximately $8.3 million of Contents

gross uncertain tax positions will be resolved within the next 12 months. Including associated foreign tax credits and penalties and interest, we have accrued a net total of $5.7$18 million and $5.6 million in the caption "other long-term liabilities" on our balance sheet at December 31, 20152018 and 2017, respectively, for unrecognizeduncertain tax benefits. We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12 months.positions.
We fileconsider the earnings of our foreign subsidiaries to be indefinitely reinvested. As of December 31, 2018, we did not provide for deferred taxes on earnings of our foreign subsidiaries that are indefinitely reinvested. If we were to make a consolidated U.S. federal income tax return for Oceaneering International, Inc. and our domestic subsidiaries. We conduct our international operations in a numberdistribution from the unremitted earnings of locations that have varying laws and regulations with regard to income and other taxes, some of which arethese subsidiaries, we would be subject to interpretation. Our management believestaxes payable to various jurisdictions, however, it is not practical to estimate the amount of tax that adequate provisions have been made for allwould ultimately be due if remitted. If our expectations were to change regarding future tax consequences, we may be required to record additional deferred taxes that will ultimately be payable, although final determinationcould have a material effect on our Consolidated Balance Sheets, Consolidated Statements of tax liabilities may differ from our estimates.Operations or Consolidated Statements of Cash Flows.

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                                  Periods
United States 20122014
United Kingdom 20122015
Norway 20052007
Angola 20102013
Brazil 20102012
Australia 20112013


4.SELECTED INCOME STATEMENT INFORMATION
5. SELECTED INCOME STATEMENT INFORMATION
 
The following schedule shows our revenue, costs and gross margins by services and products: 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Revenue:            
Services $2,001,167
 $2,336,304
 $2,174,739
 $1,245,927
 $1,181,229
 $1,509,786
Products 1,061,587
 1,323,320
 1,112,280
 663,555
 740,278
 761,817
Total revenue 3,062,754
 3,659,624
 3,287,019
 1,909,482
 1,921,507
 2,271,603
Cost of Services and Products:            
Services 1,585,305
 1,742,411
 1,624,483
 1,135,084
 1,040,817
 1,330,218
Products 800,316
 946,923
 788,109
 578,212
 625,843
 615,438
Unallocated expenses 71,704
 111,089
 108,891
 66,960
 60,237
 46,720
Total cost of services and products 2,457,325
 2,800,423
 2,521,483
 1,780,256
 1,726,897
 1,992,376
Gross margin:            
Services 415,862
 593,893
 550,256
 110,843
 140,412
 179,568
Products 261,271
 376,397
 324,171
 85,343
 114,435
 146,379
Unallocated expenses (71,704) (111,089) (108,891) (66,960) (60,237) (46,720)
Total gross margin $605,429
 $859,201
 $765,536
 $129,226
 $194,610
 $279,227



656. DEBT
Table of Contents

5.DEBT
Long-term Debt consisted of the following: 
  December 31,  December 31,
(in thousands) 2015 2014(in thousands) 2018 2017
4.650% Senior Notes due 2024:4.650% Senior Notes due 2024:    4.650% Senior Notes due 2024: $500,000
 $500,000
Principal of the notes $500,000
 $500,000
Issuance costs, net of amortization (6,073) (6,761)
Fair value of interest rate swap on $100 million of principal 1,909
 230
6.000% Senior Notes due 2028:6.000% Senior Notes due 2028:300,000,000
300,000
 —
Term Loan FacilityTerm Loan Facility 300,000
 250,000
Term Loan Facility —
 300,000
Fair value of interest rate swaps on $200 million of principalFair value of interest rate swaps on $200 million of principal (5,600) (2,990)
Unamortized debt issuance costsUnamortized debt issuance costs (7,820) (4,698)
Revolving Credit FacilityRevolving Credit Facility —
 —
Revolving Credit Facility —
 —
Long-term DebtLong-term Debt $795,836
 $743,469
Long-term Debt $786,580
 $792,312

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 may redeem some or all of the 2024 Senior Notes and the 2028 Senior Notes (collectively, the "Senior Notes") at specified redemption prices. We used the net proceeds from the 2028 Senior Notes to repay our term loan indebtedness described further below.

In October 2014, we entered into a new credit agreement (as amended, the "Credit Agreement") with a group of banks to replace our prior principal credit agreement.banks. The Credit Agreement providesinitially provided for a $300 million three-year term loan (the "Term Loan Facility") and a $500 million five-year revolving credit facility (the "Revolving Credit Facility"). Subject to certain conditions, the aggregate commitments under the Revolving Credit Facility may be increased by up to $300 million at any time upon agreement between us and existing or additional lenders. Borrowings under the Revolving Credit Facility and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of theThe Credit Agreement and pursuant to its terms,also provided for a $300 million term loan, which we repaid all amounts outstanding under,in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and terminated, the prior credit agreement.cash on hand.

