UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	~~June 30, 2019~~March 31, 2020



☐	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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $0.25 per share	OII	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted 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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑þ	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

☐ Yes ☑þ No

Number of shares of Common Stock outstanding as of ~~July 26, 2019: 98,929,503~~May 8, 2020: 99,267,911

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 (Loss)
		Consolidated Statements of Cash Flows
		Consolidated Statements of Equity
		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 1A.	Risk Factors
Item 6.	Exhibits

Signatures

PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	Jun 30, 2019			Dec 31, 2018			Mar 31, 2020			Dec 31, 2019
(in thousands, except share data)							Mar 31, 2020			Dec 31, 2019
	Jun 30, 2019	(unaudited)		Dec 31, 2018					(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	355,838		$	354,259		$	307,460		$	373,655
Accounts receivable, net of allowances for doubtful accounts of $5,676 and $7,116	374,173			368,885
Contract assets	197,001			256,201
Accounts receivable, net							372,966			421,360
Contract assets, net							237,107			221,288
Inventory, net	206,671			194,507			166,360			174,744
Other current assets	61,510			71,037			68,013			53,389
Total Current Assets	1,195,193			1,244,889			1,151,906			1,244,436
Property and equipment, at cost	2,879,197			2,837,587			2,450,116			2,622,185
Less accumulated depreciation	1,931,410			1,872,917			1,778,288			1,845,653
Net property and equipment	947,787			964,670			671,828			776,532
Other Assets:
Goodwill	422,312			413,121			73,987			405,079
Other noncurrent assets	192,698			202,318			132,263			151,378
Right-of-use operating lease assets	180,645			—			135,113			163,238
Total other assets	795,655			615,439			341,363			719,695
Total Assets	$	2,938,635		$	2,824,998		$	2,165,097		$	2,740,663
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	105,171		$	102,636		$	124,898		$	145,933
Accrued liabilities	312,347			306,933			298,906			337,681
Contract liabilities	73,526			85,172			61,929			117,342
Total current liabilities	491,044			494,741			485,733			600,956
Long-term debt	795,639			786,580			806,396			796,516
Long-term operating lease liabilities	172,090			—			150,839			160,988
Other long-term liabilities	120,829			128,379			85,470			106,794
Commitments and contingencies
Equity:
Common stock, par value $0.25 per share; 360,000,000 shares authorized; 110,834,088 shares issued	27,709			27,709			27,709			27,709
Additional paid-in capital	201,227			220,421			189,322			207,130
Treasury stock; 11,904,585 and 12,294,873 shares, at cost	(681,717		)	(704,066		)
Treasury stock; 11,567,024 and 11,903,252 shares, at cost							(662,386		)	(681,640		)
Retained earnings	2,138,679			2,204,548			1,480,373			1,850,244
Accumulated other comprehensive loss	(332,928		)	(339,377		)	(404,422		)	(334,097		)
Oceaneering shareholders' equity	1,352,970			1,409,235			630,596			1,069,346
Noncontrolling interest	6,063			6,063			6,063			6,063
Total equity	1,359,033			1,415,298			636,659			1,075,409
Total Liabilities and Equity	$	2,938,635		$	2,824,998		$	2,165,097		$	2,740,663

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 June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2019			2018			2019			2018			(in thousands, except per share data)	2020			2019
Revenue	Revenue	$	495,781		$	478,674		$	989,667		$	895,087		Revenue	$	536,668		$	493,886
Cost of services and products	Cost of services and products	453,798			448,946			920,097			846,531			Cost of services and products	489,916			466,299
	Gross margin	41,983			29,728			69,570			48,556			Gross margin	46,752			27,587
Selling, general and administrative expense	Selling, general and administrative expense	51,618			49,365			100,919			95,342			Selling, general and administrative expense	55,741			49,301
Long-lived assets impairments														Long-lived assets impairments	68,763			—
Goodwill impairment														Goodwill impairment	303,005			—
	Income (loss) from operations	(9,635		)	(19,637		)	(31,349		)	(46,786		)	Income (loss) from operations	(380,757		)	(21,714		)
Interest income	Interest income	1,848			2,950			4,452			5,542			Interest income	1,277			2,604
Interest expense, net of amounts capitalized	Interest expense, net of amounts capitalized	(10,199		)	(8,802		)	(19,623		)	(18,173		)	Interest expense, net of amounts capitalized	(12,462		)	(9,424		)
Equity in income (losses) of unconsolidated affiliates	Equity in income (losses) of unconsolidated affiliates	—			(737		)	(164		)	(1,580		)	Equity in income (losses) of unconsolidated affiliates	1,197			(164		)
Other income (expense), net	Other income (expense), net	7			(3,556		)	726			(12,030		)	Other income (expense), net	(7,128		)	719
	Income (loss) before income taxes	(17,979		)	(29,782		)	(45,958		)	(73,027		)	Income (loss) before income taxes	(397,873		)	(27,979		)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	17,203			3,294			14,051			9,182			Provision (benefit) for income taxes	(30,275		)	(3,152		)
	Net Income (Loss)	$	(35,182	)	(33,076		)	$	(60,009	)	$	(82,209	)	Net Income (Loss)	$	(367,598	)	$	(24,827	)

Weighted-average shares outstanding	Weighted-average shares outstanding													Weighted-average shares outstanding
Basic	Basic	98,929			98,531			98,822			98,457			Basic	99,055			98,714
Diluted	Diluted	98,929			98,531			98,822			98,457			Diluted	99,055			98,714
Earnings (loss) per share	Earnings (loss) per share													Earnings (loss) per share
Basic	Basic	$	(0.36	)	$	(0.34	)	$	(0.61	)	$	(0.83	)	Basic	$	(3.71	)	$	(0.25	)
Diluted	Diluted	$	(0.36	)	$	(0.34	)	$	(0.61	)	$	(0.83	)	Diluted	$	(3.71	)	$	(0.25	)

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)



		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands)	(in thousands)	2019			2018			2019			2018			(in thousands)	2020			2019
Net income (loss)	Net income (loss)	$	(35,182	)	$	(33,076	)	$	(60,009	)	$	(82,209	)	Net income (loss)	$	(367,598	)	$	(24,827	)
Other Comprehensive Income (Loss):	Other Comprehensive Income (Loss):													Other Comprehensive Income (Loss):
	Foreign currency translation adjustments	203			(37,806		)	6,449			(15,630		)	Foreign currency translation adjustments	(70,325		)	6,246
Total other comprehensive income (loss)	Total other comprehensive income (loss)	203			(37,806		)	6,449			(15,630		)	Total other comprehensive income (loss)	(70,325		)	6,246
	Comprehensive income (loss)	$	(34,979	)	$	(70,882	)	$	(53,560	)	$	(97,839	)	Comprehensive income (loss)	$	(437,923	)	$	(18,581	)

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended June 30,						Three Months Ended March 31,
(in thousands)	2019			2018			2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	(60,009	)	$	(82,209	)	$	(367,598	)	$	(24,827	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	102,790			113,971
Depreciation and amortization, including goodwill impairment							356,196			52,486
Loss on impairment of long-lived assets							68,763			—
Deferred income tax provision (benefit)	(3,686		)	(23,034		)	(8,405		)	(2,907		)
Net loss (gain) on sales of property and equipment	(1,592		)	860
Inventory write-downs							—			—
Net loss (gain) on sales of property and equipment and cost method investment							16			(11		)
Noncash compensation	5,835			5,985			3,116			2,980
Noncash impact of lease accounting							647			—
Excluding the effects of acquisitions, increase (decrease) in cash from:
Accounts receivable and contract assets	53,913			(12,161		)	30,303			22,181
Inventory	(18,687		)	(3,901		)	8,384			(15,026		)
Proceeds from interest rate swaps							12,840			—
Other operating assets	11,868			473			(11,504		)	1,010
Currency translation effect on working capital, excluding cash	2,005			(2,771		)	(9,302		)	371
Current liabilities	(18,669		)	3,941			(102,784		)	(15,058		)
Other operating liabilities	(1,059		)	14,531			(12,822		)	(2,075		)
Total adjustments to net income (loss)	132,718			97,894			335,448			43,951
Net Cash Provided by Operating Activities	72,709			15,685
Net Cash Provided by (Used in) Operating Activities							(32,150		)	19,124
Cash Flows from Investing Activities:
Purchases of property and equipment	(70,862		)	(53,530		)	(27,229		)	(29,964		)
Business acquisitions, net of cash acquired	—			(68,398		)
Proceeds from redemption of investments	—			33,405
Other investing activities	—			(10,025		)
Distributions of capital from unconsolidated affiliates	1,064			2,372			405			—
Dispositions of property and equipment	1,679			1,403
Net Cash Used in Investing Activities	(68,119		)	(94,773		)
Proceeds from sale of property and equipment							118			50
Net Cash Provided by (Used in) Investing Activities							(26,706		)	(29,914		)
Cash Flows from Financing Activities:
Net proceeds from issuance of 6.000% Senior Notes, net of issuance costs	—			295,816
Repayment of term loan facility	—			(300,000		)
Other financing activities	(2,682		)	(1,594		)	(1,668		)	(2,338		)
Net Cash Used in Financing Activities	(2,682		)	(5,778		)
Net Cash Provided by (Used in) Financing Activities							(1,668		)	(2,338		)
Effect of exchange rates on cash	(329		)	(5,909		)	(5,671		)	632
Net Increase (Decrease) in Cash and Cash Equivalents	1,579			(90,775		)	(66,195		)	(12,496		)
Cash and Cash Equivalents—Beginning of Period	354,259			430,316			373,655			354,259
Cash and Cash Equivalents—End of Period	$	355,838		$	339,541		$	307,460		$	341,763

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

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)



