UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September~~June 30, ~~2016~~2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number: 1-10945

OCEANEERING INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



Delaware	95-2628227
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11911 FM 529 Houston, Texas	77041
(Address of principal executive offices)	(Zip Code)

(713) 329-4500

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed from last report)

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

Indicate by check mark whether the registrant has submitted electronically 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated ~~filer"~~filer," "smaller reporting company," and ~~"smaller reporting~~"emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨(Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

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

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

¨ Yes þ No

Number of shares of Common Stock outstanding as of ~~October~~July 28, ~~2016: 98,065,073~~2017: 98,269,623

Oceaneering International, Inc.

Form 10-Q

Table of Contents



Part I	Financial Information

Item 1.	Financial Statements.
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Comprehensive Income
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.
Item 4.	Controls and Procedures.

Part II	Other Information

Item 1.	Legal Proceedings.
Item 6.	Exhibits.

Signatures

Index to Exhibits

PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements.

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	Sep 30, 2016			Dec 31, 2015			Jun 30, 2017			Dec 31, 2016
(in thousands, except share data)							Jun 30, 2017			Dec 31, 2016
	Sep 30, 2016	(unaudited)		Dec 31, 2015					(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	441,625		$	385,235		$	482,339		$	450,193
Accounts receivable, net of allowances for doubtful accounts of $7,982 and $5,893	510,424			612,785
Accounts receivable, net of allowances for doubtful accounts of $5,543 and $8,288							466,456			489,749
Inventory, net	297,195			328,453			266,636			280,130
Other current assets	110,024			191,020			46,274			42,523
Total Current Assets	1,359,268			1,517,493			1,261,705			1,262,595
Property and Equipment, at cost	2,770,569			2,772,580			2,744,441			2,728,125
Less accumulated depreciation	1,603,598			1,505,849			1,644,251			1,574,867
Net Property and Equipment	1,166,971			1,266,731			1,100,190			1,153,258
Other Assets:
Goodwill	448,289			426,872			450,801			443,551
Other non-current assets	263,042			218,440			279,105			270,911
Total Other Assets	711,331			645,312			729,906			714,462
Total Assets	$	3,237,570		$	3,429,536		$	3,091,801		$	3,130,315
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	95,303		$	118,277		$	81,676		$	77,593
Accrued liabilities	382,289			477,284			401,230			430,771
Income taxes payable	23,481			20,395
Total Current Liabilities	501,073			615,956			482,906			508,364
Long-term Debt	802,256			795,836			794,099			793,058
Other Long-term Liabilities	362,461			439,010			323,651			312,250
Commitments and Contingencies
Shareholders’ 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	223,665			230,179			221,731			227,566
Treasury stock; 12,773,015 and 12,984,829 shares, at cost	(731,448		)	(743,577		)
Treasury stock; 12,567,965 and 12,768,726 shares, at cost							(719,706		)	(731,202		)
Retained earnings	2,320,971			2,364,786			2,260,353			2,295,234
Accumulated other comprehensive loss	(269,117		)	(300,363		)	(298,942		)	(302,664		)
Total Shareholders' Equity	1,571,780			1,578,734			1,491,145			1,516,643
Total Liabilities and Shareholders' Equity	$	3,237,570		$	3,429,536		$	3,091,801		$	3,130,315

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


		Three Months Ended Sep 30,						Nine Months Ended Sep 30,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2016			2015			2016			2015			(in thousands, except per share data)	2017			2016			2017			2016
Revenue	Revenue	$	549,275		$	743,613		$	1,783,158		$	2,340,688		Revenue	$	515,036		$	625,539		$	961,212		$	1,233,883
Cost of services and products	Cost of services and products	513,832			575,300			1,555,002			1,841,381			Cost of services and products	461,465			530,306			862,786			1,041,170
	Gross Margin	35,443			168,313			228,156			499,307			Gross Margin	53,571			95,233			98,426			192,713
Selling, general and administrative expense	Selling, general and administrative expense	47,299			54,849			153,533			171,253			Selling, general and administrative expense	44,181			56,853			89,186			106,234
	Income (Loss) from Operations	(11,856		)	113,464			74,623			328,054			Income from Operations	9,390			38,380			9,240			86,479
Interest income	Interest income	684			229			2,421			436			Interest income	2,045			1,442			3,382			1,737
Interest expense, net of amounts capitalized	Interest expense, net of amounts capitalized	(6,325		)	(6,396		)	(18,924		)	(18,696		)	Interest expense, net of amounts capitalized	(7,599		)	(6,207		)	(13,867		)	(12,599		)
Equity in income (losses) of unconsolidated affiliates	Equity in income (losses) of unconsolidated affiliates	(246		)	1,567			543			1,313			Equity in income (losses) of unconsolidated affiliates	(394		)	263			(1,374		)	789
Other income (expense), net		570			(9,099		)	(6,823		)	(14,883		)
Other expense, net														Other expense, net	(58		)	(1,405		)	(2,614		)	(7,393		)
	Income (Loss) before Income Taxes	(17,173		)	99,765			51,840			296,224			Income (Loss) before Income Taxes	3,384			32,473			(5,233		)	69,013
Provision for income taxes (benefit)		(5,375		)	31,226			16,226			92,718
Provision for income taxes														Provision for income taxes	1,252			10,164			169			21,601
	Net Income (Loss)	$	(11,798	)	$	68,539		$	35,614		$	203,506		Net Income (Loss)	$	2,132		$	22,309		$	(5,402	)	$	47,412

Weighted average shares outstanding														Weighted average shares outstanding
Basic														Basic	98,263			98,060			98,201			98,006
Diluted														Diluted	98,751			98,424			98,201			98,355
Earnings (Loss) per Share														Earnings (Loss) per Share
Basic														Basic	$	0.02		$	0.23		$	(0.06	)	$	0.48
Diluted														Diluted	$	0.02		$	0.23		$	(0.06	)	$	0.48
Cash Dividends declared per Share	Cash Dividends declared per Share	$	0.27		$	0.27		$	0.81		$	0.81		Cash Dividends declared per Share	$	0.15		$	0.27		$	0.30		$	0.54
Basic Earnings (Loss) per Share		$	(0.12	)	$	0.70		$	0.36		$	2.06
Diluted Earnings (Loss) per Share		$	(0.12	)	$	0.70		$	0.36		$	2.06

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)


OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)


		Three Months Ended Sep 30,						Nine Months Ended Sep 30,						Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2016			2015			2016		2015			(in thousands)	2017		2016			2017			2016
Net Income (Loss)	Net Income (Loss)	$	(11,798	)	$	68,539		$	35,614	$	203,506		Net Income (Loss)	$	2,132	$	22,309		$	(5,402	)	$	47,412

Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:												Other comprehensive income (loss), net of tax:

	Foreign currency translation adjustments	16,411			(55,453		)	31,246		(100,100		)	Foreign currency translation adjustments	10,783		(19,807		)	3,722			14,835

Total other comprehensive income (loss)	Total other comprehensive income (loss)	16,411			(55,453		)	31,246		(100,100		)	Total other comprehensive income (loss)	10,783		(19,807		)	3,722			14,835

Total Comprehensive Income		$	4,613		$	13,086		$	66,860	$	103,406
Total Comprehensive Income (Loss)													Total Comprehensive Income (Loss)	$	12,915	$	2,502		$	(1,680	)	$	62,247

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended Sep 30,						Six Months Ended June 30,
(in thousands)	2016			2015			2017			2016
Cash Flows from Operating Activities:
Net income	$	35,614		$	203,506
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	(5,402	)	$	47,412
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	193,960			183,508			106,967			119,760
Deferred income tax provision (benefit)	(6,704		)	15,780			(23,771		)	761
Inventory write-downs	30,490			9,025
Net gain on sales of property and equipment	516			111
Net loss on sales of property and equipment							320			8
Noncash compensation	10,546			12,688			7,710			8,558
Excluding the effects of acquisitions, increase (decrease) in cash from:
Accounts receivable	102,361			98,357			23,293			65,660
Inventory	768			5,135			13,494			(14,570		)
Other operating assets	57,879			(49,140		)	(10,855		)	48,533
Currency translation effect on working capital, excluding cash	15,592			(19,366		)	(5,961		)	3,593
Current liabilities	(163,415		)	(80,086		)	(25,258		)	(119,182		)
Other operating liabilities	(14,857		)	(6,458		)	22,067			(15,932		)
Total adjustments to net income	227,136			169,554			108,006			97,189
Net Cash Provided by Operating Activities	262,750			373,060			102,604			144,601
Cash Flows from Investing Activities:
Purchases of property and equipment	(83,389		)	(139,208		)	(41,300		)	(52,944		)
Business acquisitions, net of cash acquired	(2,500		)	(229,979		)
Other investments	(39,818		)	(19,531		)
Other investing activities							(1,014		)	(30,158		)
Distributions of capital from unconsolidated affiliates	5,108			3,265			1,424			3,926
Dispositions of property and equipment	3,217			376			630			1,976
Net Cash Used in Investing Activities	(117,382		)	(385,077		)	(40,260		)	(77,200		)
Cash Flows from Financing Activities:
Proceeds of term loan	—			50,000
Net tax deficiency from employee benefit plans	(3,004		)	(781		)
Cash dividends	(79,429		)	(80,036		)	(29,479		)	(52,952		)
Purchases of treasury stock	—			(100,459		)
Other financing activities							(2,049		)	(1,945		)
Net Cash Used in Financing Activities	(82,433		)	(131,276		)	(31,528		)	(54,897		)
Effect of exchange rates on cash	(6,545		)	(16,266		)	1,330			(4,549		)
Net Increase (Decrease) in Cash and Cash Equivalents	56,390			(159,559		)
Net Increase in Cash and Cash Equivalents							32,146			7,955
Cash and Cash Equivalents—Beginning of Period	385,235			430,714			450,193			385,235
Cash and Cash Equivalents—End of Period	$	441,625		$	271,155		$	482,339		$	393,190

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF MAJOR ACCOUNTING POLICIES

Basis of Presentation. We have prepared these unaudited consolidated financial statements pursuant to instructions for quarterly reports on Form 10-Q, which we are required to file with the U.S. Securities and Exchange Commission (the "SEC"). These financial statements do not include all information and footnotes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). These financial statements reflect all adjustments that we believe are necessary to present fairly our financial position ~~at September~~as of June 30, ~~2016~~2017 and our results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, all such adjustments are of a normal and recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, ~~2015.~~2016. The results for interim periods are not necessarily indicative of annual results.

Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering International, Inc. and our 50% or more owned and controlled subsidiaries. We also consolidate entities that are determined to be variable interest entities if we determine that we are the primary beneficiary; otherwise, we account for those entities using the equity method of accounting. We use the equity method to account for our investments in unconsolidated affiliated companies of which we own an equity interest of between 20% and 50% and as to which we have significant influence, but not control, over operations. We use the cost method for all other long-term investments. Investments in entities that we do not consolidate are reflected on our balance sheet in Other non-current assets. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates. The preparation of financial statements in conformity with 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 period presentation.

Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or less from the date of investment.

Accounts Receivable – Allowances for Doubtful Accounts. We determine the need for allowances for doubtful accounts using the specific identification method. We do not generally require collateral from our customers.

Inventory. Inventory is valued at the lower of cost or ~~market.~~net realizable value. We determine cost using the weighted-average method. During the three- and nine-month periods ended September 30, 2016 we recorded inventory write-downs totaling $30.5 million for excess inventory of $25.2 million in our ROV segment and $5.3 million in our Subsea Products segment.

Property and Equipment and Long-Lived Intangible Assets. We provide for depreciation of property and equipment on the straight-line method over their estimated useful lives. 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. 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.

Intangible assets, primarily acquired in connection with business combinations, include trade names, intellectual property and customer relationships and are being amortized over their estimated useful lives.

We capitalize interest on assets where the construction period is anticipated to be more than three months. We capitalized ~~$1.0~~$1.2 million and ~~$0.6~~$0.9 million of interest in the three-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$2.8~~$2.2 million and ~~$1.7~~$1.8 million ~~of interest~~ in the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. We do not allocate general administrative costs to capital projects.

Our management periodically, and upon the occurrence of a triggering event, reviews the realizability of our property and equipment and long-lived intangible assets to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be

held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market

conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. For assets held for sale or disposal, the fair value of the asset is measured using fair market value less ~~cost~~estimated costs to sell. Assets are classified as held-for-sale when we have a plan for disposal of certain assets and those assets meet the held for sale criteria.

In the third quarter of 2016, the leading indicator for deepwater activity, contracted floating rigs, continued to decline, as the rate of rigs being idled, either by contract termination or expiration, continued. Therefore, we reassessed the number of ROVs we have in our fleet, as well as the associated inventory. As a result of our reassessment, we recorded a charge as additional depreciation related to our retirement of 39 ROVs this quarter for a net book value of $10.8 million. We also recorded a $2.9 million charge as additional depreciation in our Subsea Products segment related predominantly to tools in our portfolio used to support deepwater drilling and operations.

Business Acquisitions. We account for business combinations using the acquisition method of accounting, and, in each case, we allocate the acquisition price to the assets acquired and liabilities assumed based on their fair market values at the date of acquisition.

In April 2015, we completed the acquisition of C & C Technologies, Inc. ("C&C"). C&C is a global provider of ocean-bottom mapping services 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. The final acquisition price of approximately $224 million was paid in cash. We have accounted for this acquisition by allocating the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. We have included C&C's operations in our consolidated financial statements starting from the date of closing, and its operating results are reflected in our Subsea Projects segment. The acquisition of C&C did not have a material effect on our operating results, cash flows from operations or financial position.

Goodwill. InUnder existing GAAP at December 31, 2016, in our annual evaluation of goodwill for impairment, we first ~~assess~~assessed qualitative factors to determine whether the existence of events or circumstances ~~leads~~led to a determination that it iswas more likely than not that the fair value of a reporting unit iswas less than its carrying amount. If, after assessing the totality of events or circumstances, we ~~determine~~determined it iswas more likely than not that the fair value of a reporting unit iswas less than its carrying amount, we ~~are~~were required to perform the first step of the two-step impairment test. We tested the goodwill attributable to each of our reporting units for impairment as of December 31, ~~2015~~2016 and concluded that there was no impairment. In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04 "Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment." This update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this update are effective beginning January 1, 2020. Early adoption is permitted for testing dates after January 1, 2017, and the update is to be applied on a prospective basis. We adopted this update effective January 1, 2017.

In addition to our annual evaluation of goodwill for impairment, upon the occurrence of a triggering event, we review our goodwill 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.

Foreign Currency Translation. The functional currency for several of our foreign subsidiaries is the applicable local currency. Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, and the resulting translation adjustments are recognized, net of tax, in accumulated other comprehensive income as a component of shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Operations.

New Accounting Standards. In May 2014, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ~~Accounting Standards Update ("ASU")~~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 ~~chosen~~elected to apply ASU 2014-09 by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information.

~~adjusting comparative information.~~ We ~~are currently evaluating~~have formed a project team to implement this standard, and our project team has performed an initial assessment of our revenue streams, has completed its preliminary assessment of our contract population relevant to the standard, and has analyzed the impacts that ASU 2014-09 may have on our business. We believe that our project plan will enable us to complete all of the required work to assess our revenue position, create the necessary

policies, procedures and controls and calculate the cumulative effect of applying ASU 2014-09 at the date of initial application, in line with the timeline and requirements of the standard.

At this time, we have identified the following areas of our business that we expect to see some effects from the application of ASU ~~2014-09 and have not yet determined its impact on our consolidated financial statements.~~

~~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, 2017.2014-09. We ~~do not~~ anticipate that ~~this update~~elements of our product-related revenue and margins will ~~have a material impact on our consolidated financial statements.~~

~~In September 2015, the FASB issued ASU 2015-16,~~ ~~"Business Combinations –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,be accelerated as a result of the ~~change~~standard's treatment of contracts meeting the requirements of over-time recognition as compared to revenues recognized upon delivery currently. Additionally, ASU 2014-09 requires revenue recognition related to uninstalled materials if certain criteria are met. We expect that contracts within our Subsea Products segment will meet this criteria, and, as a result, we expect more variability in gross margin percentages on a period-to-period basis. We do not expect the ~~provisional amounts, calculated as if~~changes to be significant in the ~~accounting had been completed~~context of our overall results for 2018, and we are evaluating the projected adjustment to be recorded to retained earnings at the ~~acquisition date. The update~~ start of the transition period and the required disclosures.

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;

simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment — when a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value;

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 ~~on the face of the~~in other comprehensive income ~~statement or disclose in the notes~~ the portion of the ~~amount recorded~~total change in ~~current-period earnings~~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 ~~line item that would have been recorded in previous reporting periods if~~measurement category and form of financial asset (that is, securities or loans and receivables) on the ~~adjustment~~balance sheet or the accompanying notes to the ~~provisional amounts had been recognized as~~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 2016-01 will be effective for us beginning on January 1, 2018. We are currently assessing the impact of the ~~acquisition date.~~requirements of ASU ~~2015-16 became effective for our financial statements January 1, 2016. This update has not had a material impact~~2016-01 on our consolidated financial ~~statements.~~

~~In November 2015, the FASB issued ASU 2015-17,~~ ~~"Balance Sheet Classification of Deferred Taxes."~~ ~~Current U.S. GAAP requires an entity to separate deferred income tax liabilities~~statements 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.future disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases." This update requires reporting entities to separate the lease components from the non-lease components in a contract and recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. ASU No. 2016-02 is effective for us beginning January 1, 2019. We are currently evaluating the requirements of ASU 2016-02 and have not yet determined its impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation – Stock Compensation – Improvements to Employee Share-Based Payment Accounting."This update ~~requires~~simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. In addition, the update allows an entity-wide accounting policy election to either estimate the number of awards that ~~all excess~~are expected to vest or account for forfeitures when they occur. The element of the update that will have the most impact on our financial statements will be income tax consequences. See Note 6 -"Income Taxes" - for the effect this update has had on our income taxes in 2017. Excess tax benefits and tax deficiencies ~~(including tax benefits of dividends~~ on share-based ~~payment awards) should be recognized as income~~compensation awards are now included in our tax ~~expense or benefit in the income statement. The tax effects~~provision within our condensed consolidated statement of ~~exercised or vested awards should be treated~~operations as discrete items in the reporting period in which they ~~occur. An entity also should recognize excess tax benefits regardless of whether~~occur, rather than (as was 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. Excess tax benefits are recognizedprevious accounting treatment) recording in additional paid-in ~~capital;~~capital on our condensed consolidated balance sheets. We have also elected to continue our current policy of estimating forfeitures of share-based compensation awards at the time of grant and revising in subsequent periods to reflect actual forfeitures. In our consolidated statement of cash flows for the six-month period ended June 30, 2016, we have reclassified two items to conform with the presentation specified under ASU 2016-09: (1) we have

reclassified the effect related to the tax ~~deficiencies are recognized either as an offset~~deficiency associated with share-based compensation from financing activities to ~~accumulated excess~~operating activities; and (2) we have reclassified the amounts related to withholding tax ~~benefits, if any, or in the income statement. The amendments in this update are effective for us~~payments from operating activities to financing activities. Other than these two cash flow items applied retrospectively, we have implemented ASU 2016-09 prospectively beginning January 1, 2017. ~~We do not anticipate that this update will have a material effect on our consolidated financial statements.~~

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740) – Intra-Entity Transfers of Assets Other than Inventory." Current U.S. GAAP generally prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The amendments in this update will eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included within the scope of this update are intellectual property and property, plant, and equipment. The exception for an intra-entity transfer of inventory will remain in place. The amendments in this update are effective for us beginning January 1, 2018. We do not anticipate that this update will have a material effect on our consolidated financial statements.

2. INVENTORY

The following is information regarding our inventory:


(in thousands)	(in thousands)	Sep 30, 2016		Dec 31, 2015		(in thousands)	Jun 30, 2017		Dec 31, 2016
Inventory, net:	Inventory, net:					Inventory, net:
	Remotely operated vehicle parts and components	$	118,337	$	163,539	Remotely operated vehicle parts and components	$	117,168	$	118,236
	Other inventory, primarily raw materials	178,858		164,914		Other inventory, primarily raw materials	149,468		161,894
	Total	$	297,195	$	328,453	Total	$	266,636	$	280,130

3. DEBT

Long-term Debt consisted of the following:



	(in thousands)	Sep 30, 2016			Dec 31, 2015			(in thousands)	Jun 30, 2017			Dec 31, 2016
4.650% Senior Notes due 2024:	4.650% Senior Notes due 2024:							4.650% Senior Notes due 2024:
	Principal of the Notes	$	500,000		$	500,000		Principal amount of the notes	$	500,000		$	500,000
	Issuance costs, net of amortization	(5,558		)	(6,073		)	Issuance costs, net of amortization	(5,042		)	(5,385		)
	Fair value of interest rate swap on $100 million of principal	7,814			1,909			Fair value of interest rate swaps on $200 million of principal	(859		)	(1,557		)
Term Loan Facility	Term Loan Facility	300,000			300,000			Term Loan Facility	300,000			300,000
Revolving Credit Facility	Revolving Credit Facility	—			—			Revolving Credit Facility	—			—
Long-term Debt	Long-term Debt	$	802,256		$	795,836		Long-term Debt	$	794,099		$	793,058

In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "Senior Notes"). We pay interest on the Senior Notes on May 15 and November 15 of each ~~year, and we made our first interest payment on May 15, 2015.~~year. The Senior Notes are scheduled to mature on November 15, 2024. We may redeem some or all of the Senior Notes prior to maturity at specified redemption prices. We used the net proceeds from the offering for general corporate purposes, including funding ~~the C&C~~an acquisition, other capital expenditures and repurchases of shares of our common stock.