In November 2015,February 2018, we entered into an Agreement and Amendment No. 1 to Credit Agreement (the "Amendment") 4 to the Credit Agreement. The Agreement ("Amendment No. 4"). Amendment No. 4 amended the Credit Agreement to, (1) replace the maximum leverage ratio financial covenant with a new financial covenant restricting the maximum total capitalization ratio (defined in the Amendment to be the ratio of consolidated debt to total capitalization) to 55% and (2)among other things, extend the maturitiesmaturity of the Term Loan Facility and the Revolving Credit Facility by one year each, to October 27, 2018 and OctoberJanuary 25, 2020, respectively,2023 with the extending Lenders, which represent 93.75%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, 20192021, and thereafter $468.75$450 million until OctoberJanuary 25, 2020, and (b) the outstanding term loan advances pursuant to the Term Loan Facility will be $300 million until October 27, 2017 and thereafter $281.25 million until October 27, 2018.2023.

Borrowings under the Revolving Credit AgreementFacility 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 initially based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the ratings of our senior unsecured debt by 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% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for borrowings under the Term Loan Facility;; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for borrowings under the Term Loan Facility.. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) 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 enter into transactions with affiliates 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, 2015,2018, we were in compliance with all the covenants set forth in the Credit Agreement.

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In November 2014, we completedWe have two interest rate swaps in place on a total of $200 million of the public offering of $500 million aggregate principal amount of 4.650%2024 Senior Notes due 2024 (the "Senior Notes"). We payfor the period to November 2024. See Note 7 for a description of these interest on the Senior Notes on May 15 and November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on November 15, 2024. We may redeem some or all of the Senior Notes at specified redemption prices. We 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.rate swaps.

We incurred $6.9 million and $4.2 million of issuance costs related to the 2024 Senior Notes and $2.2the 2028 Senior Notes, respectively, and $2.6 million of new loan costs, including costs of the amendments prior to Amendment No. 4, related to the Credit Agreement. The costs, net of accumulated amortization, are included, as a reduction of Long-term debt in our Consolidated Balance Sheet, as it pertains to the Senior Notes, and in Other non-current assets as it pertains to the Credit Agreement. We are amortizing these costs which are included on our balance sheet as a reduction of debtto Interest expense through the maturity date for the Senior Notes and as an other non-current assetto January 2023 for the Credit Agreement, to interest expense over ten years for the Senior Notes and over six years for the Revolving Credit Facility and the Term Loan Facility.Agreement.

We made cash interest payments of $27.2$37 million, $3.7$32 million and $2.1$29 million in 2015, 20142018, 2017 and 2013,2016, respectively.


6.
7. COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

Lease Commitments
At December 31, 2015,2018, we occupied several facilities under noncancellable operating leases expiring at various dates through 2025.2035. Future minimum rentals under all of our operating leases, including vessel rentals, are as follows:
 
(in thousands)    
2016 $123,503
2017 55,377
2018 23,860
2019 15,313
 $35,064
2020 13,754
 32,216
2021 29,014
2022��28,213
2023 27,083
Thereafter 86,384
 236,161
Total Lease Commitments $318,191
 $387,751
Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately $229$101 million, $257$97 million and $191$205 million in 2015, 20142018, 2017 and 2013,2016, respectively.
Insurance
We self-insure forThe workers' compensation, maritime employer's liability and comprehensive general liability claims to levelsinsurance policies that we purchase each include a deductible layer, for which we would be responsible, that we consider financially prudent, and, beyondprudent. Insurance above the self-insurance level of exposure, we carry insurance, whichdeductible 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 uninsured expected liabilities arising from those obligations. However, it is possible that future earnings could be affected by changes in our estimates relating to these matters.


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Litigation

On June 17, 2014, a purported shareholder filed a derivative complaint against allIn the ordinary course of the then-current members ofbusiness, we are, from time to time, involved in litigation or subject to disputes, governmental investigations or claims related to our board of directorsbusiness activities, including, among other things:

performance or warranty-related matters under our customer and one of our former directors, as defendants, and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of our board of directors relating to nonexecutive director compensation. The plaintiff is seeking relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ feessupplier contracts and other costs. Webusiness arrangements; and the defendants filed a motion to dismiss the complaint
workers’ compensation claims, Jones Act claims, occupational hazard claims, premises liability claims and a supporting brief on September 5, 2014, asserting that the complaint failed to state a claim on which relief could be granted, and further that the plaintiff did not comply with procedural requirements necessary to allow him to commence litigation against certain directors on our behalf. The Court has not yet ruled on that motion. In any event, our company is only a nominal defendant in this litigation, and we do not expect the resolution of this matter to have a material adverse effect on our results of operations, cash flows or financial position.other claims.