																																	Common Stock				Additional Paid-in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Oceaneering Shareholders' Equity				Non-controlling Interest				Total Equity
(in thousands)																																	Common Stock								Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Oceaneering Shareholders' Equity				Non-controlling Interest				Total Equity
Balance, December 31, 2019																																	$	27,709			Additional Paid-in Capital			$	207,130			$	(681,640	)			$	1,850,244			$	(334,097	)		$	1,069,346			$	6,063		$	1,075,409
Cumulative effect of ASC 326 adoption																																	—				—				—				(2,273		)			—				(2,273		)		—			(2,273		)
Net income (loss)																																	—				—				—				(367,598		)		—				(367,598		)		—				(367,598		)
Other comprehensive income (loss) currency translation adjustments																																	—				—				—				—				(70,325		)		(70,325		)		—				(70,325		)
Restricted stock unit activity																																	—				(11,816		)		13,262				—				—				1,446				—				1,446
Restricted stock activity																																	—				(5,992		)		5,992				—				—				—				—				—
Balance, March 31, 2020																																	$	27,709			$	189,322			$	(662,386	)		$	1,480,373			$	(404,422	)		$	630,596			$	6,063			$	636,659
														Accumulated Other Comprehensive Income (Loss)
	Common Stock		Additional Paid-in Capital			Treasury Stock				Retained Earnings				Currency Translation Adjustments							Oceaneering Shareholders' Equity				Non-controlling Interest				Total Equity				Common Stock				Additional Paid-in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Oceaneering Shareholders' Equity				Non-controlling Interest				Total Equity
(in thousands)	Common Stock					Treasury Stock				Retained Earnings			Pension												Non-controlling Interest				Total Equity				Common Stock				Additional Paid-in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Oceaneering Shareholders' Equity				Non-controlling Interest				Total Equity
Balance, December 31, 2018	$	27,709	Additional Paid-in Capital	$	220,421		$	(704,066	)		$	2,204,548		Currency Translation Adjustments			$	(339,377		)	Oceaneering Shareholders' Equity			$	—			$	1,409,235		$	6,063			$	1,415,298			$	27,709			$	220,421			$	(704,066	)		$	2,204,548			$	(339,377	)		$	1,409,235			$	6,063		$	1,415,298
Cumulative effect of ASC 842 adoption	—		—			—				(5,860		)		—				—			(5,860		)	—				(5,860		)		—				—				—				(5,860		)		—				(5,860		)		—				(5,860		)
Net income (loss)	—		—			—				(24,827		)		—				—			(24,827		)		—				(24,827		)		—				—				—				(24,827		)		—				(24,827		)		—				(24,827		)
Other comprehensive income (loss)	—		—			—				—				6,246				—			6,246				—				6,246
Other comprehensive income (loss) currency translation adjustments																																	—				—				—				—				6,246				6,246				—				6,246
Restricted stock unit activity	—		(16,494		)	17,137				—				—				—			643				—				643				—				(16,494		)		17,137				—				—				643				—				643
Restricted stock activity	—		(5,143		)	5,143				—				—				—			—				—				—				—				(5,143		)		5,143				—				—				—				—				—
Balance, March 31, 2019	27,709		198,784			(681,786		)		2,173,861				(333,131		)		—			1,385,437				6,063				1,391,500				$	27,709			$	198,784			$	(681,786	)		$	2,173,861			$	(333,131	)		$	1,385,437			$	6,063			$	1,391,500
Net income (loss)	—		—			—				(35,182		)		—				—			(35,182		)		—				(35,182		)
Other comprehensive income (loss)	—		—			—				—				203				—			203				—				203
Restricted stock unit activity	—		2,443			69				—				—				—			2,512				—				2,512
Restricted stock activity	—		—			—				—				—				—			—				—				—
Noncontrolling interest	—		—			—								—				—			—				—				—
Balance, June 30, 2019	$	27,709	$	201,227		$	(681,717	)		$	2,138,679			$	(332,928	)		$		—		$	1,352,970			$	6,063			$	1,359,033


Balance, December 31, 2017	$	27,709	$	225,125		$	(718,946	)		$	2,417,412			$	(292,351	)		$	215		$	1,659,164			$	5,354			$	1,664,518
Cumulative effect of ASC 606 adoption	—		—			—				(537		)		—				—			(537		)		—				(537		)
Net income (loss)	—		—			—				(49,133		)		—				—			(49,133		)		—				(49,133		)
Other comprehensive income (loss)	—		—			—				—				22,176				—			22,176				—				22,176
Restricted stock unit activity	—		(9,186		)	10,365				—				—				—			1,179				—				1,179
Restricted stock activity	—		(3,951		)	3,951				—				—				—			—				—				—
Balance, March 31, 2018	27,709		211,988			(704,630		)		2,367,742				(270,175		)		215			1,632,849				5,354				1,638,203
Net income (loss)	—		—			—				(33,076		)		—				—			(33,076		)		—				(33,076		)
Other comprehensive income (loss)	—		—			—				—				(37,806		)		—			(37,806		)		—				(37,806		)
Restricted stock unit activity	—		3,085			128				—				—				—			3,213				—				3,213
Balance, June 30, 2018	$	27,709	$	215,073		$	(704,502	)		$	2,334,666			$	(307,981	)		$	215		$	1,565,180			$	5,354			$	1,570,534

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. Oceaneering International, Inc. ("Oceaneering," "we" or "us") has prepared these unaudited consolidated financial statements pursuant to instructions for quarterly reports on Form 10-Q, which we are required to file with the United States Securities and Exchange Commission (the "SEC"). These financial statements do not include all information and footnotes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). These financial statements reflect all adjustments that we believe are necessary to present fairly our financial position as of ~~June 30, 2019~~March 31, 2020 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, ~~2018.~~2019. The results for interim periods are not necessarily indicative of annual results.

Principles of Consolidation. The consolidated financial statements include the accounts of Oceaneering and our 50% or more owned and controlled subsidiaries. We also consolidate entities that are determined to be variable interest entities if we determine that we are the primary beneficiary; otherwise, we account for those entities using the equity method of accounting. We use the equity method to account for our investments in unconsolidated affiliated companies of which we own an equity interest of between 20% and 50% and as to which we have significant influence, but not control, over operations. We use the cost method for all other long-term investments. Investments in entities that we do not consolidate are reflected on our balance sheet in ~~Other~~other noncurrent 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 as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

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

~~Accounts Receivable –~~ Allowances for ~~Doubtful Accounts.~~Credit Loss—Financial Assets Measured at Amortized Costs. On January 1, 2020, we adopted Accounting Standard Update ("ASU") No. 2016-13,"Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," as amended ("ASC 326"), which introduces a new credit reserving methodology known as the Current Expected Credit Loss ("CECL") model. The CECL model applies to financial assets measured at amortized costs, including accounts receivable, contract assets and held-to-maturity loan receivables. Under the CECL model, we identify allowances for credit loss based on future expected losses when accounts receivable, contract assets or held-to-maturity loan receivables are created rather than when losses are probable.

We ~~determine~~use the ~~need~~loss-rate method in developing the allowance for ~~allowances~~credit losses, which involves identifying pools of assets with similar risk characteristics, reviewing historical losses within the last five years and consideration of reasonable supportable forecasts of economic indicators. Changes in estimates, developing trends and other new information could have material effects on future evaluations.

We monitor the credit quality of our accounts receivable and other financing receivable amounts by frequent customer interaction, following economic and industry trends and reviewing specific customer data. Our other receivable amounts include contract assets and held-to-maturity loan receivables which we consider to have a low risk of loss.

We are monitoring the impacts from the coronavirus (COVID-19) outbreak and volatility in the oil and natural gas markets on our customers and various counterparties. We have considered the current and expected economic and market conditions as a result of COVID-19 in determining credit loss expense for the period ended March 31, 2020.

As a result of the adoption of ASC 326, we recorded a cumulative-effect adjustment of $2.3 million that decreased retained earnings and increased the allowance for credit losses. As of March 31, 2020, our allowance for credit losses was $8.5 million for accounts receivable and $0.4 million for other receivables. We adopted ASC 326 using the modified retrospective method. Prior periods were not restated and reflect allowance for doubtful accounts of

$7.5 million at December 31, 2019, which we determined were needed using the specific identification ~~method.~~method, in accordance with previously applicable GAAP.

We have elected to apply the practical expedient available under ASC 326 to exclude the accrued interest receivable balance that is included in our held-to-maturity loan receivables. The amount excluded as of March 31, 2020 was $1.5 million.

Accounts receivable are considered to be past-due after the end of the contractual terms agreed to with the customer. There were no material past-due amounts for our financial assets as of March 31, 2020. We generally do not require collateral from our customers.

See Note 2—"Accounting Standards Update"—for more information on our adoption of our adoption of ASU 326.

Inventory. Inventory is valued at the lower of cost or net realizable value. We determine cost using the weighted-average method.

Property and Equipment, ~~and~~ Long-Lived Intangible Assets and Right-of-Use Operating Lease Assets. We provide for depreciation of assets included in 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~~Long-lived intangible assets, primarily acquired in connection with business combinations, include trade names, intellectual property and customer relationships and are being amortized over their estimated useful lives.

Right-of-use operating lease assets are recognized based on the present value of the future minimum lease payments over the lease term at commencement or modification date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at commencement or modification date in determining the present value of future payments. In determining the incremental borrowing rate, we considered our external credit ratings, bond yields for us and peer companies, the risk-free rate in geographic regions where we operate, and the impact associated with providing collateral over a similar term as the lease for an amount equal to the lease payments. Our right-of-use operating lease assets also include any lease prepayments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We capitalize interest on assets where the construction period is anticipated to be more than three months. We capitalized ~~$1.4 million~~no interest and ~~$1.8~~$2.0 million of interest in the three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $3.4 million and $3.4 million of interest in the~~ ~~in the six-month periods ended~~ ~~June 30, 2019 and 2018,~~ 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 and right-of-use operating lease assets to determine whether any events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred ~~through the use~~by utilization 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.

Oceaneering Entertainment Systems and Oceaneering AGV Systems asset groups. To measure market value for our asset groups, we used the following approaches:

Subsea Distribution Solutions U.K. - We utilized the cost approach and considered economic obsolescence under the income approach to determine fair value of the property and equipment.

Subsea Distribution Solutions Brazil and Angola - We utilized a combination of market and cost approaches to measure fair values.

Shallow Water vessels - We utilized the cost approach and considered historical, current and anticipated dayrates and utilization to measure market value.

Renewables and Special Projects - We utilized a combination of market and cost approaches to measure fair values.

Oceaneering Entertainment Systems and Oceaneering AGV Systems - We utilized a combination of market and cost approaches to measure fair value.

Our estimates of fair values for the asset groups in our Subsea Products, Subsea Projects and Advanced Technologies segments required us to use significant unobservable inputs, classified as Level 3 fair value measurements, including assumptions related to future performance, risk-adjusted discount rates, future commodity prices and demand for our services and estimates of expected realizable value. For our cash flow projections, we utilized a weighted average cost of capital ranging between 12% and 15% and a terminal value based on the Gordon Growth Model assuming an expected long-term growth rate of 2%.

We determined that the carrying values exceeded the estimated fair values and, as a result, recorded impairments as noted below:



		Three Months Ended March 31, 2020
(in thousands)		Property and Equipment, Net		Intangible Assets		Right-of-Use Operating Lease Assets		Total
Subsea Products
	Subsea Distribution Solutions U.K.	$	6,543	$	—	$	—	$	6,543
	Subsea Distribution Solutions Brazil	9,834		—		—		9,834
	Subsea Distribution Solutions Angola	25,941		—		12,541		38,482
Subsea Projects
	Shallow Water vessels	3,894		—		—		3,894
	Renewables and Special Projects group	3,628		—		—		3,628
	Global Data Solutions	—		167		—		167
Advanced Technologies
	Oceaneering Entertainment Systems	1,593				3,472		5,065
	Oceaneering AGV Systems	145		310		695		1,150
	Total long-lived assets impairments	$	51,578	$	477	$	16,708	$	68,763

For additional information regarding write-downs and write-offs of property and equipment, long-lived intangible assets and right-of-use operating lease assets in the three months ended March 31, 2020 and December 31, 2019, see Note 9—"Business Segment Information." We did not record any impairments of long-lived assets in the three months ended March 31, 2019.