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. The Credit Agreement provides 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 the Credit Agreement and pursuant to its terms, we repaid all amounts outstanding under, and terminated, our prior principal credit agreement.

In November 2015, we entered into an Agreement and Amendment No. 1 to Credit Agreement ~~(the "Amendment"~~("Amendment No. 1") ~~to the Credit Agreement. The~~. Amendment No. 1 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 No. 1 to be the ratio of consolidated debt to total capitalization) to 55% and (2) extend the maturities of the Term Loan Facility and the Revolving Credit Facility by one year each, which maturity terms have since been superseded by amendment, as described below.

In November 2016, we entered into Agreement and Amendment No. 2 to Credit Agreement ("Amendment No. 2"). Amendment No. 2 amended the Credit Agreement to, among other things, extend the maturities of the Term Loan Facility and the Revolving Credit Facility to October ~~27, 2018~~25, 2019 and October 25, ~~2020,~~2021, respectively, 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, ~~2019~~2020 and thereafter ~~$468.75~~$450 million until October 25, ~~2020,~~2021, and (b) the outstanding term loan advances pursuant to the Term Loan Facility will be $300 million until October 27, ~~2017~~2018 and thereafter ~~$281.25~~$270 million until October ~~27, 2018.~~25, 2019. The total commitments for the Revolving Credit Facility and the outstanding term loan advances pursuant to the Term Loan Facility have since been superseded by amendment, as described below.

In June 2017, we entered into Agreement and Amendment No. 3 to Credit Agreement ("Amendment No. 3"). Amendment No. 3 amended the Credit Agreement such that (1) the total commitments for the Revolving Credit Facility are $500 million until October 25, 2021 and (2) the outstanding term loan maturities pursuant to the Term Loan Facility are $300 million until October 25, 2019.

Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin 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 total capitalization ratio of 55%, as noted above. The Credit Agreement includes customary events of default and associated remedies. As of ~~September~~June 30, ~~2016,~~2017, we were in compliance with all the covenants set forth in the Credit Agreement.

We incurred $6.9 million of issuance costs related to the Senior Notes and $2.2 million of new loan costs, including costs of the ~~Amendment,~~Amendments, related to the Credit Agreement. We are amortizing these costs, which are included on our balance sheet, net of accumulated amortization, as a reduction of debt for the Senior Notes and as an other non-current asset for the Credit Agreement, to interest expense over ten years for the Senior Notes and over six years for the Credit Agreement. Please refer to Note 4 - "Commitments and Contingencies" - for more information on our interest rate swaps.

4. COMMITMENTS AND CONTINGENCIES

Litigation. On June 17, 2014, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of the ~~then-current~~then current members of our board of directors and one of our former directors, as defendants, and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of our board of directors relating to nonexecutive director compensation. The plaintiff is seeking relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ fees and other costs. We and the defendants ~~have~~ filed a motion to dismiss the complaint and a supporting brief on which the Court has not yet ruled. 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.

In the ordinary course of business, we are subject to actions for damages alleging personal injury under the general maritime laws of the United States, including the Jones Act, for alleged negligence. We report actions for personal injury to our insurance carriers and believe that the settlement or disposition of those claims will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Various other actions and claims are pending against us, most of which are covered by insurance. Although we cannot predict the ultimate outcome of these matters, we believe that our ultimate 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.

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

The carrying values of cash and cash equivalents approximate their fair values due to the short-term maturity of the underlying instruments. Accounts receivable are generated from a broad group of customers, primarily from within the energy industry, which is our major source of revenue. Due to their short-term nature, carrying values of our accounts receivable and accounts payable approximate fair market values. We had borrowings of $300 million ~~at September~~as of June 30, ~~2016~~2017 under our Term Loan Facility. Due to the short-term nature of the associated interest rate periods, the carrying value of our debt under the Term Loan Facility approximates its fair value. ~~This~~The fair value of this debt is classified as Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than quoted prices in active markets

for similar assets and liabilities that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities).

We estimated the fair market value of the Senior Notes to be ~~$517~~$492 million ~~at September~~as of June 30, ~~2016~~2017, based on quoted prices. Since the market for the Senior Notes is not an active market, the fair value of the Senior Notes is classified within Level 2 in the fair value hierarchy under U.S. GAAP.

We have antwo interest rate ~~swap~~swaps in place on ~~$100~~a total of $200 million of the Senior Notes for the period ~~from November 2014~~ to November 2024. The ~~agreement swaps~~agreements swap the fixed interest rate of 4.650% on $100 million of the Senior Notes to the floating rate of one month LIBOR plus 2.426%. and one month LIBOR plus 2.823% on another $100 million. We estimate the combined fair value of the interest rate ~~swap~~swaps to be ~~an asset~~a net liability of ~~$7.8~~$0.9 million ~~at September~~as of June 30, ~~2016, which is reflected~~2017, with $1.7 million included on our balance sheet ~~as a component of Other Long-term Assets, with the offset as an adjustment to the carrying value of Long-term Debt. This value was~~in our other long-term liabilities, and $0.8 million included in non-current assets. 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.~~declining, although the exchange rate was relatively stable during the six-month period ended June 30, 2017. As our functional currency in Angola is the U.S. dollar, we recorded foreign currency transaction ~~gains (losses)~~losses related to the kwanza of ~~$0.7~~$1.2 million and ~~$(7.9)~~$8.2 million in the ~~three-month~~three- and six-month periods ended ~~September~~June 30, 2016, ~~and 2015, respectively, and $(7.6) million and $(17.9) million in the nine-month periods ended September 30, 2016 and 2015,~~ respectively, as a component of Other ~~income (expense),~~expense, net in our Consolidated Statements of Operations for those respective periods. Our foreign currency transaction losses related primarily to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank has slowed this process since mid-2015, causing our kwanza cash balances to subsequently increase. As of ~~September~~June 30, ~~2016,~~2017, we had the equivalent of approximately ~~$32~~$34 million of kwanza cash ~~in kwanza~~balances in Angola reflected on our balance sheet.

To mitigate our currency exposure risk in Angola, through ~~September~~June 30, ~~2016~~2017 we used kwanza to purchase ~~$60~~$59 million equivalent Angolan central bank (Banco Nacional de Angola) bonds with various maturities throughout 2018. These bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. We have classified ~~$50 million of~~ these instruments as held-to-maturity, and have recorded the original cost on our balance sheet as other non-current assets. The remaining $10 million of these instruments are classified as available for sale and are recorded on our balance sheet as other current assets at fair market value at September 30, 2016, which approximated original cost. We estimated the fair market value of the Angolan bonds to be $57 million at ~~September~~June 30, ~~2016~~2017 using quoted prices. Since the market for the Angolan bonds is not an active market, the fair value of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP. ~~The Angolan bonds recorded as current assets were sold in October 2016 at approximately book value.~~

5. EARNINGS PER SHARE, SHARE-BASED COMPENSATION AND SHARE REPURCHASE PLAN


5.	~~EARNINGS PER SHARE, SHARE-BASED COMPENSATION AND SHARE REPURCHASE PLAN~~

Earnings per Share. ~~The table that follows presents~~For each period presented, the only difference between our ~~computation of~~calculated weighted average basic and diluted number of shares outstanding ~~which~~is the effect of outstanding restricted stock units. In periods where we ~~use in~~have a net loss, the effect of our ~~earnings per share calculations.~~ outstanding restricted stock units is anti-dilutive, and therefore does not increase our diluted shares outstanding.

For each period presented, our net income (loss) allocable to both common shareholders and diluted common shareholders is the same as our net income (loss) in our consolidated statements of operations.

Three Months Ended Sep 30, Nine Months Ended Sep 30,
(in thousands) 2016 2015 2016 2015
Basic shares outstanding 98,061
97,845
98,025
98,609
Effect of restricted stock units —
340
359
382
Diluted shares outstanding 98,061
98,185
98,384
98,991

~~Our quarterly dividend to our common shareholders was $0.27 per share from~~Dividends. From the second quarter of 2014 through the third quarter of ~~2016.~~2016, we paid a quarterly dividend to our common shareholders of $0.27 per share. Starting in the fourth quarter of 2016, we have been paying a dividend of $0.15 per share. Our latest quarterly dividend is $0.15 per share and was declared in ~~October 2016~~July 2017 and is payable in ~~December 2016.~~

September 2017.

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

~~Through 2014,~~During 2017, 2016 and 2015, we granted restricted units of our common stock to certain of our key executives ~~key employees~~ and employees. During 2017 and 2016, our Board of Directors granted restricted common stock to our nonemployee directors. During 2015, our Board of Directors granted restricted units of our common stock to our Chairman ~~of the Board. We also granted shares of~~and restricted common stock to our other ~~non-employee~~nonemployee directors. The restricted units granted to our key executives and key employees generally vest in full on the third anniversary of the award date, conditional on continued employment. The restricted stock unit grants, including those granted to our Chairman, can vest pro rata over three

years, provided the individual meets certain age and years-of-service requirements. The shares of restricted common stock we grant to our ~~other~~ non-employee directors vest in full on the first anniversary of the award date, conditional upon continued service as a director. Each grantee of shares of restricted stock is deemed to be the record owner of those shares during the restriction period, with the right to vote and receive any dividends on those shares. The restricted stock units outstanding have no voting or dividend rights. ~~In 2015 and 2016, we made corresponding grants to those described above, except we granted restricted shares, rather than restricted stock units, to our Chairman.~~

For each of the restricted stock units granted in ~~2014~~2015 through ~~2016,~~2017, at the earlier of three years after grant or at termination of employment or service, the grantee will be issued one share of our common stock for each unit vested. As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respective totals of ~~1,079,607~~1,259,039 and ~~831,291~~1,052,007 shares of restricted stock or restricted stock units were outstanding.