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 affecthave 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 or financial position.for the fiscal period in which that resolution occurs.
Letters of Credit
We had $58$55 million and $70$67 million in letters of credit outstanding as of December 31, 20152018 and 2014,2017, respectively, as guarantees in force for self-insurance requirements and various bid and performance bonds, which are usually for the duration of the applicable contract.
Financial Instruments and Risk Concentration

In the normal course of business, we manage risks associated with foreign exchange rates and interest rates through a variety of strategies, including the use of hedging transactions. As a matter of policy, we do not use derivative instruments unless there iswe 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 valuevalues of cash and cash equivalents approximates itsapproximate their fair valuevalues due to the shortshort-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 value. The carrying values of borrowings undervalues.
We estimated the Credit Agreement approximate theiraggregate fair values because the short-term durationsmarket value of the associated interest rate periods reflectSenior Notes to be $625 million as of December 31, 2018 based on quoted prices. Since the market changes to interest rates. Our borrowings underfor the Credit Agreement areSenior Notes is not an active market, the fair value of the Senior Notes is classified aswithin 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 termterms for the assets or liabilities).

We estimated the fair market value of the Senior Notes to be $422 million at December 31, 2015. We arrived at this estimate by computing the net present value of the future principal and interest payments using a yield to maturityhave two interest rate for securities of similar credit quality and term. The Senior Notes are classified as Level 2 in the fair value hierarchy under U.S. GAAP.

We have an interest rate swapswaps in place on $100a total of $200 million of the 2024 Senior Notes for the period from November 2014 to November 2024. The agreement swapsagreements swap the fixed interest rate of 4.650% 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%. We estimate the combined fair value of the interest rate swapswaps to be an asset,a net liability of $5.6 million at December 31, 2018, which is included on our balance sheet in our other non-current assets, of $1.9 million at December 31, 2015. This asset value wasOther 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, with the exception that 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 $19 million, $0.1 million and $7.3 million in 2018, 2017 and 2016, as a component of Other income (expense), net in our Consolidated Statements of Operations for those respective periods. Our foreign currency transaction losses are related primarily to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process from mid-2015 to 2017, causing our kwanza cash balances to increase during that period of time. However, beginning in 2018, the Angolan central bank has allowed us to repatriate cash from Angola. During 2018, we were able to repatriate $74 million of cash from Angola.
As of December 31, 2018 and December 31, 2017, we had the equivalent of approximately $9.3 million and $27 million of kwanza cash balances, respectively, in Angola reflected on our balance sheet. The decrease in kwanza cash balances in 2018 was mainly attributable to the repatriation of cash from Angola and cash used in our Angolan operations.
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. In 2018, we received a total of $70 million proceeds from maturities and redemptions of Angola bonds and reinvested $10 million of the proceeds in similar assets. We previously believed the chance of selling the bonds before maturity and repatriating cash out of Angola was remote. Our intention was to hold the bonds to maturity, and to reinvest funds from maturing bonds in similar long-term assets. Because we intend to sell the bonds if we are able to repatriate the proceeds, we changed our accounting for these bonds from held-to-maturity securities to available-for-sale securities.
We estimated the fair market value of the Angolan bonds to be $10 million at December 31, 2018 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. As of December 31, 2018, we have not recorded the difference between the fair market value and carrying


68
Tableamount of Contentsthe outstanding bonds through the Consolidated Statement of Comprehensive Income (Loss) due to the insignificant difference between the fair market value and the carrying amount of the bonds.
As of December 31, 2018, we classified $10 million of bonds due to mature in 2023 as Other current assets on our Consolidated Balance Sheet because we intend to sell these bonds to meet the needs of current operations in Angola.


7.OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
8. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information

We are a global oilfield provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications.energy industry. Through the use of our applied technology expertise, we also serve the defense, aerospace and commercial theme park industries. Our OilfieldEnergy Services and Products business consists of Remotely Operated Vehicles ("ROVs"), Subsea Products, Subsea Projects and Asset Integrity. Our ROV segment provides submersible vehicles operated from the surface to support offshore oil and gasenergy 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 oilfieldoffshore diving and support vessel operations, primarily for inspection, maintenance and repair and installation activities. Since April 2015, we haveWe also providedprovide 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-oilfield markets.non-energy industries. 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, 20152018 from those used in our consolidated financial statements for the years ended December 31, 20142017 and 2013.2016.