For assets held for sale or disposal, the fair value of the asset is measured using fair market value less estimated costs to sell. Assets are classified as held-for-sale when we have a plan for disposal of certain assets and those assets meet the held for sale criteria.

~~Business Acquisitions~~Goodwill.~~. We account~~ Our goodwill is evaluated for ~~business combinations using~~impairment annually and whenever we identify certain triggering events or circumstances that would more likely than not reduce the ~~acquisition method~~fair value of ~~accounting, and, in each case, we allocate the acquisition price to the assets acquired and liabilities assumed based on their fair market values as of the date of acquisition.~~a reporting unit below its carrying amount.

In ~~March 2018,~~our evaluation of goodwill, we acquired Ecosse Subsea Limited (“Ecosse”) for $68 million in cash. Headquartered in Aberdeen, Scotland, Ecosse builds and operates tools for seabed preparation, route clearance and trenching for the installation of submarine cables and pipelines. These services are offered on an integrated basis that includes vessels, remotely operated vehicles ("ROVs") and survey services. We have accounted for this acquisition by allocating the purchase price to the assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition. We have included Ecosse’s operations in our consolidated financial statements starting from the date of closing, and its operating results are reflected in our Subsea Projects segment.

~~Goodwill.~~ ~~Annually, we are required to evaluate our goodwill by performing~~perform a qualitative or quantitative impairment test. Under the qualitative approach, ~~and after assessing the totality of events or circumstances,~~ if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we are required to perform the quantitative analysis to determine the fair value for ~~that~~the reporting unit. Thereafter, we compare the fair value of the reporting unit with its carrying amount and recognize an impairment loss for the amount by which the carrying amount exceeds the fair value of the reporting unit. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. We also consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

Our estimates of fair values for our reporting units required us to use significant unobservable inputs, classified as Level 3 fair value measurements, including assumptions related to future performance, risk-adjusted discount rates, future commodity prices and demand for our services and estimates of expected realizable value. For our cash flow projections for the three-months ended March 31, 2020, we utilized a weighted average cost of capital ranging between 12% and 15% and a terminal value based on the Gordon Growth Model assuming an expected long-term growth rate of 2%.

Due to the protracted energy downturn compounded with demand destruction and insufficient control of supply levels, our customers' continued focus on cost discipline, and adverse impacts of COVID-19, we determined that impairment indicators were present in the first quarter of 2020 and we were required to perform a quantitative analysis for our Subsea Products-Service, Technology and Rentals ("ST&R"), Subsea Products-Manufactured Products, Subsea Projects, Asset Integrity and Advanced Technologies-Commercial reporting units. Based on these quantitative analyses, the fair value was determined to be less than the carrying value for each of those reporting units with the exclusion of Subsea Products-Manufactured Products. As a result, for our Subsea Products-ST&R, Subsea Projects, Asset Integrity and Advanced Technologies-Commercial reporting units, we recorded pre-tax goodwill impairment losses of $51 million, $130 million, $111 million and $11 million, respectively. For our ROV and Advanced Technologies-Government reporting units, qualitative assessments were performed; and we concluded that it was more likely than not the fair value of the reporting units were more than the carrying value of the reporting unit and, therefore, no impairment was required.

In the fourth quarter of 2019, we were required to perform a quantitative analysis for our Subsea Projects ~~Segment~~ and Asset Integrity reporting units. Based on these quantitative tests, we determined that the fair value for our Subsea Projects reporting unit exceeded the carrying amount and there was no impairment. For our Asset Integrity reporting unit, the fair value was less than the carrying value and, as a result, we recorded a pre-tax goodwill impairment loss of ~~$76 million in the Subsea Projects reporting unit. The impairment loss was recorded in our Consolidated Statement of Operation for the quarter ended December 31, 2018.~~$15 million. For the remaining reporting units, qualitative assessments were performed; and we concluded that it was more likely than not the fair value of the reporting unit was more than the carrying value of the reporting unit and, therefore, no impairment was required.

~~In addition~~Besides the goodwill impairments discussed above, the changes in our reporting units' goodwill balances during the periods presented are from currency exchange rate changes. For information regarding goodwill by business segment, see Note 9-"Operations by Business Segment and Geographic Area."

Business Acquisitions. We account for business combinations using the acquisition method of accounting, with acquisition prices being allocated to ~~our annual evaluation~~the assets acquired and liabilities assumed based on their fair values as of ~~goodwill for impairment, upon~~ the ~~occurrence~~respective dates 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.

acquisition.

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 as of the balance sheet date, and the resulting translation adjustments are recognized, net of tax, in accumulated other comprehensive income (loss) as a component of shareholders' equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Operations.

Revenue Recognition. ~~On January 1, 2018, we adopted Accounting Standard Update ("ASU") 2014-09, "Revenue from Contracts with Customers,~~" which implemented Accounting Standards Codification Topic 606 ("ASC 606"). We applied the modified retrospective method to those contracts that were not completed as of January 1, 2018, and utilized the practical expedient to reflect the effect on contract modifications in the aggregate. The adoption of this ASU resulted in a cumulative effect adjustment of $537,000 recorded to retained earnings as of January 1, 2018.

All of our revenue is realized through contracts with customers. We recognize our revenue according to the contract type. On a daily basis, we recognize service revenue over time for contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly. We use the input method to faithfully depict revenue recognition, because each day of service provided represents value to the customer. The performance obligations in these contracts are satisfied, and revenue is recognized, as the work is performed. We have used the expedient available to recognize revenue when the billing corresponds to the value realized by the customer where appropriate.

We account for significant fixed-price contracts, mainly relating to our Subsea Products segment, and to a lesser extent in our Subsea Projects and Advanced Technologies segments, by recognizing revenue over time using an input, cost-to-cost measurement percentage-of-completion method. We use the input cost-to-cost method to faithfully depict revenue recognition. This commonly used method allows appropriate calculation of progress on our

contracts. A performance obligation is satisfied as we create a product on behalf of the customer over the life of the contract. The remainder of our revenue is recognized at the point in time when control transfers to the customer, thus satisfying the performance obligation.

We have elected to recognize the cost for freight and shipping as an expense when incurred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by us from customers, are excluded from revenue.

In our service-based business lines, ~~which~~we principally charge on a ~~day rate~~dayrate basis for services ~~provided, there is no significant impact in the pattern of revenue and profit recognition as a result of implementation of ASC 606.~~provided. In our product-based business lines, predominantly in our Subsea Products segment, we ~~have seen impacts on the pattern of our~~recognize revenue and profit ~~recognition in our contracts~~ using the percentage-of-completion method ~~as a result of the requirement to~~and exclude uninstalled materials and significant inefficiencies from the measure of progress. ~~This occurs predominantly in our Subsea Products segment.~~

We apply judgment in the determination and allocation of transaction price to performance obligations, and the subsequent recognition of revenue, based on the facts and circumstances of each contract. We routinely review estimates related to our contracts and, where required, reflect revisions to profitability in earnings immediately. If an element of variable consideration has the potential for a significant future reversal of revenue, we will constrain that variable consideration to a level intended to remove the potential future reversal. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine it. In prior years, we have recorded adjustments to earnings as a result of revisions to contract estimates; however, we did not have any material adjustments during the ~~six~~three months ended ~~June 30,~~ March 31, 2020 and 2019. There could be significant adjustments to overall contract costs in the future, due to changes in facts and circumstances.

In general, our payment terms consist of those services billed regularly as provided and those products delivered at a point in time, which are invoiced after the performance obligation is satisfied. Our product and service contracts with milestone payments due at agreed progress points during the contract are invoiced when those milestones are reached, which may differ from the timing of revenue recognition. Our payment terms generally do not provide financing of contracts to customers, nor do we receive financing from customers as a result of these terms.

See Note 2—3—"Revenue" for more information on our revenue from contracts with customers.

Leases. On January 1, 2019 we adopted ~~Accounting Standards Update ("ASU") 2018-11, an amendment to~~ ASU 2016-02, "Leases (Topic 842" ~~(collectively, the "New Leases Standard"~~) ~~that~~, ("ASC 842"), which requires lessees to recognize right-of-use assets ("ROU assets") and lease liabilities for virtually all leases and updates previous accounting standards for lessors to align certain requirements of the ~~New Leases Standard~~new leases standard and the revenue recognition accounting standard. We elected to apply the transition method that allowed us to apply this ~~standard~~update at the adoption date and adopted the package of practical expedients that permitted us to retain the identification and classification of leases made under the previously applicable accounting standards. The adoption of ~~the New Leases Standard~~this ASU as of January 1, 2019 resulted in a cumulative effect adjustment of $5.9 million recorded to retained earnings, with corresponding adjustments to increase ROU assets and lease liabilities by $185 million and $191 million, respectively. The adoption of this ~~standard~~ASU did not materially affect our net earnings and had no impact on cash flows. Comparative information with respect to prior periods has not been retrospectively restated and continues to be reported under the accounting standards in effect for those periods.

As a lessee, we utilize the expedients to not recognize leases with an initial lease term of 12 months or less on the balance sheet and to combine lease and non-lease components together and account for the combined component as a lease for all asset classes, except real estate.

As a lessor, we lease certain types of equipment along with the provision of services and utilize the expedient allowing us to combine the lease and non-lease components into a combined component that is accounted for under ASC 842 where the lease component is predominant and under ASC 606 where the service component is predominant. In general, wherever we have a service component, this is typically the predominant element and leads to accounting under ASC 606.

We determine whether a contract is or contains a lease at inception, whether as a lessee or a lessor. We take into consideration the elements of an identified asset, right to control and the receipt of economic benefit in making these determinations.

As a lessor, we lease certain types of equipment along with the provision of services and utilize the expedient allowing us to combine the lease and non-lease components into a combined component that is accounted for (1) under ASC 842, when the lease component is predominant, and (2) under the accounting standard "Revenue from Contracts with Customers" ("ASC 606"), where the service component is predominant. In general, when we have a service component, it is typically the predominant element and leads to accounting under ASC 606.

As a lessor, we lease certain types of equipment, often providing services at the same time. These leases can be priced on a dayrate or lump-sum basis for periods ranging from a few days to multi-year contracts. These leases

are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our customers sole discretion. These leases generally do not contain options to purchase, material restrictions or covenants that impact our accounting for leases.

As a lessee, we lease land, buildings, vessels and equipment for the operation of our business and to support some of our service line revenue streams. These generally carry lease terms that range from days for operational and support equipment to 20fifteen years for land and buildings. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our discretion. When the exercise of those options is reasonably certain, we include them in the lease assessment. Our leases do not contain material restrictions or covenants that impact our accounting for them, nor do we provide residual value guarantees.

As a ~~lessor,~~lessee, we utilize the expedients to not recognize leases with an initial lease ~~certain types~~term of ~~equipment, often providing services at~~12 months or less on the ~~same time. These leases can be priced on~~balance sheet and to combine lease and non-lease components together and account for the combined component as a ~~day-rate or lump-sum basis~~lease for periods ranging from a few days to multi-year contracts. These leases are negotiated on commercial terms at market rates and many carry standard options to extend or terminate at our customers sole discretion. These leases generally do not contain options to purchase, material restrictions or covenants that impact our accounting for leases.all asset classes, except real estate.