We estimate that ~~stock-based~~share-based compensation cost not yet recognized related to shares of restricted stock or restricted stock units, based on their grant-date fair values, was ~~$17~~$18 million at ~~September~~June 30, ~~2016.~~2017. This expense is being recognized on a staged-vesting basis over three years for awards attributable to individuals meeting certain age and years-of-service requirements, and on a straight-line basis over the applicable vesting period of one or three years for the other awards.

Share Repurchase Plan. In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock. Under this plan, we had repurchased 2.0 million shares of our common stock for $100 million through December 31, ~~2015.~~2016. We did not repurchase any shares under the plan during the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2016.~~2017. We account for the shares we hold in treasury under the cost method, at average cost.

6. INCOME TAXES

During interim periods, we provide for income taxes based on our current estimated annual effective tax rate using assumptions as to (1) earnings and other factors that would affect the tax provision for the remainder of the year and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. ~~We conduct business through several foreign subsidiaries and, although~~In the six-month period ended June 30, 2017, we ~~expect our consolidated operations to be profitable, there is no assurance that profits will be earned in entities or jurisdictions that have net operating loss carryforwards available.~~recognized additional tax expense of $1.2 million from discrete items. The primary ~~difference between~~discrete tax expense item was $2.9 million as a result of our implementation of ASU 2016-09, "Compensation – Stock Compensation – Improvements to Employee Share-Based Payment Accounting." Excess tax benefits and tax deficiencies on share-based compensation awards are now included in our tax provision within our condensed consolidated statement of operations as discrete items in the reporting period in which they occur, rather than (as was the previous accounting treatment) recording in additional paid-in capital on our condensed consolidated balance sheets. See Note 1 for further discussion of ASU 2016-09. The effective tax ~~rates~~rate, before discrete items, of ~~31.3% in~~20.4% for the ~~periods~~six months ended ~~September~~June 30, ~~2016 and~~2017 was less beneficial than the federal statutory rate of ~~35% reflects~~35.0%, primarily due to non-deductible expenses partially offset by our intention to continue to indefinitely reinvest in certain of our international operations. AsWe do not believe that this effective rate is meaningful, as the rate is less significant at a ~~result, we~~low pretax income or a pretax loss position. The effective tax rate, before discrete items, of 31.3% for the six months ended June 30, 2016 was lower than the federal statutory rate of 35.0%, primarily due to our intention to indefinitely reinvest in certain of our international operations. We do not provide for U.S. taxes on ~~that~~the portion of our foreign ~~earnings.~~earnings we indefinitely reinvest.

We conduct our international operations in a number of locations that have varying laws and regulations with regard to income and other taxes, some of which are subject to interpretation. 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 do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

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. Including associated foreign tax credits and penalties and interest, we have accrued a net total of ~~$4.7~~$5.2 million in Other Long-term Liabilities on our balance sheet for unrecognized tax benefits ~~at September~~as of June 30, ~~2016.~~2017. All additions or reductions to those liabilities would affect our effective income tax rate in the periods of change.

Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following lists the earliest tax years open to examination by tax authorities where we have significant operations:




Jurisdiction		Periods
United States		2013
United Kingdom		~~2012~~2013
Norway		~~2006~~2007
Angola		2013
Brazil		~~2010~~2011
Australia		2012

7. BUSINESS SEGMENT INFORMATION

We are a global oilfield provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of our applied technology expertise, we also serve the defense, aerospace and commercial theme park industries. Our Oilfield business consists of Remotely Operated Vehicles ("ROVs"), Subsea Products, Subsea Projects and Asset Integrity. Our ROV segment provides submersible vehicles operated from the surface to support offshore oil and gas exploration, development, production and decommissioning activities. Our Subsea Products segment supplies a variety of specialty subsea hardware and related services. To improve operational efficiency, we have reorganized our Subsea Products segment into two business ~~units~~ –units: (1) manufactured ~~products~~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. This internal reorganization ~~does~~did not affect our segment reporting structure or the historical comparability of our segment results. Our Subsea Projects segment provides multiservice subsea support vessels and oilfield diving and support vessel operations, primarily for inspection, maintenance and repair and installation activities. Since April 2015, we have also provided survey, autonomous underwater vehicle ("AUV") and satellite-positioning services. Our Asset Integrity segment provides asset integrity management and assessment services and nondestructive testing and inspection. Our Advanced Technologies business provides project management, engineering services and equipment for applications in non-oilfield markets. Unallocated Expenses are those not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses, including corporate administrative expenses.

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from those used in our consolidated financial statements for the year ended December 31, ~~2015.~~2016.

The table that follows presents Revenue, ~~and~~ Income (Loss) from Operations and Depreciation and Amortization by business segment for each of the periods indicated.


	Three Months Ended									Nine Months Ended						Three Months Ended									Six Months Ended
(in thousands)	Sep 30, 2016			Sep 30, 2015			Jun 30, 2016			Sep 30, 2016			Sep 30, 2015			Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017			Jun 30, 2016
Revenue
Oilfield
Remotely Operated Vehicles	$	126,507		$	198,426		$	139,641		$	413,769		$	634,299		$	103,432		$	139,641		$	94,022		$	197,454		$	287,262
Subsea Products	157,269			220,039			190,897			542,978			700,825			174,893			190,897			150,639			325,532			385,709
Subsea Projects	110,799			147,191			138,662			378,883			473,087			75,545			138,662			62,956			138,501			268,084
Asset Integrity	71,995			95,609			73,864			215,459			289,611			58,192			73,864			52,658			110,850			143,464
Total Oilfield	466,570			661,265			543,064			1,551,089			2,097,822			412,062			543,064			360,275			772,337			1,084,519
Advanced Technologies	82,705			82,348			82,475			232,069			242,866			102,974			82,475			85,901			188,875			149,364
Total	$	549,275		$	743,613		$	625,539		$	1,783,158		$	2,340,688		$	515,036		$	625,539		$	446,176		$	961,212		$	1,233,883
Income (Loss) from Operations
Oilfield
Remotely Operated Vehicles	$	(23,845	)	$	52,417		$	18,020		$	21,162		$	175,893		$	10,376		$	18,020		$	5,925		$	16,301		$	45,007
Subsea Products	6,109			46,079			25,121			71,870			138,379			10,552			25,121			11,483			22,035			65,761
Subsea Projects	15,029			28,841			10,237			32,055			81,724			3,000			10,237			187			3,187			17,026
Asset Integrity	4,725			8,549			(805		)	4,354			18,150			3,755			(805		)	2,267			6,022			(371		)
Total Oilfield	2,018			135,886			52,573			129,441			414,146			27,683			52,573			19,862			47,545			127,423
Advanced Technologies	4,357			1,635			5,528			10,478			12,922			7,632			5,528			5,026			12,658			6,121
Unallocated Expenses	(18,231		)	(24,057		)	(19,721		)	(65,296		)	(99,014		)	(25,925		)	(19,721		)	(25,038		)	(50,963		)	(47,065		)
Total	$	(11,856	)	$	113,464		$	38,380		$	74,623		$	328,054		$	9,390		$	38,380		$	(150	)	$	9,240		$	86,479
Depreciation and Amortization
Oilfield
Remotely Operated Vehicles	$	43,705		$	35,094		$	34,026		$	111,415		$	107,236		$	29,036		$	34,026		$	29,229		$	58,265		$	67,710
Subsea Products	14,205			12,681			12,952			39,964			38,247			12,785			12,952			12,999			25,784			25,759
Subsea Projects	8,575			9,782			8,353			25,447			24,140			7,781			8,353			8,080			15,861			16,872
Asset Integrity	5,980			2,663			2,843			11,736			8,222			1,780			2,843			1,460			3,240			5,756
Total Oilfield	72,465			60,220			58,174			188,562			177,845			51,382			58,174			51,768			103,150			116,097
Advanced Technologies	789			618			806			2,329			1,879			784			806			797			1,581			1,540
Unallocated Expenses	946			1,184			999			3,069			3,784			1,138			999			1,098			2,236			2,123
Total	$	74,200		$	62,022		$	59,979		$	193,960		$	183,508		$	53,304		$	59,979		$	53,663		$	106,967		$	119,760

We determine income (loss) from operations for each business segment before interest income or expense, other income (expense) and provision for income taxes. We do not consider an allocation of these items to be practical. Our equity in earnings (losses) of unconsolidated affiliates is part of our Subsea Projects segment.


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

Certain statements we make in this quarterly report on Form 10-Q are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our expectations about:

~~fourth~~third quarter and the full ~~years~~year of ~~2016 and~~ 2017 operating results and earnings per share, and the contributions from our segments to those results (including anticipated revenue, operating income and utilization information);, as well as the items below the operating income line;

demand and business activity levels;

our plans for future operations (including planned additions to and retirements from our remotely operated vehicle ("ROV") fleet, our intent regarding the new multiservice subsea support vessel scheduled for delivery ~~late in~~at the ~~second~~end of December 2017 and to be placed into service during the first quarter of ~~2017,~~2018, and other capital expenditures);

our future cash flows;

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

our expectations regarding shares to be repurchased under our share repurchase plan;

our expectations regarding future dividends and their sustainability;

our ~~anticipated~~assumptions that could affect our estimated tax ~~rates~~rate;

the implementation of new accounting standards and ~~underlying assumptions;~~related policies, procedures and controls;

seasonality; and

industry conditions.

These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we have referred to under the headings "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in Part I of our annual report on Form 10-K for the year ended December 31, ~~2015.~~2016. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.

The following discussion should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Executive Overview

Our diluted earnings (loss) per share for the ~~nine months~~three- and six-month periods ended ~~September~~June 30, ~~2016 was $0.36,~~2017 were $0.02 and $(0.06), respectively, as compared to ~~$2.06~~$0.23 and $0.48, respectively, for the corresponding ~~period~~periods of the prior year. Taking into account our results through ~~September~~June 30, ~~2016~~2017 and our ~~fourth quarter~~ outlook for the remainder of 2017, we project our 2017 diluted earnings per share to be less than our 2016 diluted earnings per share of $0.25.

For the third quarter of 2017, we anticipate improvements in operating income from our Subsea Products and Subsea Projects segments compared to the second quarter of 2017. The operating income of the remaining business segments is expected to be ~~significantly less than our 2015 diluted earnings per share of $2.34. With our limited market visibility resulting from~~slightly lower compared to the ~~uncertain energy market, we are not providing specific earnings guidance for the fourth quarter or~~preceding quarter.