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The table that follows presents Revenue, Income from Operations and Depreciation and Amortization Expense and Equity Earnings of Unconsolidated Affiliates by business segment:
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Revenue            
Oilfield      
Energy Services and Products      
Remotely Operated Vehicles $807,723
 $1,069,022
 $981,728
 $394,801
 $393,655
 $522,121
Subsea Products 959,714
 1,238,746
 1,027,792
 515,000
 625,513
 692,030
Subsea Projects 604,484
 588,572
 509,440
 329,163
 291,993
 472,979
Asset Integrity 372,957
 500,237
 481,919
 253,886
 236,778
 275,397
Total Oilfield 2,744,878
 3,396,577
 3,000,879
Total Energy Services and Products 1,492,850
 1,547,939
 1,962,527
Advanced Technologies 317,876
 263,047
 286,140
 416,632
 373,568
 309,076
Total $3,062,754
 $3,659,624
 $3,287,019
 $1,909,482
 $1,921,507
 $2,271,603
Income from Operations      
Oilfield      
Income (Loss) from Operations      
Energy Services and Products      
Remotely Operated Vehicles $192,514
 $320,550
 $281,973
 $1,641
 $22,366
 $25,193
Subsea Products 175,585
 281,239
 231,050
 5,614
 45,539
 75,938
Subsea Projects 92,034
 107,852
 93,865
 (86,008) 10,279
 34,476
Asset Integrity 18,235
 55,469
 55,243
 8,660
 11,231
 7,551
Total Oilfield 478,368
 765,110
 662,131
Total Energy Services and Products (70,093) 89,415
 143,158
Advanced Technologies 9,689
 13,230
 24,954
 33,920
 22,039
 11,809
Unallocated Expenses (114,247) (150,010) (141,969) (109,309) (100,798) (84,203)
Total $373,810
 $628,330
 $545,116
 $(145,482) $10,656
 $70,764
Depreciation and Amortization Expense            
Oilfield      
Energy Services and Products      
Remotely Operated Vehicles $143,364
 $145,691
 $128,310
 $111,311
 $113,979
 $140,967
Subsea Products 49,792
 46,085
 39,964
 53,085
 52,561
 53,759
Subsea Projects 29,863
 18,561
 15,331
 114,481
 31,869
 34,042
Asset Integrity 10,713
 12,775
 12,401
 6,904
 7,715
 14,336
Total Oilfield 233,732
 223,112
 196,006
Total Energy Services and Products 285,781
 206,124
 243,104
Advanced Technologies 2,549
 2,574
 2,682
 3,081
 3,171
 3,120
Unallocated Expenses 4,954
 4,093
 3,540
 4,728
 4,224
 4,023
Total $241,235
 $229,779
 $202,228
 $293,590
 $213,519
 $250,247
            
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 2015,2018, we recognized restructuring expensesrecorded a pre-tax goodwill impairment of $25.4$76 million in our Subsea Projects segment, as a component of Depreciation and Amortization Expense. We also recorded the write-offs of certain equipment and intangible assets associated with exiting the land survey business and equipment obsolescence of $7.6 million, attributable to each reporting segment as follows:

Remotely Operated Vehicles - $7.20.6 million;
Subsea Products - $8.71.5 million; and
Subsea Projects - $5.5 million;

During 2016, we recognized restructuring expenses related to severance costs of $11.6 million, attributable to each reporting segment as follows:

Remotely Operated Vehicles - $3.8 million;
Subsea Products - $3.7 million;
Subsea Projects - $2.52.1 million;
Asset Integrity - $6.41.4 million;
Advanced Technologies - $0.20.5 million; and

Unallocated Expenses - $0.40.1 million.

The restructuring expenses consisted substantiallyRevenue from one customer, Royal Dutch Shell, accounted for 10% of severance costs that totaled $23.1 million during the year, of which $7.0 million was unpaid at December 31, 2015.
During each of 2015, 2014our 2018 total consolidated annual revenue, and, 2013, revenue from oneanother customer, BP plc and subsidiaries, accounted for 12% in 2017 and 18% in 2016 of our total consolidated annual revenue.



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The following table presents Assets, Property and Equipment and Goodwill by business segment as of the dates indicated: 
 December 31, December 31,
(in thousands) 2015 2014 2018 2017
Assets        
Oilfield    
Energy Services and Products    
Remotely Operated Vehicles $951,001
 $1,148,680
 $612,983
 $650,832
Subsea Products 890,041
 904,935
 723,774
 788,586
Subsea Projects 671,019
 448,378
 611,476
 626,791
Asset Integrity 295,955
 347,411
 241,693
 268,055
Total Oilfield 2,808,016
 2,849,404
Total Energy Services and Products 2,189,926
 2,334,264
Advanced Technologies 97,764
 86,203
 168,302
 129,185
Corporate and Other 523,756
 569,333
 466,770
 560,501
Total $3,429,536
 $3,504,940
 $2,824,998
 $3,023,950
Property and Equipment, net        
Oilfield    
Energy Services and Products    
Remotely Operated Vehicles $580,315
 $693,240
 $353,139
 $420,088
Subsea Products 348,042
 336,125
 295,297
 329,486
Subsea Projects 277,695
 214,478
 274,518
 272,649
Asset Integrity 35,359
 41,624
 20,556
 19,445
Total Oilfield 1,241,411
 1,285,467
Total Energy Services and Products 943,510
 1,041,668
Advanced Technologies 12,614
 8,780
 11,229
 10,850
Corporate and Other 12,706
 11,575
 9,931
 11,686
Total $1,266,731
 $1,305,822
 $964,670
 $1,064,204
Goodwill        
Oilfield    
Energy Services and Products    
Remotely Operated Vehicles $24,344
 $25,458
 $24,396
 $24,777
Subsea Products 88,279
 99,656
 99,744
 103,128
Subsea Projects 149,389
 19,712
 123,624
 155,292
Asset Integrity 143,018
 164,806
 143,515
 150,560
Total Oilfield 405,030
 309,632
Total Energy Services and Products 391,279
 433,757
Advanced Technologies 21,842
 21,842
 21,842
 21,842
Total $426,872
 $331,474
 $413,121
 $455,599
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.