~~ROU~~Right-of-use operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement or modification date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at commencement or modification date in determining the present value of future payments. In determining the incremental borrowing rate, we considered our external credit ratings, bond yields for us and our identified peers, the risk-free rate in geographic regions where we operate, and the impact associated with providing collateral over a similar term as the lease for an amount equal to the lease payments. Our ~~ROU~~right-of-use operating lease assets also include any lease prepayments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

See ~~Note 5—~~"~~Leases"—~~Property and Equipment, Long-Lived Intangible Assets and Right-of-Use Operating Lease Assets" above for more information on determination of impairment indicators for our ~~operating leases.~~right-of-use assets.

2. ACCOUNTING STANDARDS UPDATE

~~New~~Recently Adopted Accounting Standards. ~~In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13,~~ ~~"Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments,"~~ ~~as modified by subsequently issued ASU 2018-19, ASU 2019-04 and ASU 2019-05. The guidance~~On January 1, 2020, we adopted ASC 326, which introduces a new credit reserving model known as the ~~Current Expected Credit Loss ("CECL") model, which is based~~CECL model. The adoption of ASC 326 did not materially affect our net earnings and had no impact on ~~expected losses,~~cash flows. Comparative information with respect to prior periods has not been retrospectively restated and ~~differs significantly from~~continues to be reported under the ~~incurred loss approach used today. The CECL model requires estimating all expected credit losses~~accounting standards in effect for certain types of financial instruments, including trade receivables and contract assets, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. These ASUs affect an entity to varying degrees depending on the credit quality for the assets held by the entity, their duration and how the entity applies current U.S. GAAP. These ASUs will become effective for us beginning January 1, 2020. We have formed a project team to review these requirements and ensure that we meet the required implementation date. We are currently evaluating the impact of this guidance.those periods.

In August ~~2017,~~2018, the Financial Accounting Standards Board (the "FASB") issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement” ("ASU 2018-13"). This standard eliminated the prior requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard added disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and the disclosure of other relevant quantitative information for certain unobservable inputs. The adoption of ASU 2018-13 on January 1, 2020, did not have a material impact on our disclosures.

Recently Issued Accounting Standards. In December 2019, the FASB issued ASU No. ~~2017-12~~ 2019-12, "~~"Derivatives and Hedging (Topic 815): Targeted improvements to~~Simplifying the Accounting for ~~Hedging Activities,~~Income Taxes" (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, " ~~which simplified~~Income Taxes," and clarifies certain aspects of the ~~application of hedge accounting~~current guidance ~~in current U.S. GAAP~~to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are evaluating the impact and ~~improved the reporting of hedging relationships~~do not expect this ASU to ~~better portray the economic results of our risk management activities in~~have a material impact on our consolidated financial statements. ~~Our adoption~~

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides temporary optional expedients and exceptions to existing guidance on applying contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Interbank Offered Rate (“LIBOR”), which is scheduled to be phased out in 2021, to alternate rates such as the Secured Overnight Financing Rate ("SOFR"). Entities may elect to apply the provisions of this new standard as early as March 12, 2020 until December 31, 2022, when the reference rate replacement activity is expected to be complete. We have not yet elected an adoption date. We continue to evaluate the impact and do not expect this ASU ~~on January 1, 2019 did not~~to have a material impact on our consolidated financial statements.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~"Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."~~ The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the December 2017 enactment of U.S. tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update were effective for us beginning January 1, 2019. This ASU has not had a material effect on our consolidated financial statements.

~~In June 2018, the FASB issued ASU 2018-07,~~ ~~"Compensation – Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting."~~ This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this ASU become effective for us beginning January 1, 2019. This ASU has not had a material effect on our consolidated financial statements.

2.3. REVENUE

Revenue by Category

We recognized revenue, disaggregated by business segment, geographical region, and timing of transfer of goods or services, as follows:


			Three Months Ended						Six Months Ended						Three Months Ended
(in thousands)	(in thousands)		Jun 30, 2019		Jun 30, 2018		Mar 31, 2019		Jun 30, 2019		Jun 30, 2018		(in thousands)		Mar 31, 2020		Mar 31, 2019		Dec 31, 2019
Business Segment:	Business Segment:												Business Segment:
	Energy Services and Products												Energy Services and Products
		Remotely Operated Vehicles	$	120,363	$	107,426	$	100,346	$	220,709	$	193,020		Remotely Operated Vehicles	$	111,780	$	100,346	$	116,020
		Subsea Products	138,910		121,704		128,844		267,754		248,392			Subsea Products	194,838		128,844		183,659
		Subsea Projects	75,104		78,036		89,728		164,832		134,896			Subsea Projects	61,455		89,728		86,728
		Asset Integrity	61,156		67,422		60,689		121,845		128,710			Asset Integrity	59,132		60,689		61,835
	Total Energy Services and Products		395,533		374,588		379,607		775,140		705,018		Total Energy Services and Products		427,205		379,607		448,242
	Advanced Technologies		100,248		104,086		114,279		214,527		190,069		Advanced Technologies		109,463		114,279		112,568
		Total	$	495,781	$	478,674	$	493,886	$	989,667	$	895,087		Total	$	536,668	$	493,886	$	560,810


			Three Months Ended						Six Months Ended						Three Months Ended
(in thousands)	(in thousands)		Jun 30, 2019		Jun 30, 2018		Mar 31, 2019		Jun 30, 2019		Jun 30, 2018		(in thousands)		Mar 31, 2020		Mar 31, 2019		Dec 31, 2019
Geographic Operating Areas:	Geographic Operating Areas:												Geographic Operating Areas:
	Foreign:												Foreign:
		Africa	$	61,390	$	61,966	$	87,106	$	148,496	$	117,053		Africa	$	63,417	$	87,106	$	70,421
		United Kingdom	65,058		50,999		53,298		118,356		96,318			United Kingdom	60,787		53,298		76,078
		Norway	60,252		51,827		42,466		102,718		90,869			Norway	52,184		42,466		55,169
		Asia and Australia	43,123		43,448		41,426		84,549		82,394			Asia and Australia	45,680		41,426		47,558
		Brazil	23,658		13,461		17,763		41,421		32,289			Brazil	26,489		17,763		26,686
		Other	28,334		14,811		21,222		49,556		34,450			Other	24,659		21,222		27,857
	Total Foreign		281,815		236,512		263,281		545,096		453,373		Total Foreign		273,216		263,281		303,769
	United States		213,966		242,162		230,605		444,571		441,714		United States		263,452		230,605		257,041
Total	Total		$	495,781	$	478,674	$	493,886	$	989,667	$	895,087	Total		$	536,668	$	493,886	$	560,810


Timing of Transfer of Goods or Services:	Timing of Transfer of Goods or Services:											Timing of Transfer of Goods or Services:
	Revenue recognized over time	$	455,937	$	437,035	$	461,245	$	917,182	$	811,702	Revenue recognized over time	$	498,307	$	461,245	$	523,518
	Revenue recognized at a point in time	39,844		41,639		32,641		72,485		83,385		Revenue recognized at a point in time	38,361		32,641		37,292
Total	Total	$	495,781	$	478,674	$	493,886	$	989,667	$	895,087	Total	$	536,668	$	493,886	$	560,810

Contract Balances

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

The following table provides information about contract assets, and contract liabilities from contracts with customers:



(in thousands)	Mar 31, 2020		Dec 31, 2019
Contract assets	$	237,107	$	221,288
Contract liabilities	61,929		117,342

Our payment terms consist of those services billed regularly as provided and those products delivered at a point in time, which are invoiced after the performance obligation is satisfied. Our product and service contracts with milestone payments due at agreed progress points during the contract are invoiced when those milestones are reached, which may differ from the timing of revenue recognition.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, contract assets ~~decreased~~increased by ~~$59~~$16 million from ~~its opening~~the balance at December 31, 2019, due to revenue earned of $456 million, which exceeded the timing of billings of approximately ~~$1.0 billion, which exceeded revenue earned of $961~~$440 million. Contract liabilities decreased ~~$12~~$55 million from ~~its opening~~the balance at December 31, 2019, due to revenue recognition of ~~$29~~$66 million ~~less~~in excess of deferrals of milestone payments that totaled ~~$17~~$11 million. There were no cancellations, impairments or other significant impacts in the period that relate to other categories of explanation.

Performance Obligations

As of ~~June 30, 2019,~~March 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$405~~$325 million. In arriving at this value, we have used two expedients available to us and are not disclosing amounts in relation to performance obligations: (1) that are part of contracts with an original expected duration of one year or less; or (2) on contracts where we recognize revenue in line with the billing. Of this amount, we expect to recognize revenue of ~~$309~~$232 million over the next 12 months and substantially all of the remaining balance of $93 million will be recognized within the next 24 months.

Due to the nature of our service contracts in our Remotely Operated Vehicle, Subsea Projects, Asset Integrity and Advanced Technologies segments, the majority of our contracts either have initial contract terms of one year or less or have customer option cancellation clauses that lead us to consider the original expected duration of one year or less.

In our Subsea Products and Advanced Technologies segments, we have long-term contracts that extend beyond one year, and these make up the majority of the performance obligations balance ~~reported.~~reported as of March 31, 2020. We also have shorter-term product contracts with an expected original duration of one year or less that have been excluded.

Where appropriate, we have made estimates within the transaction price of elements of variable consideration within the contracts and constrained those amounts to a level where we consider ~~that~~ it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The amount of revenue recognized in the ~~three- and six-month periods~~three months ended ~~June 30, 2019, which~~March 31, 2020 that was associated with performance obligations completed or partially completed in prior periods was not significant.

As of ~~June 30, 2019,~~March 31, 2020, there ~~was~~were no significant outstanding liability ~~balance~~balances for refunds or returns due to the nature of our contracts and the services and products we provide. Our warranties are limited to assurance warranties that are of a standard length and are not considered to be a material right. The majority of our contracts consist of a single performance obligation. When there are multiple obligations, we look for observable evidence of stand-alone selling prices on which to base the allocation. This involves judgment as to the appropriateness of the observable evidence relating to the facts and circumstances of the contract. If we do not have observable evidence, we estimate stand-alone selling prices by taking a ~~cost plus margin~~cost-plus-margin approach, using typical margins from the type of product or service, customer and regional geography involved.

Costs to Obtain or Fulfill a Contract

In line with the available expedient, we capitalize costs to obtain a contract when those amounts are significant and the contract is expected at inception to exceed one year in duration; otherwise, the costs are expensed in the period

when incurred. Costs to obtain a contract primarily consist of bid and proposal costs, which are incremental to our fixed costs. There were no balances or amortization of costs to obtain a contract in the current reporting periods.