For the full year ~~2016 or~~2017, we project that we will be marginally profitable at the ~~full year 2017. For the fourth quarter of 2016, we~~operating income line on a consolidated basis. We anticipate continued lower global demand for deepwater drilling, field development, and inspection, maintenance and repair and installation activities ~~as uncertain~~due to the current and ~~lower commodity prices have~~anticipated oil price environment, which has led to spending cuts by our customers and pricing pressure. Below the operating income line, we expect:

increased interest expense from higher interest rates, which affect our floating rate debt and our swaps to ~~substantially reduce spending, resulting~~floating rates on $200 million of fixed-rate debt; and

a loss on our equity investment in ~~decreased demand. Compared~~Medusa Spar LLC, as production continues to ~~2015,~~decline.

In the first half of 2017, we recognized an additional tax expense of $1.2 million for discrete items. The primary discrete tax expense item was $2.9 million related to the tax effects on the difference between book and tax amounts of share-based compensation paid in ~~2016 we are forecasting substantial decreases in each~~the periods. As a result of our ~~oilfield operating business segments, most notably:~~implementation of Accounting Standards Update ("ASU") 2016-09, "Compensation – Stock Compensation – Improvements to Employee Share-

~~ROVs,~~Based Payment Accounting," these tax effects are recognized in our statements of operations effective January 1, 2017. Previously, these tax effects were reflected on ~~lower days on hire and reduced revenue per day;~~

~~Subsea Products, on lower pricing and demand~~our balance sheet as adjustments to ~~support field development projects; and~~

~~Subsea Projects, on lower pricing and demand,~~additional paid-in capital. See Note 1 to the consolidated financial statements included in this report for ~~both deepwater vessels and diving.~~further discussion of ASU 2016-09.

In the ~~three- and nine-month~~six-month periods ended ~~September~~June 30, 2017 and 2016, we incurred foreign exchange ~~gains (losses)~~losses of ~~$0.6~~$2.1 million and ~~$(6.5)~~$7.1 million, respectively. The foreign exchange losses in 2016 primarily related to ~~Angola~~the Angolan kwanza and its declining exchange rate relative to the U.S. dollar. We did not incur significant exchange losses in any one currency during the six months ended June 30, 2017. Our foreign exchange losses are reflected in Other income (expense), net.

We added ~~five~~three new ROVs to our fleet during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and retired ~~41,~~four, resulting in a total of 279 ROVs in our ROV ~~segment~~ fleet. ~~On average, in normal market conditions, we expect to retire 4% to 5% of our fleet on an annual basis.~~

In the third quarter of 2016, the leading indicator for deepwater activity, contracted floating rigs, continued to decline, as the rate of rigs being idled, either by contract termination or expiration, continued. Therefore, we reassessed the number of ROVsSince 2014, we have inbeen decreasing our ROV fleet size as ~~well as the associated inventory. As~~ a result of our reassessment, we recorded $36.0 million of charges related to our retirement of 39 ROVs this quarter (for a net book value of $10.8 million) and the establishment of a $25.2 million reserve for excess inventory. We also scrutinized assets in our Subsea Products segment and recorded a total of $8.2 million of charges, related predominantly to tools and inventory in our portfolio used to support deepwater drilling and operations.

We forecast our fourth quarter 2016 operating income to be higher than that of the third quarter. As noted above, in the third quarter of 2016, we wrote down certain ROV inventory and fixed assets, including the retirement of 39 ROVs, resulting in an operating loss in the segment in the third quarter, and we expect an increase in our ROV operating income in the fourth quarter as compared to the third quarter. We expect reduced revenue and lower margins in Subsea Projects and Asset Integrity. We anticipate our other operating segments to be relatively flat. We expect to be marginally profitable at the operating income level for the full year 2017.

Historically, we have generated approximately 90% of our revenue and substantially all of our operating income before Unallocated Expenses from our services and products provided to the oil and gas industry, particularly in the deepwater sector of the offshore market. Consequently, the levels of our customers' capital and operational spending on deepwater exploration, development and production have a significant impact on the demand for many of our services and products.market demand.

Critical Accounting Policies and Estimates

For information about our Critical Accounting Policies and Estimates, please refer to the discussion in our annual report on Form 10-K for the year ended December 31, ~~2015~~2016 under the heading "Critical Accounting Policies and Estimates" in Item 7 – "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Liquidity and Capital Resources

~~At September~~As of June 30, ~~2016,~~2017, we had working capital of ~~$858~~$779 million, including ~~$442~~$482 million of cash and cash equivalents. Additionally, we had $500 million of borrowing capacity available under our revolving credit facility under a credit agreement with a group of banks (the "Credit Agreement"). The Credit Agreement includes a $300 million, three-year term loan and a $500 million, five-year, revolving credit facility. We consider our liquidity, cash flows and capital resources to be adequate to support our existing operations, capital commitments and anticipated dividends.

Our capital expenditures were ~~$86~~$41 million during the first ~~nine~~six months of ~~2016,~~2017, as compared to ~~$369~~$53 million during the first ~~nine~~six months of last year. Of the $86 million of capital expenditures in 2016, $39 million was invested in our ROV segment and $22 million was invested in our Subsea Products segment. We added five new ROVs to our fleet during the nine months ended September 30, 2016 and retired 41, resulting in a total of 279 ROVs in our ROV segment fleet.2016. We currently estimate our capital expenditures for ~~2016,~~2017, excluding business acquisitions, will be ~~approximately $110~~in the range of $90 million to ~~$125~~$120 million, including ~~$15~~$25 million of construction progress payments ~~in the fourth quarter of 2016~~ for the new deepwater multiservice subsea support vessel, to be named the Ocean Evolution, discussed below. Of the $369 million of capital expenditures in the first nine months of 2015, $230 million related to the acquisition of C & C Technologies, Inc. ("C&C"), $53 million was invested in our ROV segment and $53 million was invested in our Subsea Products segment.

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~~the vessel ~~late in~~at the ~~second~~end of December 2017 and to place it into service during the first quarter of ~~2017.~~2018. We intend for the vessel to be U.S.-flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to have an overall length of 353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-ton active heave-compensated crane, and a working moonpool. We expect to outfit the vessel with two of our high specification work-class ROVs. The vessel will also be equipped with a satellite communications system capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the vessel will be used to augment our ability to provide subsea intervention services and hardware installations in the ~~ultra-deep waters of the~~deepwater U.S. Gulf of Mexico. ~~These services are required to perform inspection, maintenance and repair projects and hardware installations.~~

~~Each~~Unless indicated otherwise, each of the vessels discussed below is a deepwater multiservice subsea support vessel outfitted with two of our high-specification work-class ROVs. We

Beginning in the third quarter of 2008, we chartered a vessel, the Olympic Intervention IV, for an initial term of five ~~years, which began~~years. Following extension periods, the charter expired in July 2016, and we released the vessel to its owner. We had been using the Olympic Intervention IV in the ~~third quarter~~U.S. Gulf of ~~2008, and was extended to July 2016, when the charter expired.~~ Mexico.

In 2012, we moved the chartered vessel Ocean Intervention III to Angola and also chartered the Bourbon Oceanteam 101 to work on a three-year field support vessel services contract for a unit of BP plc. We had extended the charter of the Bourbon Oceanteam 101 to January 2017. However, in early 2016, the customer exercised its right, under the field support vessel services contract, to terminate its use of the Bourbon Oceanteam 101at the end of May 2016. Under the terms of the contract, the costs incurred by us associated with the early release and demobilization of the vessel were reimbursed by the customer. Following the release of the vessel, we redelivered it to the vessel supplier. The charter for the Ocean Intervention III expired at

the end of July 2017. Under the field support vessel services contract, which has been extended through January 2019, we are continuing to supply project management and engineering ~~and the~~ ~~Ocean Intervention III~~.services. We also provide ROV tooling, asset integrity services and installation and workover control system ~~services.~~services as requested by the customer. We also have ~~also~~ provided other chartered vessels and ~~a barge as requested by the customer.~~

~~In October 2016, we entered into a two-year extension through January 2019 under the field support vessel services contract with BP plc. Under the contract term extension, the~~ ~~Ocean Intervention III~~ will remain chartered through April 2017, with five option periods for further extension of one-month each. Additional or substitute vessels and services, if any, would be provided during the remaining period of the contract, on as-needed basis.

barges upon request.

In March 2013, we commenced a five-year charter ~~with five one-year extension options~~ for ~~the use of~~a Jones Act-compliant multi-service support vessel, the Ocean Alliance ~~a Jones Act-compliant vessel.~~, we have been using in the U.S. Gulf of Mexico. In January 2015, we commenced a two-year ~~time charter agreement~~contract with a customer for the use of the Ocean Alliance. The contract expired in January 2017, and we are marketing the vessel for spot market work in the U.S. Gulf of Mexico.

In December 2013, we commenced a three-year charter for ~~a vessel,~~ the Normand Flower., a multi-service subsea marine support vessel. We ~~have~~ made modifications to the vessel and ~~have~~ used the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. ~~Unless~~In December 2016, we ~~choose to exercise one of~~declined our ~~options~~option to extend the charter ~~for up to three additional years or we negotiate new terms,~~and the ~~charter for the~~ vessel was released.~~Normand Flower~~ ~~will expire in December 2016.~~

In November 2015, we commenced a two-year charter for the use of ~~a vessel,~~ the Island ~~Pride.~~ Pride, a multi-service subsea marine support vessel. We~~have modified the vessel to enhance its service capabilities, including reconfiguration to accommodate two of our ROVs, and~~ 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.

We also charter or lease vessels on a short-term basis as necessary to augment our fleet.

~~At September~~As of June 30, ~~2016,~~2017, we had long-term debt in the principal amount of $800 million outstanding and $500 million available under our revolving credit facility provided under the Credit Agreement.

In October 2014, we entered into a new credit agreement (as amended, the ~~Credit Agreement~~"Credit Agreement") with a group of banks to replace our prior principal credit agreement. The Credit Agreement provides 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 the Credit Agreement and pursuant to its terms, we repaid all amounts outstanding under, and terminated, our prior principal credit agreement.

Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin ~~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.

In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "Senior Notes"). We pay interest on the Senior Notes on May 15 and November 15 of each year. The Senior Notes are scheduled to mature on November 15, 2024. We may redeem some or all of the Senior Notes prior to maturity at specified redemption prices. We used the net proceeds from the offering for general corporate purposes, including funding an acquisition, other capital expenditures and repurchases of shares of our common stock.

Our principal source of cash from operating activities is our net income (loss), adjusted for the non-cash effects of, among other things, depreciation and amortization, deferred income taxes and noncash compensation under our share-based compensation plans. Our ~~$263~~$103 million and ~~$373~~$145 million of cash provided from operating activities in the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, were principally affected by cash increases (decreases) of:

$~~102~~23 million and ~~$98~~$66 million, respectively, from changes in accounts receivable;

$58(11) million and ~~$(49)~~$49 million, respectively, from changes in other operating assets; and

$~~(163)~~(25) million and ~~$(80)~~$(119) million, respectively, from changes in current liabilities.