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The following table presents Capital Expenditures, including business acquisitions, by business segment for the periods indicated:
 
 Year Ended December 31, Year Ended December 31,
(in thousands) 2015 2014 2013 2018 2017 2016
Capital Expenditures            
Oilfield      
Energy Services and Products      
Remotely Operated Vehicles $57,558
 $188,848
 $225,885
 $45,732
 $40,425
 $50,339
Subsea Products 69,434
 112,851
 102,653
 25,149
 27,711
 56,669
Subsea Projects 276,308
 91,918
 40,833
 99,701
 29,544
 25,602
Asset Integrity 9,841
 27,027
 8,327
 2,874
 3,651
 3,910
Total Oilfield 413,141
 420,644
 377,698
Total Energy Services and Products 173,456
 101,331
 136,520
Advanced Technologies 5,015
 2,352
 13,175
 3,550
 2,063
 2,742
Corporate and Other 5,832
 3,675
 2,717
 1,033
 1,564
 3,251
Total $423,988
 $426,671
 $393,590
 $178,038
 $104,958
 $142,513
Geographic Operating Areas
The following table summarizestables summarize certain financial data by geographic area:
       
  Year Ended December 31,
(in thousands) 2018 2017 2016
Revenue      
Foreign:      
Africa $239,959
 $256,198
 $486,615
United Kingdom 203,391
 236,177
 304,635
Norway 185,552
 178,712
 166,180
Asia and Australia 163,843
 193,865
 196,679
Brazil 64,004
 42,607
 73,280
Other 103,548
 81,364
 66,870
Total Foreign 960,297
 988,923
 1,294,259
United States 949,185
 932,584
 977,344
Total $1,909,482
 $1,921,507
 $2,271,603
       
 Year Ended December 31, December 31,
(in thousands) 2015 2014 2013(in thousands) 2018 2017
Revenue      
Foreign:      
Africa $659,038
 $795,229
 $696,202
United Kingdom 367,326
 456,804
 383,397
Norway 250,272
 488,789
 461,915
Asia and Australia 245,978
 317,277
 335,129
Brazil 118,056
 185,299
 213,282
Other 116,647
 98,881
 90,456
Total Foreign 1,757,317
 2,342,279
 2,180,381
United States 1,305,437
 1,317,345
 1,106,638
Total $3,062,754
 $3,659,624
 $3,287,019
Long-Lived Assets      
Property and equipment, net    
Foreign:          
Norway $274,868
 $332,503
 $429,603
 $58,042
 $78,279
Africa 205,440
 215,122
 186,865
 117,877
 135,345
United Kingdom 138,327
 113,191
 99,250
 106,330
 87,601
Asia and Australia 71,438
 90,061
 83,885
 48,837
 50,057
Brazil 57,896
 99,269
 112,840
 51,282
 50,842
Other 43,128
 56,079
 38,516
 21,374
 25,346
Total Foreign 791,097
 906,225
 950,959
 403,742
 427,470
United States 1,070,841
 838,273
 691,404
 560,928
 636,734
Total $1,861,938
 $1,744,498
 $1,642,363
 $964,670
 $1,064,204
    
Revenue is based on location where services are performed and products are manufactured.

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8.EMPLOYEE BENEFIT PLANS

9. 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 $22.8$18 million, $21.3$17 million and $18.4$20 million for the plan years ended December 31, 2015, 20142018, 2017 and 2013, respectively. In 2013, we amended the plan to give plan participants the option to be paid directly, or through the plan within 90 days of the close of the plan year, for dividends on Oceaneering International, Inc. stock that the plan participants held within the plan. This change allowed us to realize a tax benefit from tax deductions in excess of financial statement expense of $1.1 million and $0.8 million in 2015 and 2014,2016, respectively.
We also make matching contributions to foreign employee savings plans similar in nature to a 401(k) plan. In 2015, 20142018, 2017 and 2013,2016, these contributions, principally related to plans associated with U.K. and Norwegian subsidiaries, were $15.1$11 million, $18.7$9.1 million and $17.4$12 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 2015, 20142018, 2017 and 20132016 were $3.3$2.8 million, $3.3$3.2 million and $3.4$3.3 million, respectively.
We havehad a defined benefit plansplan covering some of our employees in the U.K. and Norway. There are no further benefits accruing underThe assets of the U.K. plan andwere invested in individual pensioners' annuities in anticipation of the Norway plan is closed to new participants.settlement, which occurred in the fourth quarter of 2018. There were no plan assets or obligations for the U.K plan at December 31, 2018. The projected benefit obligations for both plansthe U.K. plan were $28 million and $32$21 million at December 31, 2015 and 2014, respectively,2017 and the fair values of the plan assets (using Level 2 inputs) for both plansthe U.K. plan were $26 million and $27$22 million at December 31, 2015 and 2014, respectively.2017.
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.