Costs to fulfill a contract primarily consist of certain mobilization costs incurred to provide services or products to our customers. These costs are deferred and amortized over the period of contract performance. The closing balance of costs to fulfill a contract was ~~$14~~$13 million and ~~$13~~$15 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. For the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~$1.7 million and $4.3 million of amortization expense was recorded, respectively. For the~~ ~~three- and six-month periods ended~~ ~~June 30, 2018,~~ we recorded amortization expense of ~~$1.2~~$1.9 million and ~~$2.5~~$2.6 million, respectively. No impairment costs were recognized.

3.4. SELECTED BALANCE SHEET INFORMATION

The following is information regarding selected balance sheet accounts:


(in thousands)	(in thousands)	Jun 30, 2019		Dec 31, 2018		(in thousands)	Mar 31, 2020		Dec 31, 2019
Inventory:	Inventory:					Inventory:
	Remotely operated vehicle parts and components	$	105,987	$	108,939	Remotely operated vehicle parts and components	$	72,590	$	76,120
	Other inventory, primarily raw materials	100,684		85,568		Other inventory, primarily raw materials	93,770		98,624
	Total	$	206,671	$	194,507	Total	$	166,360	$	174,744

Other Current Assets:
Other current assets:						Other current assets:
	Prepaid expenses	$	51,331	$	60,858	Prepaid expenses	$	57,834	$	43,210
	Angolan bonds	10,179		10,179		Angolan bonds	10,179		10,179
	Total	$	61,510	$	71,037	Total	$	68,013	$	53,389

Accrued Liabilities:
Accrued liabilities:						Accrued liabilities:
	Payroll and related costs	$	116,323	$	114,676	Payroll and related costs	$	105,956	$	137,001
	Accrued job costs	58,227		62,281		Accrued job costs	56,982		54,387
	Income taxes payable	28,029		34,954		Income taxes payable	36,024		36,996
	Current operating lease liability	19,733		—		Current operating lease liability	18,793		19,863
	Other	90,035		95,022		Other	81,151		89,434
	Total	$	312,347	$	306,933	Total	$	298,906	$	337,681

4.5. INCOME TAXES

Due to the economic uncertainty presented by COVID-19 and the current volatility in the oil and natural gas markets, we believe using a discrete tax provision method for the period ended March 31, 2020, based on actual earnings for the quarter, is a more reliable method for providing for income taxes because our annual effective tax rate as calculated under ASC 740-270 is highly sensitive to changes in estimates of total ordinary income (loss). The tax provision is based on (1) our earnings for the period and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographic mix in the sources of our results. The effective tax rate for the three months ended March 31, 2020 and March 31, 2019 was different than the federal statutory rate of 21%, primarily due to the 2020 enactment of the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the geographic mix of operating revenue and results, and changes in uncertain tax positions and other discrete items. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur incremental tax consequences upon the distribution of such earnings. Therefore, we do not believe a discussion of the effective tax rate is meaningful.

In the three-month period ended March 31, 2020, we recognized tax benefit of $42.2 million from discrete items, primarily related to an $33.8 million benefit related to the CARES Act and $9.7 million of uncertain tax positions, partially offset by $1.0 million related to share-based compensation and $0.3 million associated with various other matters. Under the CARES Act, we expect to file a carryback claim for the U.S. net operating loss generated in 2019 to tax year 2014. We also intend to file an amended 2013 income tax return utilizing foreign tax credits

released from the 2014 income tax return. As a result, we expect to receive refunds of approximately $16 million and $18 million related to the 2014 and 2013 tax years, respectively. These refunds are classified as income taxes receivable in the consolidated balance sheet as of March 31, 2020. We also realized a non-cash tax benefit of $9.9 million due to the carryback provision of the CARES Act. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. In the three-month period ended March 31, 2019, we recognized additional tax expense of $1.4 million from discrete items, primarily related to share-based compensation and valuation allowances.

We conduct our international operations in jurisdictions that have varying laws and regulations with regard to income and other taxes, some of which are subject to interpretation. We recognize the expense or benefit for a tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax expense or benefit is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.

We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. Including associated foreign tax credits, penalties and interest, we have accrued a net total of $11 million and $21 million in other long-term liabilities on our balance sheet for unrecognized tax liabilities as of March 31, 2020 and December 31, 2019, respectively. Changes in management's judgment related to those liabilities would affect our effective income tax rate in the periods of change.

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




Jurisdiction		Periods
United States		2014
United Kingdom		2018
Norway		2015
Angola		2013
Brazil		2015

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

6. DEBT

Long-term debt consisted of the following:


	(in thousands)	Jun 30, 2019			Dec 31, 2018			(in thousands)	Mar 31, 2020			Dec 31, 2019

4.650% Senior Notes due 2024	4.650% Senior Notes due 2024	$	500,000		$	500,000		4.650% Senior Notes due 2024	$	500,000		$	500,000
6.000% Senior Notes due 2028	6.000% Senior Notes due 2028	300,000			300,000			6.000% Senior Notes due 2028	300,000			300,000
Fair value of interest rate swaps on $200 million of principal	Fair value of interest rate swaps on $200 million of principal	2,911			(5,600		)	Fair value of interest rate swaps on $200 million of principal	—			3,235
Unamortized hedge accounting adjustments								Unamortized hedge accounting adjustments	12,840			—
Unamortized debt issuance costs	Unamortized debt issuance costs	(7,272		)	(7,820		)	Unamortized debt issuance costs	(6,444		)	(6,719		)
Revolving Credit Facility		—			—
Long-term debt	Long-term debt	$	795,639		$	786,580		Long-term debt	$	806,396		$	796,516

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

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

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

In October 2014, we entered into a credit agreement (as amended, the "Credit Agreement") with a group of banks. The Credit Agreement initially provided for 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 may be used for general corporate purposes. The Credit Agreement also provided for a $300 million term loan, which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and cash on hand.

In February 2018, we entered into Agreement and Amendment No. 4 to the Credit Agreement ("Amendment No. 4"). Amendment No. 4 amended the Credit Agreement to, among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with the extending lenders, which represent 90% of the existing commitments of the lenders, such that the total commitments for the Revolving Credit Facility will be $500 million until October 25, 2021, and thereafter $450 million until January 25, 2023. As of March 31, 2020, we had no borrowings outstanding under the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on the ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the Adjusted Base Rate, from 0.125% to 0.750%; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750%. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage Ratio. The commitment fees are included as interest expense in our consolidated financial statements.

We ~~have two~~had 2 interest rate swaps ~~in place on~~relating to a total of $200 million of the 2024 Senior Notes for the period to November 2024. The agreements swapped the fixed interest rate of 4.650% on $100 million of the 2024 Senior Notes to the floating rate of one-month LIBOR plus 2.426% and on another $100 million to one-month LIBOR plus 2.823%. In March 2020, we settled both interest rate swaps with the counterparty for cash proceeds of $13 million. The settlement had no impact on our earnings for the three months ended March 31, 2020 and resulted in a $13 million adjustment to increase our long-term debt balance that will be amortized to interest expense prospectively through the maturity date for the 2024 Senior Notes using the effective interest method. See Note 6—7—"Commitments and Contingencies" for more information on our interest rate swaps.

We incurred $6.9 million and ~~$4.1~~$4.2 million of issuance costs related to the 2024 Senior Notes and the 2028 Senior Notes, respectively, and ~~$2.6~~$3.0 million of loan costs, including costs of the amendments prior to Amendment No. 4, related to the Credit Agreement. The costs, net of accumulated amortization, are included as a reduction of long-term debt on our Consolidated Balance Sheets, as ~~it pertains~~they pertain to the Senior Notes, and in other noncurrent assets, as ~~it pertains~~they pertain to the Credit Agreement. We are amortizing these costs to ~~Interest~~interest expense through the respective maturity ~~date~~dates for the Senior Notes and to January 2023 for the Credit Agreement.

~~5. LEASES~~

~~Supplemental information about our operating leases follows:~~

(in thousands) Jun 30, 2019 Jan 1, 2019
Assets:
Right-of-Use Operating Lease Assets $ 180,645
$ 184,648

Liabilities:
Operating Current operating $ 19,733
$ 20,318
Operating Noncurrent operating 172,090
170,190
Lease Liabilities $ 191,823
$ 190,508

Three Months Ended Six Months Ended
(in thousands) Jun 30, 2019 Jun 30, 2019
Lease Cost:
Operating lease cost Operating lease cost $ 11,331
$ 18,334
Short-term lease cost Short-term lease cost 23,840
42,929
Total Lease Cost $ 35,171
$ 61,263

Jun 30, 2019 Jan 1, 2019
Lease Term and Discount Rate:
Weighted-average remaining lease terms (years) Weighted-average remaining lease term (years) 11.0
11.0

Weighted-average discount rate Weighted-average discount rate 6.9 % 7.1 %

~~Future maturities of lease liabilities under all of our operating leases are as follows:~~

(in thousands)
For the twelve months ended June 30,
2020 $ 28,938
2021 29,862
2022 30,633
2023 26,277
2024 23,692
Thereafter 148,813
Total lease payments 288,215
Less: Interest (96,392 )
Present Value of Lease Liabilities $ 191,823

6.7. COMMITMENTS AND CONTINGENCIES

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

•

performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, premises liability claims and other claims.

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

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

The carrying values of cash and cash equivalents approximate their fair values due to the short-term maturity of the underlying instruments. Accounts receivable are generated from a broad group of customers, primarily from within

the energy industry, which is our major source of revenue. Due to their short-term nature, carrying values of our accounts receivable and accounts payable approximate fair market values.

We estimated the aggregate fair market value of the Senior Notes to be ~~$792~~$325 million as of ~~June 30, 2019,~~March 31, 2020, based on quoted prices. Since the market for the Senior Notes is not an active market, the fair value of the Senior Notes is classified within Level 2 in the fair value hierarchy under U.S. GAAP (inputs other than quoted prices in active markets for similar assets and liabilities that are observable or can be corroborated by observable market data for substantially the full terms for the assets or liabilities).

We have two interest rate swaps in place on a total of $200 million of the 2024 Senior Notes for the period to November 2024. The agreements swap the fixed interest rate of 4.650% on $100 million of the 2024 Senior Notes to the floating rate of one month LIBOR plus 2.426% and on another $100 million to one month LIBOR plus 2.823%. We estimate the combined fair value of the interest rate swaps to be a net asset of $2.9 million as of June 30, 2019, which is included on our balance sheet in other long-term assets. These values were arrived at based on a discounted cash flow model using Level 2 inputs.

Since the second quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has been declining, with the exception that the exchange rate was relatively stable during 2017. As our functional currency in Angola is the U.S. dollar, we recorded foreign currency transaction ~~gains (losses)~~losses related to the kwanza of ~~$(0.6)~~$1.9 million and ~~$(4.8)~~less than $0.1 million in the three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $(0.6) million and $(12) million in the~~ ~~six-month periods ended~~ ~~June 30, 2019 and 2018,~~ respectively, as a component of other income (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. Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process from mid-2015 to 2017, causing our kwanza cash balances to increase during that period of time. However, beginning in 2018, the Angolan central bank has allowed us to repatriate cash from Angola. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had the equivalent of approximately ~~$7.1~~$6.2 million ~~and $9.3 million, respectively,~~ of kwanza cash balances in Angola reflected on our ~~balance sheet.~~Consolidated Balance Sheets.