We had an increase in cash related to accounts receivable in the ~~nine~~six months ended ~~September~~June 30, 2016, as we had lower revenue in the quarter ended ~~September~~June 30, 2016 as compared to the fourth quarter of 2015, so, combined with our cash collections, our overall accounts receivable balances decreased. The 2016 increase in cash related to changes in other operating assets was largely attributable to a prepayment we made during 2015 to a steel tube vendor for material we received in 2016 for a steel tube umbilical contract. ~~The 2015 decrease in cash related to changes in other operating assets was largely attributable to the prepayment, which we made in exchange for more favorable pricing from the vendor.~~ Each of the ~~2016~~2017 and ~~2015~~2016 decreases in cash related to current liabilities reflected generally lower business levels, ~~than we had during the fourth quarter of the respective immediately preceding fiscal year,~~ and in 2016 we decreased our accruals for incentive compensation.

In the ~~nine~~six months ended ~~September~~June 30, 2017, we used $40 million of cash in investing activities, largely related to capital expenditures of $41 million. We also used $32 million in financing activities, primarily for the payment of cash dividends of $29 million. In the six months ended June 30, 2016, we used ~~$117~~$77 million of cash in investing activities. The cash used in investing activities ~~largely~~ related to the capital expenditures of ~~$86~~$53 million and other investments of ~~$40~~$30 million. The other investments were primarily for the purchase of bonds in Angola for the purpose of mitigating our Angolan currency risk. We also used ~~$82~~$55 million in financing activities, primarily for the payment of cash dividends of ~~$79~~$53 million. In the nine months ended September 30, 2015, we used $385 million of cash in investing activities. The cash used in investing activities related to the capital expenditures, including the C&C acquisition described above. We also used $131 million in financing activities, which included uses of cash for repurchases of 2.0 million shares of our common stock for $100 million, the payment of cash dividends of $80 million, and borrowing the final $50 million under our term loan facility.

We have not guaranteed any debt not reflected on our consolidated balance sheet, and we do not have any off-balance sheet arrangements, as defined by SEC rules.

In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock. Under this plan, we had repurchased 2.0 million shares of our common stock for $100 million through ~~September~~June 30, ~~2016,~~2017, all during 2015. We account for the shares we hold in treasury under the cost method, at average cost. The timing and amount of any future repurchases will be determined by our management. We expect that any additional shares repurchased under the plan will be held as treasury stock for possible future use. The plan does not obligate us to repurchase any particular number of shares.

~~Since~~

From the second quarter of 2014 through the third quarter of 2016, we paid a quarterly dividend to our common shareholders of $0.27 per share. Starting in the fourth quarter of 2016, we have been paying a dividend of $0.15 per share. Our latest quarterly dividend was declared in ~~October 2016~~July 2017 at $0.15 per share and is payable in ~~December 2016. We believe it was prudent to lower our dividend rate to a sustainable level, in light of the projected low level of offshore activity through~~September 2017.

Results of Operations

We operate in five business segments. The segments are contained within two businesses — services and products provided to the oil and gas industry ("Oilfield") and all other services and products ("Advanced Technologies"). Our Unallocated Expenses are those not associated with a specific business segment.

Consolidated revenue and profitability information is as follows:


		Three Months Ended									Nine Months Ended							Three Months Ended									Six Months Ended
(dollars in thousands)	(dollars in thousands)	Sep 30, 2016			Sep 30, 2015			Jun 30, 2016			Sep 30, 2016			Sep 30, 2015			(dollars in thousands)	Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017			Jun 30, 2016
Revenue	Revenue	$	549,275		$	743,613		$	625,539		$	1,783,158		$	2,340,688		Revenue	$	515,036		$	625,539		$	446,176		$	961,212		$	1,233,883
Gross Margin	Gross Margin	35,443			168,313			95,233			228,156			499,307			Gross Margin	53,571			95,233			44,855			98,426			192,713
Gross Margin %	Gross Margin %	6		%	23		%	15		%	13		%	21		%	Gross Margin %	10		%	15		%	10		%	10		%	16		%
Operating Income (Loss)	Operating Income (Loss)	(11,856		)	113,464			38,380			74,623			328,054			Operating Income (Loss)	9,390			38,380			(150		)	9,240			86,479
Operating Income (Loss) %		(2		)%	15		%	6		%	4		%	14		%
Operating Income %																	Operating Income %	2		%	6		%	—		%	1		%	7		%

In our Subsea Projects segment, we generate a material amount of our consolidated revenue from contracts for services in the U.S. Gulf of Mexico, which has historically been more active from April through October, as compared to the rest of the year. The European operations of our Asset Integrity segment have historically been more active in the second and third quarters; however, the reduced customer spending levels in the current commodity price environment have substantially obscured this seasonality since mid-2014. Revenue in our ROV segment is generally subject to seasonal variations in demand, with our first quarter typically being the low quarter of the year. The level of our ROV seasonality primarily depends on the number of ROVs we have engaged in vessel-based subsea infrastructure inspection, maintenance and repair and installation, which is more seasonal than drilling support. Periods since mid-2014 reflect an exception, as there has been a general decline in offshore activity, which caused a decrease in our ROV days on hire and utilization during each sequential quarter from September 2014 through ~~March 2016.~~June 2017, with two exceptions. The number of ROV days on hire for the ~~quarter~~quarters ended June 2017 and June 2016 ~~was~~were slightly higher than that of the quarter ended March 2016. Instead of a seasonal increase, in the third quarter of 2016 our ROV days on hire declined compared to the quarter ended June 2016, and ROV quarterly revenue declined due to lower average revenue per day-on-hire from lower pricing.their respective immediately preceding quarters. Revenue in our Subsea Products and Advanced Technologies segments has generally not been seasonal.

Oilfield

The following table sets forth the revenues and margins for our Oilfield business segments for the periods indicated. In the ROV section of the table that follows, "Days available" includes all days from the first day that an ROV is placed into service until the ROV is retired. All days during 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. We retired 39 ROVs at the end of the third quarter of 2016. Included in the periods ended September 30, 2016 presented below are the 349 total days these 39 ROVs were utilized and the combined 3,588 days they were available in the third quarter.


		Three Months Ended									Nine Months Ended							Three Months Ended									Six Months Ended
(dollars in thousands)	(dollars in thousands)	Sep 30, 2016			Sep 30, 2015			Jun 30, 2016			Sep 30, 2016			Sep 30, 2015			(dollars in thousands)	Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017			Jun 30, 2016
Remotely Operated Vehicles	Remotely Operated Vehicles																Remotely Operated Vehicles
	Revenue	$	126,507		$	198,426		$	139,641		$	413,769		$	634,299		Revenue	$	103,432		$	139,641		$	94,022		$	197,454		$	287,262
	Gross Margin	(16,288		)	60,681			26,925			45,959			202,124			Gross Margin	16,659			26,925			13,022			29,681			62,247
	Operating Income (Loss)	(23,845		)	52,417			18,020			21,162			175,893			Operating Income	10,376			18,020			5,925			16,301			45,007
	Operating Income (Loss) %	(19		)%	26		%	13		%	5		%	28		%	Operating Income %	10		%	13		%	6		%	8		%	16		%
	Days available	29,126			31,025			28,959			86,904			91,621			Days available	25,300			28,959			25,219			50,519			57,778
	Days utilized	15,156			21,229			16,057			47,218			65,078			Days utilized	12,267			16,057			11,488			23,755			32,062
	Utilization	52		%	68		%	55		%	54		%	71		%	Utilization	48		%	55		%	46		%	47		%	55		%

Subsea Products	Subsea Products																Subsea Products
	Revenue	157,269			220,039			190,897			542,978			700,825			Revenue	174,893			190,897			150,639			325,532			385,709
	Gross Margin	20,423			64,078			42,728			119,287			196,310			Gross Margin	22,762			42,728			24,991			47,753			98,864
	Operating Income (Loss)	6,109			46,079			25,121			71,870			138,379			Operating Income	10,552			25,121			11,483			22,035			65,761
	Operating Income (Loss) %	4		%	21		%	13		%	13		%	20		%	Operating Income %	6		%	13		%	8		%	7		%	17		%
	Backlog at end of period	457,000			736,000			503,000			457,000			736,000			Backlog at end of period	328,000			503,000			407,000			328,000			503,000

Subsea Projects	Subsea Projects																Subsea Projects
	Revenue	110,799			147,191			138,662			378,883			473,087			Revenue	75,545			138,662			62,956			138,501			268,084
	Gross Margin	19,321			34,830			14,317			45,147			98,719			Gross Margin	6,462			14,317			4,024			10,486			25,826
	Operating Income (Loss)	15,029			28,841			10,237			32,055			81,724			Operating Income	3,000			10,237			187			3,187			17,026
	Operating Income (Loss) %	14		%	20		%	7		%	8		%	17		%	Operating Income %	4		%	7		%	—		%	2		%	6		%

Asset Integrity	Asset Integrity																Asset Integrity
	Revenue	71,995			95,609			73,864			215,459			289,611			Revenue	58,192			73,864			52,658			110,850			143,464
	Gross Margin	11,591			15,009			10,096			29,030			39,558			Gross Margin	10,004			10,096			8,381			18,385			17,439
	Operating Income (Loss)	4,725			8,549			(805		)	4,354			18,150			Operating Income (Loss)	3,755			(805		)	2,267			6,022			(371		)
	Operating Income (Loss) %	7		%	9		%	(1		)%	2		%	6		%	Operating Income (Loss) %	6		%	(1		)%	4		%	5		%	—		%

Total Oilfield	Total Oilfield																Total Oilfield
	Revenue	$	466,570		$	661,265		$	543,064		$	1,551,089		$	2,097,822		Revenue	$	412,062		$	543,064		$	360,275		$	772,337		$	1,084,519
	Gross Margin	35,047			174,598			94,066			239,423			536,711			Gross Margin	55,887			94,066			50,418			106,305			204,376
	Operating Income (Loss)	2,018			135,886			52,573			129,441			414,146			Operating Income	27,683			52,573			19,862			47,545			127,423
	Operating Income (Loss) %	—		%	21		%	10		%	8		%	20		%	Operating Income %	7		%	10		%	6		%	6		%	12		%

In general, our Oilfield business focuses on supplying services and products to the deepwater sector of the offshore market. ~~For 2016, we~~We have experienced, and expect to continue to experience, lower global demand for deepwater drilling, field development, and inspection, maintenance and repair activities due to the decline in oil prices since

June 2014. As a result, we are forecasting ~~substantial decreases~~an overall decrease in ~~each of~~ our oilfield operating ~~business~~ segments for the full year ~~2016~~of 2017 as compared to ~~2015.~~2016.