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In 2015, 20142018, 2017 and 2013,2016, the Compensation Committee granted awards of performance units to certain of our key executives and employees and, in 2014 and 2013, our Board of Directors granted performance units under a prior incentive plan to our Chairman of the Board of Directors (our "Chairman").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 have approved specific financial goals and measures (as defined in the Performance Award Goals and Measures)defined), based on our cumulative cash flow from operations and a comparison of return on invested capital and cost of capital for each of the three-yearthree-year periods ending December 31, 2017, 20162020, 2019 and 20152018 to be used as the basis for the final value of the performance units. The final value of eachthe performance unit granted in 2015, 2014 and 2013 may range from $0 to $150.$200 in each of 2018 and 2017 and from $0 to $150 in 2016. 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 $6.8$3.9 million, $22.8$4.2 million and $22.9$(4.2) million in 2015, 20142018, 2017 and 2013,2016, respectively. As of December 31, 2015,2018, there were 462,674332,756 performance units outstanding.
During 2015, 20142018, 2017 and 2013,2016, the Compensation Committee granted restricted units of our common stock to certain of our key executives and employees. During 2015,2018, 2017 and 2016, our Board of

Directors granted restricted common stock to our nonemployee directors. During 2014 and 2013, our Board of Directors granted restricted units of our common stock to our Chairman and restricted common stock to our other nonemployee directors. Over 65%85%, 60%80%, and 60%65% of the grants made to our employees in 2015, 20142018, 2017 and 2013,2016, 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 two exceptions.one exception.  In each of February 2013 and February 2015,2017, 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 April 2013 and May 2015, respectively.  Both directors2017.  The director fulfilled that requirement by resigning concurrent with that election and the shares of restricted stock became vested.
In April 2009, the Compensation Committee adopted a policy that Oceaneering will not provide U.S. federal income tax gross-up payments to any of its directors or executive officers in connection with future awards of restricted stock or stock units. This policy had no effect on existing change-in-control agreements with two of our executive officers or the existing service agreement with our Chairman, which provideprovides 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 benefit (additional charge)charge realized from tax deductions in excess of (less than)less than the financial statement expense of our restricted stock grants was $(0.9)$2.1 million, $3.1 million and $3.4$3.0 million in 2015, 20142018, 2017 and 2013,2016, respectively. The 2018 and 2017 charges were recognized in our Consolidated Statements of Operations and the 2016 charge was recognized in our Consolidated Statements of Equity.


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The following is a summary of our restricted stock and restricted stock unit activity for 2015, 20142018, 2017 and 2013:2016:
 
Number 
Weighted
Average
Fair Value
 
Aggregate
Intrinsic Value
Number 
Weighted
Average
Fair Value
 
Aggregate
Intrinsic Value
Balance at December 31, 20121,031,572
 $42.27
  
Balance at December 31, 2015831,291
 60.49
  
Granted330,705
 62.55
  587,953
 27.90
  
Issued(376,078) 33.18
 $23,904,000
(278,572) 61.48
 $7,866,000
Forfeited(25,909) 52.72
  (88,665) 43.03
  
Balance at December 31, 2013960,290
 52.53
  
Balance at December 31, 20161,052,007
 43.48
  
Granted299,274
 70.63
  489,514
 26.70
  
Issued(411,800) 43.57
 $29,043,000
(277,968) 61.90
 $7,038,000
Forfeited(33,364) 62.66
  (81,748) 34.15
  
Balance at December 31, 2014814,400
 63.30
  
Balance at December 31, 20171,181,805
 32.84
  
Granted380,991
 52.40
  653,286
 18.05
  
Issued(311,119) 57.94
 $16,518,000
(320,147) 47.62
 $5,993,000
Forfeited(52,981) 60.45
  (71,047) 24.87
  
Balance at December 31, 2015831,291
 $60.49
  
Balance at December 31, 20181,443,897
 23.27
  
          

The restricted stock units granted in 2015, 20142018, 2017 and 20132016 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 2015, 20142018, 2017 and 20132016 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 $15.9$10 million, $17.2$11 million and $16.7$14 million for 2015, 20142018, 2017 and 2013,2016, respectively. As of December 31, 2015,2018, we had $14.9$10.0 million of future expense to be recognized related to our restricted stock unit plans over a weighted average remaining life of 1.71.6 years.


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Post-Employment Benefit
In 2001, we entered into an agreement with our Chairman who was also then our Chief Executive Officer. That agreement was amended in 2006 and in 2008. Pursuant to the amended agreement, the Chairman relinquished his position as Chief Executive Officer in May 2006 and began his post-employment service period on December 31, 2006, which continued through August 15, 2011, during which service period the Chairman, acting as an independent contractor, agreed to serve as nonexecutive Chairman of our Board of Directors. The agreement provides the Chairman with post-employment benefits for ten years following August 15, 2011. The agreement also provides for medical coverage on an after-tax basis to the Chairman, his spouse and children for their lives. We recognized the net present value of the post-employment benefits over the expected service period. Our total accrued liabilities, current and long-term, under this post-employment benefit were $5.1$3.2 million and $5.7$3.9 million at December 31, 20152018 and 2014,2017, 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).