To mitigate our currency exposure risk in Angola, we have used kwanza to purchase equivalent Angolan central bank (Banco Nacional de Angola) bonds. The bonds are denominated as U.S. dollar equivalents, so that, upon payment of semi-annual interest and principal upon maturity, payment is made in kwanza, equivalent to the respective U.S. dollars at the then-current exchange rate. During 2018, we received a total of $70 million in proceeds from maturities and redemptions of Angolan bonds and reinvested $10 million of the proceeds in similar assets. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we ~~have~~had $10 million of Angolan bonds on our Consolidated Balance Sheets. Because we intend to sell the bonds if we are able to repatriate the proceeds, we have classified these bonds as available-for-sale securities, and they are recorded asin other current assets on our Consolidated Balance Sheets.

We estimated the fair market value of the Angolan bonds to be $10 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 using quoted market prices. Since the market for the Angolan bonds is not an active market, the fair value of the Angolan bonds is classified within Level 2 in the fair value hierarchy under U.S. GAAP. ~~As of June 30, 2019 and December 31, 2018, the difference between the fair market value and the carrying amount of the Angolan bonds was immaterial.~~

7.8. EARNINGS (LOSS) PER SHARE, SHARE-BASED COMPENSATION AND SHARE REPURCHASE PLAN

Earnings (Loss) per Share.For each period presented, the only difference between our calculated weighted-average basic and diluted number of shares outstanding is the effect of outstanding restricted stock units. In periods

where we have a net loss, the effect of our outstanding restricted stock units is anti-dilutive, and therefore does not increase our diluted shares outstanding.

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

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

During ~~2017,~~ 2018, 2019 and through ~~June 30, 2019,~~March 31, 2020, we granted restricted units of our common stock to certain of our key executives and employees. During ~~2017,~~ 2018, 2019 and ~~2019,~~2020, our Board of Directors granted restricted common stock to our nonemployee directors. The restricted stock units granted to our key executives and key employees generally vest in full on the third anniversary of the award date, conditional on continued employment. The restricted stock unit grants can vest pro rata over three years, provided the individual meets certain age and years-of-service requirements. The shares of restricted stock we grant to our nonemployee directors vest in full on the first anniversary of the award date, conditional on 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.

For each of the restricted stock units granted in ~~2017~~2018 through ~~June 30, 2019,~~March 31, 2020, 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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respective totals of ~~1,862,489~~2,195,304 and ~~1,443,897~~1,741,335 shares of restricted stock orand restricted stock units were outstanding.

We estimate that share-based compensation cost not yet recognized related to shares of restricted stock or restricted stock units, based on their grant-date fair values, was $18 million as of ~~June 30, 2019.~~March 31, 2020. This expense is being recognized on a graded-vesting basis over three years for awards attributable to individuals meeting certain age and years-of-service requirements, and on a straight-line basis over the applicable vesting period of one or three years for the other awards.

Share Repurchase Plan. In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock. Under this plan, in 2015, we ~~had~~ repurchased 2.0 million ~~shares of our common stock for $100 million.~~shares. We ~~did not repurchase~~have 0t repurchased any shares ~~during 2016 through June 30, 2019.~~under this plan since December 2015. We account for the shares we hold in treasury under the cost method, at average cost.

~~8. 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. In the ~~six-month period ended~~ June 30, 2019, we recognized additional tax expense of $5.1 million from discrete items, primarily related to $2.3 million of additional uncertain tax positions, $1.5 million of valuation allowances and $1.0 million associated with share-based compensation. In the ~~six-month period ended~~ June 30, 2018, we recognized additional tax expense of $3.6 million from discrete items, primarily related to $1.8 million associated with share-based compensation and $1.3 million of additional uncertain tax positions.

~~The effective tax rate for the~~ ~~six months ended~~ June 30, 2019 and June 30, 2018 was different than the federal statutory rate of 21.0%, primarily due to the geographic mix of operating revenue and results that generated taxes in certain jurisdictions that exceeded the tax benefit from losses and credits in other jurisdictions, which could not be realized in the quarter due to valuation allowances being provided, and discrete items. It is our intention to continue to indefinitely reinvest in certain of our international operations; therefore, we do not provide for withholding taxes on the possible distribution of these earnings. We do not believe the effective tax rate before discrete items is meaningful due to the ongoing shifting of geographic mix of our operating revenue and results.

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 expense or benefit for a tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax expense or benefit is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement.

We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. Including associated foreign tax credits, penalties and interest, we have accrued a net total of $20 million and $18 million in other long-term liabilities on our balance sheet for unrecognized tax liabilities as of June 30, 2019 and December 31, 2018, respectively. Changes in management's judgment related to those liabilities would affect our effective income tax rate in the periods of change.

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




~~Jurisdiction~~		~~Periods~~
~~United States~~		~~2014~~
~~United Kingdom~~		~~2015~~
~~Norway~~		~~2015~~
~~Angola~~		~~2013~~
~~Brazil~~		~~2014~~
~~Australia~~		~~2014~~

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


9.	BUSINESS SEGMENT INFORMATION

We are a global provider of engineered services and products, primarily to the offshore energy industry. Through the use of our applied technology expertise, we also serve the defense, aerospace and commercial theme park industries. Our Energy Services and Products business consists of ROVs, Subsea Products, Subsea Projects and Asset Integrity. Our ROV segment provides submersible vehicles operated from the surface to support offshore energy exploration, development and production activities. Our Subsea Products segment supplies a variety of specialty subsea hardware and related services. Our Subsea Projects segment provides multiservice subsea support shallow and deepwater vessels and offshore diving and support vessel operations, primarily for inspection, maintenance and repair and installation activities. We also provide survey, autonomous underwater vehicle and satellite-positioning services. For the renewable energy markets, we provide seabed preparation, route clearance and trenching services for submarine cables. Our Asset Integrity segment provides asset integrity management and assessment services, nondestructive testing and inspection. Our Advanced Technologies business provides project management, engineering services and equipment for applications in non-energy industries. Unallocated Expenses are those not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses, including corporate administrative expenses.

There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from those used in our consolidated financial statements for the year ended December 31, ~~2018.~~2019.

The following table ~~that follows~~ presents ~~Revenue, Income (Loss)~~revenue, income (loss) from ~~Operations~~operations and ~~Depreciation~~depreciation and ~~Amortization~~amortization expense by business segment for each of the periods indicated.


	Three Months Ended									Six Months Ended						Three Months Ended
(in thousands)	Jun 30, 2019			Jun 30, 2018			Mar 31, 2019			Jun 30, 2019			Jun 30, 2018			Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Revenue
Energy Services and Products
Remotely Operated Vehicles	$	120,363		$	107,426		$	100,346		$	220,709		$	193,020		$	111,780		$	100,346		$	116,020
Subsea Products	138,910			121,704			128,844			267,754			248,392			194,838			128,844			183,659
Subsea Projects	75,104			78,036			89,728			164,832			134,896			61,455			89,728			86,728
Asset Integrity	61,156			67,422			60,689			121,845			128,710			59,132			60,689			61,835
Total Energy Services and Products	395,533			374,588			379,607			775,140			705,018			427,205			379,607			448,242
Advanced Technologies	100,248			104,086			114,279			214,527			190,069			109,463			114,279			112,568
Total	$	495,781		$	478,674		$	493,886		$	989,667		$	895,087		$	536,668		$	493,886		$	560,810
Income (Loss) from Operations
Energy Services and Products
Remotely Operated Vehicles	$	8,688		$	4,542		$	1,418		$	10,106		$	2,144		$	9,066		$	1,418		$	(18,660	)
Subsea Products	7,413			2,295			(476		)	6,937			4,050			(91,858		)	(476		)	(10,325		)
Subsea Projects	87			(10,358		)	2,892			2,979			(12,717		)	(145,290		)	2,892			(148,075		)
Asset Integrity	(1,302		)	3,357			(713		)	(2,015		)	5,036			(109,441		)	(713		)	(48,919		)
Total Energy Services and Products	14,886			(164		)	3,121			18,007			(1,487		)	(337,523		)	3,121			(225,979		)
Advanced Technologies	7,241			7,886			9,599			16,840			9,554			(10,585		)	9,599			5,270
Unallocated Expenses	(31,762		)	(27,359		)	(34,434		)	(66,196		)	(54,853		)	(32,649		)	(34,434		)	(33,461		)
Total	$	(9,635	)	$	(19,637	)	$	(21,714	)	$	(31,349	)	$	(46,786	)	$	(380,757	)	$	(21,714	)	$	(254,170	)
Depreciation and Amortization
Depreciation and Amortization, including Goodwill Impairment
Energy Services and Products
Remotely Operated Vehicles	$	26,871		$	28,269		$	27,990		$	54,861		$	55,911		$	25,725		$	27,990		$	32,043
Subsea Products	12,366			14,914			12,991			25,357			28,939			62,454			12,991			30,992
Subsea Projects	7,550			13,053			7,882			15,432			21,366			143,346			7,882			14,541
Asset Integrity	1,570			1,836			1,634			3,204			3,684			111,385			1,634			30,529
Total Energy Services and Products	48,357			58,072			50,497			98,854			109,900			342,910			50,497			108,105
Advanced Technologies	765			737			830			1,595			1,503			12,178			830			766
Unallocated Expenses	1,182			1,034			1,159			2,341			2,568			1,108			1,159			1,199
Total	$	50,304		$	59,843		$	52,486		$	102,790		$	113,971		$	356,196		$	52,486		$	110,070

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~~

Income (Loss) from Operations

Three Months Ended March 31, 2020—During the three months ended March 31, 2020, we recorded total adjustments of $386 million for:

loss on impairment of $69 million in ~~earnings (losses)~~our Subsea Products, Subsea Projects and Advanced Technologies segments for long-lived assets;


•	write-downs and write-offs of certain intangible assets as discussed below in "Depreciation and Amortization Expense" of $7.3 million;

pre-tax goodwill impairment of ~~unconsolidated affiliates is part~~$303 million in our Subsea Products, Subsea Projects, Asset Integrity and Advanced Technologies segments; and

other expenses of $6.6 million.

These total adjustments of $386 million, attributable to each of our reporting segments, are summarized as follows:

Remotely Operated Vehicles - $0.7 million;

Subsea Products - $108 million;

Subsea Projects - $146 million;

Asset Integrity - $112 million; and

Advanced Technologies - $18 million.

Three Months Ended December 31, 2019—During the three months ended December 31, 2019, we recorded total adjustments of $252 million for:

loss on impairment of $143 million in our Subsea Projects ~~segment.~~segment for deepwater and shallow water vessels and Renewables and Special Projects long-lived assets;


•	write-downs and write-offs of certain equipment and intangible assets as discussed below in "Depreciation and Amortization Expense" of $45 million;

inventory write-downs of $21 million;

impairment of long-lived assets of $17 million in our Asset Integrity segment;

pre-tax goodwill impairment of $15 million in our Asset Integrity segment; and

other expenses of $12 million.