During the third quarter of 2016, the leading indicator for deepwater activity, contracted floating rigs, continued to decline as the rate of rigs being idled, either by contract termination or expiration, continued. This prevailing market condition required us to reassess the number of ROVs we have in our fleet, as well as the associated inventory.

~~As a result of our reassessment, in the third quarter of 2016 we recorded~~ $36.0 million of charges consisting of (1) $25.2 million for a reserve for excess inventory, and (2) $10.8 million in the form of additional depreciation expense for the retirement of 39 ROVs. Additionally, we recorded $8.2 million of charges in our Subsea Products segment, predominantly for tools and inventory in our portfolio used to support deepwater drilling.

We believe we are the world's largest provider of ROV services, and this business segment historically, but not currently, has been the largest contributor to our Oilfield business operating income. Our ROV segment revenue reflects the utilization percentages, fleet sizes and average pricing of the respective periods. Our ROV operating margins have declined ~~during periods of lower utilization and pricing,~~ as depreciation has become a higher percentage of ~~revenue.~~revenue, and we have experienced lower utilization and pricing. In the full year of 2014, ROV depreciation and amortization was 14% of ROV revenue; in the full year of 2015, it was 18% of ROV ~~revenue,~~revenue; in the ~~nine months ended September 30,~~full year 2016, it was 27% of ~~ROV revenue~~revenue; and in the ~~quarter~~six months ended ~~September~~June 30, ~~2016~~2017 it was ~~35%, including the $10.8 million~~30% of ~~additional depreciation expense related to the 39 ROVs we retired .~~ROV revenue. Our ROV operating income decreased in the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016~~2017 compared to the corresponding periods of the prior year, as a result of ~~lower~~fewer days on hire and lower average revenue per ~~day-on-hire, as well as inventory write-downs and fixed asset write-offs totaling $36.0 million in~~day-on-hire. During the ~~third~~second quarter of ~~2016. Our decrease in~~2017, ROV operating income ~~in the third quarter of 2016~~increased seasonally compared to the immediately preceding quarter, ~~was due to the same factors.~~primarily as a result of increased days on hire and average revenue per day-on-hire, resulting from seasonally higher vessel-based work. We added ~~five~~three new ROVs to our fleet during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and retired ~~41, including 39 in the third quarter,~~four, resulting in a total of 279 ROVs in our ROV ~~segment~~ fleet. We expect our ~~fourth~~third quarter ~~2016~~2017 ROV operating income to ~~increase~~decrease slightly from that of the ~~third quarter and~~second quarter. For the full year of 2017 compared to 2016, we expect ROV operating income to be ~~positive,~~up slightly, as ~~the third quarter reflected the~~2016 included charges for inventory write-downs and fixed asset write-offs ~~totaling~~of $36.0 ~~million discussed above, although we expect decreases in days on hire and average revenue per day-on-hire.~~million.

To improve operational efficiency, in 2016 we reorganized our Subsea Products segment into 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. This internal reorganization ~~does~~did not affect our segment reporting structure or the historical comparability of our segment results. The following table presents revenue from manufactured products and service and rental, as their respective percentages of total Subsea Products revenue:


		Three Months Ended						Nine Months Ended					Three Months Ended						Six Months Ended
		Sep 30, 2016		Sep 30, 2015		Jun 30, 2016		Sep 30, 2016		Sep 30, 2015			Jun 30, 2017		Jun 30, 2016		Mar 31, 2017		Jun 30, 2017		Jun 30, 2016
Manufactured products	Manufactured products	64	%	59	%	68	%	66	%	59	%	Manufactured products	70	%	68	%	71	%	71	%	66	%

Service and rental	Service and rental	36	%	41	%	32	%	34	%	41	%	Service and rental	30	%	32	%	29	%	29	%	34	%

Our Subsea Products revenue and operating income were lower across both business units in the ~~three-month period~~three- and six- month periods ended ~~September~~June 30, ~~2016~~2017 compared to the corresponding ~~period~~periods of the prior year, due to lower demand and pricing in both manufactured products and service and rental. ~~The third quarter of 2016 included an $8.2 million charge, predominantly for tools and inventory in our portfolio used to support deepwater drilling and operations.~~ Subsea Products operating income in the ~~third~~second quarter of ~~2016~~2017 was lower than that of the immediately preceding quarter on higher revenue at a lower margin, due ~~to: (1)~~to the ~~$8.2 million charge; (2) a combination~~continued weakness and competitive nature of ~~lower pricing and activity in~~the service and rental which is more short-cycle or call-out in nature; and (3) lower margins on manufactured products, as we processed backlog and new orders with lower pricing. For the nine months ended September 30, 2016, our Subsea Products revenue and operating income decreased from that of the corresponding period of the prior year across both business units, but most notably due to lower demand for and pricing of service and rental.market.

Our Subsea Products backlog was ~~$457~~$328 million ~~at September~~as of June 30, ~~2016,~~2017, compared to ~~$652~~$431 million atas of December 31, ~~2015.~~2016. The backlog decline was primarily in manufactured ~~products.~~products, particularly in umbilicals. We expect Subsea Products operating income to ~~be lower~~increase in the ~~fourth~~third quarter ~~2016~~2017 compared to the ~~third~~second quarter ~~due to further weakening of margins as a result~~

~~of pricing degradation and lower throughput in manufactured products, as well as softer demand and reduced pricing for short-cycle work in~~on increased service and ~~rental.~~rental activity. For the full year of 2017 compared to 2016, we expect lower Subsea Products operating income, with operating margins in the mid-to-high single digit range.

Our Subsea Projects operating income was lower in the three- and ~~three-month period~~six-month periods ended ~~September~~ended June 30, ~~2016~~2017 compared to the corresponding ~~period~~periods of the prior year, as a result of generally lower vessel demand and pricing, and the release in May 2016 of the Bourbon Oceanteam 101,, which was previously deployed under the field support vessel services contract offshore Angola. Our Subsea Projects operating income ~~was higher~~increased in the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the immediately preceding quarter, ~~despite a decline in revenue, as a result of: (1) a seasonal increase for diving services and survey work in the Gulf of Mexico; (2) lower costs for the~~ ~~Olympic Intervention IV~~ ~~charter; and (3) the completion of the~~ ~~Ocean Alliance~~ ~~dry docking in the second quarter.~~

~~For the~~ ~~nine months ended September 30, 2016, our Subsea Projects revenue and operating income decreased from that of the corresponding period of the prior year,~~ as a result of ~~decreased demand and lower pricing~~seasonal improvements in the U.S. Gulf of Mexico for deepwater vessel ~~services, including the completion during April 2015 of~~ work ~~associated with the~~ ~~Bourbon Evolution 803, a vessel we chartered on a short-term basis for use offshore Angola associated with our field support vessel services contract,~~ and ~~the release in May 2016 of the~~ ~~Bourbon Oceanteam 101, which was previously deployed under the same contract offshore Angola.~~survey services. In the ~~fourth~~third quarter ~~2016,~~of 2017, we expect ~~lower~~higher operating income than we had for the ~~third~~second quarter, from a seasonal ~~decrease~~increase in ~~diving activity in the~~U.S. Gulf of Mexico for deepwater vessel and diving services. For the ~~drydocking~~full year of ~~the~~ ~~Ocean Patriot~~.2017 compared to 2016, we expect lower Subsea Projects operating income as a result of decreased global demand.

For the ~~three-month period~~three- and six-month periods ended ~~September~~June 30, 2016, our Asset Integrity segment improved to profitability from the operating loss it sustained in the immediately preceding quarter. This improvement was a result of a smaller workforce, and was also due to the fact that the second quarter results included a bad debt expense

~~of $3.3 million. Compared~~2017, compared to the corresponding ~~period~~periods of the prior year, Asset Integrity's operating results ~~were~~improved on lower ~~due~~revenue, as we benefited from restructuring efforts we made in prior periods. Asset Integrity's 2016 operating results for the three- and six-month periods ended included a bad debt expense of $3.3 million. Compared to ~~lower demand and pricing for~~the immediately preceding quarter, our ~~services globally. For the nine months ended September 30, 2016, our~~second quarter Asset Integrity revenue and operating income ~~decreased from that of the corresponding period of the prior year across most of our operating areas,~~increased due to ~~decreased demand and pricing.~~seasonality. For the ~~fourth~~third quarter of 2017, we expect Asset Integrity's operating income to decline slightly compared to the second quarter. For the full year of 2017

compared to 2016, we expect lower Asset Integrity ~~to be considerably lower due to seasonality.~~revenue as a result of decreased demand, with higher operating income, as 2016 Asset Integrity results included charges totaling $6.4 million for restructuring and bad debts.

Advanced Technologies

Revenue and margin information was as follows:


		Three Months Ended									Nine Months Ended							Three Months Ended									Six Months Ended
(dollars in thousands)	(dollars in thousands)	Sep 30, 2016			Sep 30, 2015			Jun 30, 2016			Sep 30, 2016			Sep 30, 2015			(dollars in thousands)	Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017			Jun 30, 2016
Revenue	Revenue	$	82,705		$	82,348		$	82,475		$	232,069		$	242,866		Revenue	$	102,974		$	82,475		$	85,901		188,875			149,364
Gross Margin	Gross Margin	9,665			6,974			10,600			26,092			27,319			Gross Margin	$	14,133		$	10,600		$	10,072		$	24,205		$	16,427
Operating Income (Loss)		4,357			1,635			5,528			10,478			12,922
Operating Income (Loss) %		5		%	2		%	7		%	5		%	5		%
Operating Income																	Operating Income	7,632			5,528			5,026			12,658			6,121
Operating Income %																	Operating Income %	7		%	7		%	6		%	7		%	4		%

Advanced Technologies operating income for the ~~three-month period~~three- and six-month periods ended ~~September~~June 30, ~~2016~~2017 was higher than that of the corresponding ~~period~~periods of the prior year, from improved execution on theme park and other commercial projects. ~~For~~Operating income in the ~~nine months ended September 30, 2016, Advanced Technologies operating income~~second quarter of 2017 was ~~lower~~higher than that of the ~~corresponding period of 2015,~~immediately preceding quarter, due to ~~low margins on certain now-completed~~increased commercial ~~programs.~~activities and work for the U.S. Navy. We expect a slight ~~improvement~~decrease in our Advanced Technologies operating income in the ~~fourth~~third quarter of ~~2016~~2017 compared to the ~~third quarter, due~~second quarter. For the full year of 2017 compared to ~~expected better results~~2016, we expect Advanced Technologies revenue and operating income to be higher than that of 2016, on ~~theme park projects.~~increased activity in both our government contracting and commercial businesses, with improved execution.