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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
 
 Year Ended December 31, 2015
2018
Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
March 31
June 30
Sept. 30
Dec. 31
Total
Revenue $786,772
 $810,303
 $743,613
 $722,066
 $3,062,754

$416,413

$478,674

$519,300

$495,095

$1,909,482
Gross margin 163,449
 167,545
 168,313
 106,122
 605,429

18,828

29,728

47,635

33,035

129,226
Income from operations 106,650
 107,940
 113,464
 45,756
 373,810
Net income 69,499
 65,468
 68,539
 27,505
 231,011
Diluted earnings per share $0.70
 $0.66
 $0.70
 $0.28
 $2.34
Income (loss) from operations
(27,149)
(19,637)
(1,552)
(97,144)
(145,482)
Net income (loss)
(49,133)
(33,076)
(65,979)
(64,139)
(212,327)
Diluted loss per share
$(0.50)
$(0.34)
$(0.67)
$(0.65)
$(2.16)
Weighted average number of diluted shares outstanding 99,912
 98,893
 98,185
 98,268
 98,808

98,383

98,531

98,533

98,534

98,496











 Year Ended December 31, 2014
2017
Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
March 31
June 30
Sept. 30
Dec. 31
Total
Revenue $840,201
 $927,407
 $973,089
 $918,927
 $3,659,624

$446,176

$515,036

$476,120

$484,175

$1,921,507
Gross margin 189,491
 218,215
 241,855
 209,640
 859,201

44,855

53,571

54,885

41,299

194,610
Income from operations 132,862
 161,311
 181,918
 152,239
 628,330
Net income 91,225
 110,295
 124,338
 102,471
 428,329
Diluted earnings per share $0.84
 $1.02
 $1.16
 $0.99
 $4.00
Income (loss) from operations
(150)
9,390

10,531

(9,115)
10,656
Net income (loss)
(7,534)
2,132

(1,768)
173,568

166,398
Diluted earnings (loss) per share
$(0.08)
$0.02

$(0.02)
$1.76

$1.68
Weighted average number of diluted shares outstanding 108,724
 108,421
 107,407
 103,851
 107,091

98,138

98,751

98,270

98,852

98,764


77
Table of Contents

Exhibit Index

81
    Registration or File Number Form of Report Report Date Exhibit Number
*3.01
Restated Certificate of Incorporation 1-10945 10-K Dec. 2000 3.01
*3.02
Certificate of Amendment to Restated Certificate of Incorporation 1-10945 8-K May 2008 3.1
*3.03
Certificate of Amendment to Restated Certificate of Incorporation 1-10945 8-K May 2014 3.1
*3.04
Amended and Restated Bylaws 1-10945 8-K Aug. 2015 3.1
*4.01
Specimen of Common Stock Certificate 1-10945 10-K Mar. 1993 4(a)
*4.02
Credit Agreement, dated as of October 27, 2014, by and among Oceaneering International, Inc., Wells Fargo Bank, National Association, as administrative agent and swing line lender, and certain lenders party thereto 1-10945 8-K Oct. 2014 4.1
*4.03
Agreement and amendment No. 1 to Credit Agreement 1-10945 8-K Nov. 2015 4.1
*4.04
Indenture dated, November 21, 2014, between Oceaneering International, Inc. and Wells Fargo Bank, National Association, as Trustee, relating to senior debt securities of Oceaneering International, Inc.
 1-10945 8-K Nov. 2014 4.1
*4.05
First Supplemental Indenture, dated 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). 1-10945 8-K Nov. 2014 4.2
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
Oceaneering International, Inc. Retirement Investment Plan, Amended and Restated effective January 1, 2013 1-10945 10-Q June 2014 10.01
*10.02+First Amendment to the Oceaneering Retirement Investment Plan, effective June 1, 2014 1-10945 10-K Dec. 2014 10.02
*10.03+Second Amendment to the Oceaneering Retirement Investment Plan, effective January 1, 2015 1-10945 10-K Dec. 2014 10.35
*10.04+Oceaneering Retirement Investment Plan Trust Agreement effective December 31, 2013 1-10945 10-K Dec. 2014 10.13
*10.05+Amended and Restated Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff 1-10945 8-K Dec. 2006 10.1
*10.06+Modification to Service Agreement dated as of December 21, 2006 between Oceaneering and John R. Huff 1-10945 8-K Dec. 2008 10.9
*10.07+Trust Agreement dated as of May 12, 2006 between Oceaneering and United Trust Company, National Association 1-10945 8-K May 2006 10.2