These total adjustments of $252 million, attributable to each of our reporting segments, are summarized as follows:

Remotely Operated Vehicles - $23 million;

Subsea Products - $25 million;

Subsea Projects - $153 million;

Asset Integrity - $49 million; and

Advanced Technologies - $1.6 million.

Depreciation and Amortization, including Goodwill Impairment

~~During~~Depreciation expense on property and equipment, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $43 million, $49 million and $48 million in the ~~three- and six-month periods~~three months ended ~~June 30, 2018,~~March 31, 2020 and 2019 and December 31, 2019, respectively.

Amortization expense on long-lived intangible assets, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $2.6 million, $3.9 million and $3.0 million in the three months ended March 31, 2020 and 2019 and December 31, 2019, respectively.

Goodwill impairment expense, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $303 million, in the three months ended March 31, 2020, attributable to each reporting segment as follows:

Subsea Products - $51 million;

Subsea Projects - $130 million; and

Asset Integrity - $111 million; and

Advanced Technologies - $11 million.

Goodwill impairment expense, reflected in Depreciation and Amortization, including Goodwill Impairment in the table above, was $15 million in our Asset integrity segment in the three months ended December 31, 2019.

In the three months ended March 31, 2020, we also recorded the write-downs and write-offs of certain intangible assets of $7.3 million in our Subsea Projects segment, which is included in our first quarter 2020 Depreciation and Amortization, including Goodwill Impairment, of $356 million.

In the three months ended December 31, 2019, we also recorded the write-offs of certain equipment and intangible assets ~~associated with exiting the land survey business~~of $45 million, which is included in our fourth quarter 2019 Depreciation and ~~equipment obsolescence~~Amortization, including Goodwill impairment of ~~$7.6~~$110 million, attributable to each reporting segment as follows:

Remotely Operated Vehicles - ~~$0.6~~$5.7 million;

Subsea Products - ~~$1.5~~$19 million; ~~and~~

Subsea Projects - ~~$5.5~~$6.1 million; and

Asset Integrity - $14 million.

Goodwill

The following table presents Goodwill by business segment:




(in thousands)	Mar 31, 2020		Dec 31, 2019
Goodwill
Energy Services and Products
Remotely Operated Vehicles	$	23,609	$	24,423
Subsea Products	39,924		99,409
Subsea Projects	—		131,768
Asset Integrity	—		127,637
Total Energy Services and Products	63,533		383,237
Advanced Technologies	10,454		21,842
Total	$	73,987	$	405,079


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

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

~~the third quarter~~free cash flow, which we define as net cash provided by operating activities less cash paid for purchases of property and ~~full year of 2019 operating results~~equipment, in 2020 and the contributions from our segments to those results (including anticipated revenue, operating income or loss, backlog and utilization information), as well as the items below the operating income (loss) line;

~~our cash flows and earnings before interest, taxes, depreciation and amortization ("EBITDA")~~ in ~~2019;~~future periods;

future demand, order intake and business activity levels;

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

the impacts of COVID-19 on the U.S. and the global economy, as well as on our business;

our expectations regarding tax refunds under the CARES Act;

our projected capital expenditures, unallocated expenses and cash tax payments for 2020;

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

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

the implementation of new accounting standards and 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, ~~2018.~~2019. 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, ~~2018.~~2019.

Recent Developments Affecting Industry Conditions and Our Business

Our first priority in our response to this crisis has been the health and safety of our employees and those of our customers and other business counterparties. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers’ global operations to the best of our ability in the circumstances. We have implemented prevention measures and developed corporate and regional response plans based on guidance received from the World Health Organization, Centers for Disease Control and Prevention, International SOS and our corporate medical advisor. Our goal is to minimize exposure and prevent infection while ensuring the continued support of our customers’ operations. We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences) and implemented new protocols to promote social distancing and enhance sanitary measures in our offices and facilities to conform to government restrictions and best practices encouraged by governmental and regulatory authorities.

There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, delays in the delivery of materials and supplies that

are sourced from around the globe, and have caused, and may continue to cause, milestones or deadlines relating to various projects to be missed.

We have also received various notices from some of our suppliers and other business counterparties, and provided notices to several customers, regarding performance delays resulting from the pandemic. These actions may result in some disputes and could strain our relations with customers and others. If and to the extent these actions were to result in material modifications or cancellations of the underlying contracts, we could experience reductions in our currently reported backlog and in the anticipated conversion of backlog into revenue in future periods. In addition, worsening economic conditions could result in reductions in backlog over time, which would impact our future financial performance.

One of the impacts of the pandemic has been a significant reduction in global demand for oil and natural gas. For example, global demand for oil has dropped precipitously by approximately 14 million barrels per day since mid-February. This significant decline in demand has been met with a sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of the Organization of Petroleum Exporting Countries ("OPEC"), and other foreign, oil-exporting countries. The resulting supply/demand imbalance is having disruptive impacts on the oil and natural gas exploration and production industry and on other industries that serve exploration and production companies. These industry conditions, coupled with those resulting from the COVID-19 pandemic, are expected to lead to significant global economic contraction generally and in our industry in particular.

We expect to see continued volatility in oil and natural gas prices for the foreseeable future, which could, over the long term, adversely impact our business. A significant decline in exploration and development activities and related spending by our customers, whether due to decreases in demand or prices for oil and natural gas or otherwise, would have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.

As of the date of this report, our efforts to respond to the challenges presented by the conditions described above and minimize the impacts to our business have yielded results as we have largely been able to maintain operational continuity on a worldwide basis. Our manufacturing, services operations, and other operating facilities have remained operational and our vessels have continued to perform. We have moved quickly to reduce costs, increase operational efficiencies and lower our capital spending. In addition, as of March 31, 2020, we had $307 million of cash on our balance sheet and our revolving credit facility was undrawn and remains available to support our operations. We have not required any funding under any COVID-19-related, U.S. federal or other governmental programs to support our operations, and we do not expect to have to utilize any such funding. We have experienced some increased absenteeism in our hourly workforce, but, so far, we have not experienced any resulting problems that we have not been able to manage. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented.

In our March 31, 2020 press release, we announced that we had withdrawn our 2020 financial guidance. We are not providing operating results or EBITDA guidance for the second quarter and full year of 2020, due to the continuing, significant uncertainty impacting the majority of our businesses. Many of the markets we serve are being profoundly affected by the effects of and associated responses to COVID-19, as well as the significant reductions in customer spending as a result of the lower crude oil price environment.

We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments beyond our control, which are highly uncertain and cannot be predicted, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by members of OPEC and other foreign oil-exporting countries, governmental authorities, customers, suppliers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. For additional discussion regarding risks associated with the COVID-19 pandemic, see Item 1A “Risk Factors” in this report.

Executive Overview

Our diluted earnings (loss) per share for the ~~three- and six-month periods~~three months ended ~~June 30, 2019 were $(0.36) and $(0.61)~~ March 31, 2020 was $(3.71), ~~respectively,~~ as compared to ~~$(0.34) and $(0.83)~~$(0.25) for the corresponding ~~periods~~period of ~~2018. These~~the prior year. Our operating results ~~met~~adjusted for asset impairments and write-offs exceeded our ~~expectations,~~expectations. The key factor in achieving these results was better-than-anticipated performance within our energy-focused businesses, which included the benefit from cost reduction measures implemented during the fourth quarter of 2019 and ~~each~~the first quarter of ~~our operating segments, except Asset Integrity, contributed operating income.~~

2020.

For the ~~third~~second quarter and full year of 2020, we are not providing operating results or EBITDA guidance due to our businesses being impacted by the effects of COVID-19 and associated responses and customer spending reductions occurring as a result of the substantial reduction in crude oil demand and the lower oil price environment. We maintain our guidance that Unallocated Expenses are forecast to be in the high-$20 million range per quarter. We are further revising our guidance by lowering our annual capital expenditures to be in the range of $45 million to $65 million.

On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law in the U.S. In accordance with the recently established rules and procedures under the CARES Act, we expect to file a carryback claim for the U.S. net operating loss generated in 2019 ~~compared~~to tax year 2014. We also intend to file an amended 2013 income tax return utilizing foreign tax credits released from the 2014 income tax return. As a result, we expect to receive refunds of approximately $16 million and $18 million related to the ~~second quarter,~~2014 and 2013 tax years, respectively. These refunds are classified as income taxes receivable in the consolidated balance sheet as of March 31, 2020. We also realized a non-cash tax benefit of $9.9 million due to the carryback provision of the CARES Act. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result of these actions and other factors, any discussion of an estimated effective tax rate would not be meaningful.

We estimate our 2020 net income tax payments to be $15 million, primarily due to taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations.

Although we are ~~expecting~~not able to currently provide operating or EBITDA guidance, we continue to believe that we will generate positive free cash flow during 2020. This belief is based on the following: actions we have taken to achieve cost reductions; reduced capital spending levels; lower cash taxes; our expectation of $16 million to $34 million in CARES Act tax refunds; and cash from working capital for the remainder of the year.

Results of Operations

We operate in five business segments. The segments are contained within two businesses — services and products provided primarily to the offshore energy industry ("Energy Services and Products") and services and products provided to non-energy industries ("Advanced Technologies"). Our Unallocated Expenses are those not associated with a ~~slight improvement~~specific business segment.

Consolidated revenue and profitability information are as follows:



	Three Months Ended
(dollars in thousands)	Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Revenue	$	536,668		$	493,886		$	560,810
Gross Margin	46,752			27,587			(20,387		)
Gross Margin %	9		%	6		%	(4		)%
Operating Income (Loss)	(380,757		)	(21,714		)	(254,170		)
Operating Income (Loss) %	(71		)%	(4		)%	(45		)%

We generate a material amount of our consolidated revenue from contracts for services in our overall operating results on moderately higher revenue. For our energy segments, we expect declines in operating contribution from our ROV segment on flat activity levels due to a change in operating mix, a decline in profitability in Subsea Products, due to a greater proportionthe U.S. Gulf of ~~segment revenue coming from manufacturing, and relatively flat results~~Mexico in our Subsea Projects ~~and Asset Integrity segments. For our non-energy~~ segment, ~~Advanced Technologies, we expect revenue to increase and operating margins to improve to the low double-digit range. Unallocated Expenses are expected to be~~which is usually more active in the ~~mid-$30 million range.~~

~~For the~~ second ~~half of 2019,~~and third quarters, as compared to the rest of the year. The European operations of our Asset Integrity segment are also seasonally more active in the second and third quarters. Revenue in our ROV segment is subject to seasonal variations in demand, with our first ~~half,~~quarter generally being the low quarter of the year. The level of our ROV seasonality depends on the number of ROVs we ~~expect to improve our consolidated operating results on increased revenue, with positive EBITDA contributions from~~have engaged in vessel-based subsea infrastructure inspection, maintenance, repair and installation,

which is more seasonal than drilling support. Revenue in each of our ~~operating segments. We anticipate meaningful improvements in~~ Subsea Products and Advanced ~~Technologies.~~ Technologies segments generally has not been seasonal.