Unallocated Expenses

Our Unallocated Expenses, i.e., those not associated with a specific business segment, within gross profit consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units and bonuses, as well as other general expenses. Our Unallocated Expenses within operating income consist of those expenses within gross profit plus general and administrative expenses related to corporate functions.

The following table sets forth our Unallocated Expenses for the periods indicated.

Three Months Ended Nine Months Ended
(dollars in thousands) Sep 30, 2016 Sep 30, 2015 Jun 30, 2016 Sep 30, 2016 Sep 30, 2015
Gross margin expenses $ 9,269
$ 13,259
$ 9,433
$ 37,359
$ 64,723
Operating income expenses 18,231
24,057
19,721
65,296
99,014
% of revenue 3 % 3 % 3 % 4 % 4 %



	Three Months Ended									Six Months Ended
(dollars in thousands)	Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017		Jun 30, 2016
Gross margin	$	16,449		$	9,433		$	15,635		32,084		28,090
Operating income	25,925			19,721			25,038			50,963		47,065
Operating income % of revenue	5		%	3		%	6		%	5	%	4	%

Our Unallocated Expenses ~~were lower in~~for the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016~~2017 increased compared to the corresponding periods of the prior year, primarily due to ~~lower~~higher 2017 estimated expenses related to incentive compensation from our performance units and ~~bonuses and ongoing cost reduction initiatives.~~bonuses. Our Unallocated Expenses for the ~~third quarter of 2016 slightly decreased from those of~~three months ended June 30, 2017 was flat compared to the immediately preceding ~~quarter, primarily due to lower corporate expenses.~~quarter. For the ~~fourth quarter~~remainder of ~~2016,~~2017, we expect our quarterly Unallocated Expenses to ~~be higher than the third quarter.~~remain essentially flat.

Other

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


		Three Months Ended									Nine Months Ended							Three Months Ended									Six Months Ended
(in thousands)	(in thousands)	Sep 30, 2016			Sep 30, 2015			Jun 30, 2016			Sep 30, 2016			Sep 30, 2015			(in thousands)	Jun 30, 2017			Jun 30, 2016			Mar 31, 2017			Jun 30, 2017		Jun 30, 2016
Interest income	Interest income	$	684		$	229		$	1,442		$	2,421		$	436		Interest income	$	2,045		$	1,442		$	1,337		3,382		1,737
Interest expense, net of amounts capitalized	Interest expense, net of amounts capitalized	(6,325		)	(6,396		)	(6,207		)	(18,924		)	(18,696		)	Interest expense, net of amounts capitalized	(7,599		)	(6,207		)	(6,268		)	(13,867	)	(12,599	)
Equity in income (losses) of unconsolidated affiliates	Equity in income (losses) of unconsolidated affiliates	(246		)	1,567			263			543			1,313			Equity in income (losses) of unconsolidated affiliates	(394		)	263			(980		)	(1,374	)	789
Other income (expense), net		570			(9,099		)	(1,405		)	(6,823		)	(14,883		)
Provision for income taxes (benefit)		(5,375		)	31,226			10,164			16,226			92,718
Other expense, net																	Other expense, net	(58		)	(1,405		)	(2,556		)	(2,614	)	(7,393	)
Provision for income taxes																	Provision for income taxes	1,252			10,164			(1,083		)	169		21,601

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.

Foreign currency transaction gains and losses is the principal component of Other ~~income (expense),~~expense, net. In the ~~nine months~~six-month periods ended ~~September~~June 30, 2017 and 2016, we incurred foreign currency transaction losses of ~~$6.5~~$2.1 million and $7.1 million, respectively. In six months ended June 30, 2017, we did not incur significant currency losses in any one currency. The currency losses in 2016 primarily related to ~~Angola~~the Angolan kwanza and its ~~currency's~~ declining exchange rate relative to the U.S. ~~dollar. The foreign currency transaction losses~~dollar, and related primarily to our cash balances in Angola. Conversion of cash balances from Angolan kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process starting in mid-2015, causing our cash balances in kwanza to increase.

The provisions for income taxes were related to U.S. income taxes that we provided at estimated annual effective rates using assumptions as to earnings and other factors that would affect the tax provision for the remainder of the year, and to the operations of foreign branches and subsidiaries that were subject to local income and withholding taxes. ~~We currently anticipate our effective tax rate for 2016 will be 31.3%.~~ Factors that could affect our ~~estimate of this~~estimated tax rate include our profitability levels in general and the geographic mix in the sources of our results. ~~The primary difference between~~We do not believe that this effective rate is meaningful, as the rate is less significant at a low pretax income or a pretax loss position. Nevertheless, our ~~current 2016 estimated~~ effective tax rate, before discrete items, of ~~31.3% and~~20.4% for the six-month period ended June 30, 2017 was less beneficial than the federal statutory ~~tax~~ rate of ~~35% reflects~~35.0%, primarily due to non-deductible expenses partially offset by our intention to continue to indefinitely reinvest in certain of our international operations. ~~As a result, we~~The effective tax rate of 31.3% for the period ended June 30, 2016 was lower than the federal statutory rate of 35.0%, primarily due to our intention to indefinitely reinvest in certain of our international operations. We do not provide for U.S. taxes on ~~that~~the portion of our foreign ~~earnings.~~earnings we indefinitely reinvest.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

We are currently exposed to certain market risks arising from transactions we have entered into in the normal course of business. These risks relate to interest rate changes and fluctuations in foreign exchange rates. 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. When we have a significant amount of borrowings, we typically manage our exposure to interest rate changes through the use of a combination of fixed- and floating-rate debt. See Note 3 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 antwo interest rate ~~swap~~swaps in place on ~~$100~~a total of $200 million ~~in principal amount~~ of ~~our 4.650%~~the Senior Notes ~~due 2024~~ for the period ~~from November 2014~~ to November 2024. The ~~agreement swaps~~agreements swap the fixed interest rate of 4.650% on $100 million of the Senior Notes to the floating rate of one month LIBOR plus 2.426%. and one month LIBOR plus 2.823% on another $100 million. We believe significant interest rate changes would not have a material near-term impact on our future earnings or cash flows.

Because we operate in various oil and gas exploration and production regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar. The functional currency for several of our international operations is the applicable local currency. A stronger U.S. dollar against the U.K. pound sterling, the Norwegian kroner and the Brazilian real may 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 to our equity accounts of ~~$31~~$3.7 million and ~~$(100)~~$14.8 million in the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~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 ~~$0.6~~$2.1 million and ~~$(6.5)~~$7.1 million in the ~~three- and nine-month~~six-month periods ended ~~September~~June 30, 2017 and 2016, ~~and $(9.1) million and $(14.4) million in the three- and nine-month periods ended September 30, 2015, respectively, that~~respectively. Those losses are included in Other expense, net in our Consolidated Statements of Operations in those respective periods. Since the second quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has been ~~declining.~~declining, although the exchange rate was relatively stable during the six-month period ended June 30, 2017. As our functional currency in Angola is the U.S. dollar, ~~included within our foreign currency translation losses are~~we recorded foreign currency transaction ~~gains (losses)~~losses related to the kwanza of ~~$0.7~~$1.2 million and ~~$(7.6)~~$8.2 million in the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2016.~~2016, respectively, as a component of Other expense, net in our Consolidated Statements of Operations for those respective periods. Our foreign currency transaction losses related primarily to the remeasurement of our Angolan kwanza cash balances to U.S. dollars. Conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank has slowed this process since mid-2015, causing our kwanza cash balances to subsequently increase. As of ~~September~~June 30, ~~2016,~~2017, we had the equivalent of approximately ~~$32~~$34 million of kwanza cash ~~in kwanza~~balances in Angola reflected on our balance sheet.

To mitigate our currency exposure risk in Angola, through ~~September~~June 30, ~~2016~~2017 we used kwanza to purchase ~~$60~~$59 million equivalent Angolan central bank (Banco Nacional de Angola) bonds with various maturities throughout 2018. These bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. We have classified ~~$50 million of~~ these instruments as held-to-maturity, and have recorded the original cost on our balance sheet as other non-current assets. The remaining $10 million of these instruments are classified as available for sale and are recorded on our balance sheet as other current assets at fair market value at September 30, 2016, which approximated original cost. We estimated the fair market value of the Angolan bonds recorded as current assets at September 30, 2016 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. The Angolan bonds recorded as current assets were sold in October 2016 at approximately book value.

Item 4. Controls and Procedures.

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2016~~2017 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There has been no change in our internal control over financial reporting that occurred during the three months ended ~~September~~June 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION


Item 1.	Legal Proceedings.

On June 17, 2014, Peter L. Jacobs, a purported shareholder, filed a derivative complaint against all of the ~~then-current~~then current members of our board of directors and one of our former directors, as defendants, and our company, as nominal defendant, in the Court of Chancery of the State of Delaware. Through the complaint, the plaintiff is asserting, on behalf of our company, actions for breach of fiduciary duties and unjust enrichment in connection with prior determinations of our board of directors relating to nonexecutive director compensation. The plaintiff is seeking relief including disgorgement of payments made to the defendants, an award of unspecified damages and an award for attorneys’ fees and other costs. We and the defendants filed a motion to dismiss the complaint and a supporting brief on which the Court has not yet ruled. 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.

Item 6. 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
12.01
Computation of Ratio of Earnings to Fixed Charges
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.

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

Agreement and Amendment No. 3 to Credit Agreement, dated as of June 27, 2017, 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

June 2017

4.1

10.1+

Supplemental 2017 Performance Unit Agreement for Mr. Larson

1-10945

8-K

May 2017

10.1

10.2+

Supplemental 2017 Restricted Stock Unit Agreement for Mr. Larson

1-10945

8-K

May 2017

10.2

10.3+

2017 Nonemployee Director Restricted Stock Agreement for Mr. McEvoy

1-10945

8-K

May 2017

10.3

12.01

Computation of Ratio of Earnings to Fixed Charges

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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




~~November 7, 2016~~August 3, 2017		/S/ ~~M. K~~R~~EVIN~~ODERICK MA. LCE~~VOY~~ARSON
Date		~~M. Kevin McEvoy~~Roderick A. Larson
		President and Chief Executive Officer
		(Principal Executive Officer)


~~November 7, 2016~~August 3, 2017		/S/ ALAN R. CURTIS
Date		Alan R. Curtis
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)


~~November 7, 2016~~August 3, 2017		/S/ W. CARDON GERNER
Date		W. Cardon Gerner
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)