78
Table of Contents

*10.08+First Amendment to Trust Agreement dated as of May 12, 2006 between Oceaneering International, Inc. and Bank of America National Association, as successor trustee 1-10945 8-K Dec. 2008 10.10
*10.09+Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2009 1-10945 8-K Dec. 2008 10.5
*10.10+Amended and Restated Oceaneering International, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2000 (for Internal Revenue Code Section 409A-grandfathered benefits) 1-10945 8-K Dec. 2008 10.6
*10.11+Change-of-Control Agreements dated as of November 16, 2001 between Oceaneering and M. Kevin McEvoy and Marvin J. Migura 1-10945 10-K Dec. 2001 10.06
*10.12+Form of First Amendment to Change-of-Control Agreement with M. Kevin McEvoy and Marvin J. Migura 1-10945 8-K Dec. 2008 10.7
*10.13+Form of Change-of-Control Agreement and Annex for Roderick A. Larson 1-10945 8-K Aug. 2015 10.3
*10.14+Form of Change-of-Control Agreement 1-10945 8-K May 2011 10.5
*10.15+Form of Indemnification Agreement 1-10945 8-K May 2011 10.4
*10.16+2010 Incentive Plan 333-166612 S-8 May 2010 4.6
*10.17+Amended and Restated 2010 Incentive Plan 1-10945 DEF 14A Apr. 2015 Appendix A
*10.18+Form of 2013 Employee Restricted Stock Unit Agreement for Executive Officers 1-10945 8-K Feb. 2013 10.1
*10.19+Form of 2013 Chairman Restricted Stock Unit Agreement for John R. Huff 1-10945 8-K Feb. 2013 10.3
*10.20+Form of 2013 Performance Unit Agreement for Executive Officers 1-10945 8-K Feb. 2013 10.2
*10.21+Form of 2013 Chairman Performance Unit Agreement for John R. Huff 1-10945 8-K Feb. 2013 10.4
*10.22+2013 Performance Award: Goals and Measures, relating to the form of 2013 Performance Unit Agreement for its executive officers and 2013 Chairman Performance Unit Agreement 1-10945 8-K Feb. 2013 10.5
*10.23+Form of 2013 Nonemployee Director Restricted Stock Agreement for T. Jay Collins, Jerold J. DesRoche, D. Michael Hughes, Paul B. Murphy, Jr. and Harris J. Pappas 1-10945 8-K Feb. 2013 10.6
*10.24+Oceaneering International, Inc. 2014 Annual Bonus Award Program Summary 1-10945 8-K Feb. 2015 10.6
*10.25+Form of 2014 Employee Restricted Stock Unit Agreement for Executive Officers 1-10945 8-K Feb. 2014 10.1
*10.26+Form of 2014 Chairman Restricted Stock Unit Agreement for Mr. Huff 1-10945 8-K Feb. 2014 10.3
*10.27+Form of 2014 Performance Unit Agreement for Executive Officers 1-10945 8-K Feb. 2014 10.2
*10.28+Form of 2014 Chairman Performance Unit Agreement for Mr. Huff 1-10945 8-K Feb. 2014 10.4
*10.29+2014 Performance Award: Goals and Measures, relating to the form of 2014 Performance Unit Agreement for its executive officers and 2014 Chairman Performance Unit Agreement 1-10945 8-K Feb. 2014 10.5

79
Table of Contents

*10.30+Form of 2014 Nonemployee Director Restricted Stock Agreement for Messrs. Collins, DesRoche, Hughes, Murphy and Pappas 1-10945 8-K Feb. 2014 10.6
*10.31+Oceaneering International, Inc. 2015 Annual Bonus Award Program Summary 1-10945 8-K Feb. 2015 10.7
*10.32+Form of 2015 Restricted Stock Unit Agreement 1-10945 8-K Feb. 2015 10.1
*10.33+Form of 2015 Performance Unit Agreement 1-10945 8-K Feb. 2015 10.2
*10.34+2015 Performance Award: Goals and Measures, relating to the form of 2015 Performance Unit Agreement 1-10945 8-K Feb. 2015 10.3
*10.35+Form of 2015 Nonemployee Director Restricted Stock Agreement for Messrs. Collins, Huff, Hughes, Murphy and Pappas 1-10945 8-K Feb. 2015 10.4
*10.36+Form of 2015 Nonemployee Director Restricted Stock Agreement for Mr. DesRoche 1-10945 8-K Feb. 2015 10.5
 12.01
Computation of Ratio of Earnings to Fixed Charges  
 21.01
Subsidiaries of Oceaneering  
 23.01
Consent of Independent Registered Public Accounting Firm  
 31.01
Rule 13a – 14(a)/15d – 14(a) certification of principal executive officer  
 31.02
Rule 13a – 14(a)/15d – 14(a) certification of principal financial officer  
 32.01
Section 1350 certification of principal executive officer  
 32.02
Section 1350 certification of principal financial officer  
 101.INS
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.        
 *
Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.  
 +
Management contract or compensatory plan or arrangement.  


80