We had operating losses of $381 million, $22 million and $254 million in the three months ended March 31, 2020, March 31, 2019 and December 31, 2019, respectively. Included in our operating losses for the three months ended March 31, 2020 and December 31, 2019, were charges of $386 million and $252 million, respectively, primarily due to market conditions requiring impairment of certain of our assets along with other costs we recognized as we adapted our geographic footprint and staffing levels to the conditions of the markets we serve. Charges for the three months ended March 31, 2020 and December 31, 2019 are summarized as follows:



			For the three months ended March 31, 2020
(in thousands)			Remotely Operated Vehicles		Subsea Products		Subsea Projects		Asset Integrity		Advanced Tech.		Unallocated Expenses		Total
Charges for the effects of:
	Long-lived assets impairments		$	—	$	54,859	$	7,689	$	—	$	6,215	$	—	$	68,763
	Long-lived assets write-offs		—		—		7,328		—		—		—		7,328
	Goodwill impairment		—		51,302		129,562		110,753		11,388		—		303,005
	Other		713		1,668		1,480		1,694		795		280		6,630
		Total charges	$	713	$	107,829	$	146,059	$	112,447	$	18,398	$	280	$	385,726



			For the three months ended December 31, 2019
(in thousands)			Remotely Operated Vehicles		Subsea Products		Subsea Projects		Asset Integrity		Advanced Tech.		Unallocated Expenses		Total
Charges for the effects of:
	Long-lived assets impairments		$	—	$	—	$	142,615	$	16,738	$	—	$	—	$	159,353
	Long-lived assets write-offs		5,697		18,757		6,091		14,108		—		—		44,653
	Inventory write-downs		15,343		3,567		1,586		—		789		—		21,285
	Goodwill impairment		—		—		—		14,713		—		—		14,713
	Other		2,297		2,650		2,851		3,082		815		56		11,751
		Total charges	$	23,337	$	24,974	$	153,143	$	48,641	$	1,604	$	56	$	251,755

Energy Services and Products

The primary focus of our Energy Services and Products business over the last several years has been toward leveraging our asset base and capabilities for providing services and products for offshore energy operations and subsea completions, inclusive of our customers' operating expenses and the offshore renewable energy market.

The following table sets forth the revenue, gross margin and operating income (loss) for our Energy Services and Products 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.



		Three Months Ended
(dollars in thousands)		Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Remotely Operated Vehicles
	Revenue	$	111,780		$	100,346		$	116,020
	Gross Margin	18,112			9,421			(7,728		)
	Operating Income (Loss)	9,066			1,418			(18,660		)
	Operating Income (Loss) %	8		%	1		%	(16		)%
	Days Available	22,750			24,506			25,576
	Days Utilized	14,853			12,942			14,836
	Utilization	65		%	53		%	58		%

Subsea Products
	Revenue	194,838			128,844			183,659
	Gross Margin	28,639			12,315			4,527
	Operating Income (Loss)	(91,858		)	(476		)	(10,325		)
	Operating Income (Loss) %	(47		)%	—		%	(6		)%
	Backlog at End of Period	528,000			464,000			630,000

Subsea Projects
	Revenue	61,455			89,728			86,728
	Gross Margin	(2,114		)	9,033			1,546
	Operating Income (Loss)	(145,290		)	2,892			(148,075		)
	Operating Income (Loss) %	(236		)%	3		%	(171		)%

Asset Integrity
	Revenue	59,132			60,689			61,835
	Gross Margin	8,729			6,272			(6,867		)
	Operating Income (Loss)	(109,441		)	(713		)	(48,919		)
	Operating Income (Loss) %	(185		)%	(1		)%	(79		)%

Total Energy Services and Products
	Revenue	$	427,205		$	379,607		$	448,242
	Gross Margin	53,366			37,041			(8,522		)
	Operating Income (Loss)	(337,523		)	3,121			(225,979		)
	Operating Income (Loss) %	(79		)%	1		%	(50		)%

In general, our energy-related business focuses on supplying services and products to the offshore energy industry. Since the downturn in oil prices in mid-2014, we have experienced lower activity levels and reduced pricing. In 2019, oil prices stabilized, resulting in increased demand and higher utilization for our energy-related businesses, with slightly improved pricing through the first quarter of 2020. Looking ahead, the adverse impacts of COVID-19 and the resulting supply and demand imbalance along with significantly lower crude oil prices are resulting in lower levels of activity and profitability. As we expect ~~relatively flat results from~~a recovery will take time to restore profitability and generate satisfactory returns, we are reviewing our operating model’s cost structure and aggressively implementing costs reductions.

ROV. We believe we are the world's largest provider of ROV services and, ~~Asset Integrity segments~~generally, this business segment has been the largest contributor to our Energy Services and Products business operating income. Our ROV segment revenue reflects the utilization percentages, fleet sizes and average pricing in the respective periods.

ROV operating income for the first quarter of 2020 increased $7.6 million compared to the corresponding period of the prior year as a ~~decline in Subsea Projects~~result of increased days on hire. ROV operating income was higher for the three months ended March 31, 2020 when compared to the immediately preceding quarter, which included $23 million of charges for write-downs and write-offs of certain equipment, intangibles, inventory and other expenses. Days on hire as compared to the preceding quarter were relatively flat.

Average ROV revenue per day on hire declined 4% year-over-year as a result of changes in geographic mix. However, this decline was more than offset by lower costs per day resulting in improved operating income. Fleet utilization increased to 65% during the first ~~half of 2019. For~~quarter from 53% in the ~~second half~~corresponding period of the ~~year, we project Unallocated Expenses~~prior year. We added one new ROV to beour fleet during the three months ended March 31, 2020 and retired one, resulting in a total of 250 ROVs in our ROV fleet as of March 31, 2020.

Subsea Products. Our Subsea Products segment consists of two business units: (1) Manufactured Products; and (2) Service and Rental. Manufactured Products includes production control umbilicals and specialty subsea hardware, while Service and Rental includes tooling, subsea work systems and installation and workover control systems. The following table presents revenue from Manufactured Products and Service and Rental, as their respective percentages of total Subsea Products revenue:



	Three Months Ended
	Mar 31, 2020		Mar 31, 2019		Dec 31, 2019
Manufactured Products	74	%	51	%	72	%

Service and Rental	26	%	49	%	28	%

Our Subsea Products operating results decreased in the ~~mid-$30 million range per quarter.~~

~~For Subsea Products, we continue to expect good order intake and increased manufacturing throughput and operating margins in the mid-single-digit range during the second half~~first quarter of 2019, as well as a book-to-bill ratio in the range of 1.25 to 1.4 for the full year. We expect increased activity levels in Advanced Technologies for the remainder of 2019, with operating margins in the low-double-digit range. For Subsea Projects, we expect a slight decline in results2020 as compared to the ~~first half~~corresponding period of the prior year, primarily as a result of charges for the impairment and write-offs of goodwill, certain equipment, intangibles and other expenses of $108 million. Subsea Products operating results also were lower for the three months ended March 31, 2020 when compared to the immediately preceding quarter, which included $25 million of charges related to impairments and write-offs of assets, inventory and other expenses. Exclusive of charges, operating results increased when compared to both the corresponding period of the prior year and preceding quarter primarily due to increased activity in subsea umbilical and hardware throughput, as well as improved margins in our service and rental business.

Our Subsea Products backlog was $528 million as of March 31, 2020, compared to $630 million as of December 31, 2019. The backlog decrease was attributable to a significant amount of manufacturing activity being performed at our facilities combined with lower than planned order intake as a result of the negative market impacts from COVID-19 and the recent decline in crude oil prices. The higher throughput and lower order intake resulted in a 0.5 book-to-bill ratio for the first quarter of 2020. Our book-to-bill ratio for the trailing 12 months was 1.1.

Subsea Projects. Our Subsea Projects operating results decreased in the three months ended March 31, 2020, compared to the corresponding period of the prior year, due to the impairments and write-offs referred to below, as well as reduced amounts of Gulf of Mexico diving and construction work. Our Subsea Projects revenue and operating results were lower in the three-month period ended March 31, 2020 as compared to the immediately preceding quarter, as a ~~combination~~result of as a result of lower ~~expected project call-out work~~seasonal vessel and ~~a typical seasonal decline in activity during~~survey activity. The three months ended March 31, 2020 and December 31, 2019 results included charges of $146 million and $153 million, respectively, for goodwill impairment, vessel and intangible impairments, write-downs and write-offs of certain equipment and inventory, and other expenses.

Asset Integrity. Asset Integrity's operating results for the ~~fourth quarter.~~

~~Below~~three month period ended March 31, 2020, compared to the ~~operating income (loss) line, we expect increased interest expense, as we will no longer be capitalizing interest on~~corresponding period of the ~~Ocean Evolution~~ ~~since it was placed into service~~prior year and the immediately preceding quarter, were lower due to charges related to goodwill impairment, asset impairments, write-downs and write-offs of certain equipment, intangible assets and inventory, and other expenses of $112 million and $49 million in the ~~second~~three months ended March 31, 2020 and December 31, 2019, respectively. Exclusive of these charges, operating results were higher as compared to the corresponding period of the prior year and the immediately preceding quarter due to cost reductions instituted in the fourth quarter of 2019.

Advanced Technologies

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

Revenue, gross margin and operating income information for our Advanced Technologies segment are as follows:



	Three Months Ended
(dollars in thousands)	Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Revenue	$	109,463		$	114,279		$	112,568
Gross Margin	13,428			15,248			12,354
Operating Income (Loss)	(10,585		)	9,599			5,270
Operating Income (Loss) %	(10		)%	8		%	5		%

Advanced Technologies operating results for the three-month period ended March 31, 2020 were lower when compared to the corresponding period of the prior year and the immediately preceding quarter primarily as a result of charges of $18 million for our commercial business unit in the first quarter of 2020 for goodwill impairment, asset impairments, write-downs of certain equipment and other expenses. Advanced Technologies operating results for the three-month period ended December 31, 2019 included $1.6 million of charges relating to inventory write-downs and other expenses. Exclusive of charges, operating results decreased on lower levels of revenue in the first quarter of 2020 when compared to the corresponding period of the prior year and the preceding quarter due to customer operational project delays and the adverse impacts of COVID-19, combined with higher costs on certain projects within our entertainment business.

The following table presents revenue from government and commercial, as their respective percentages of total Advanced Technologies revenue:



	Three Months Ended
	Mar 31, 2020		Mar 31, 2019		Dec 31, 2019
Government	83	%	71	%	76	%

Commercial	17	%	29	%	24	%

Unallocated Expenses

Our Unallocated Expenses, (i.e., those not ~~providing guidance as~~associated with a specific business segment), within gross margin 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 expense consist of those expenses within gross margin plus general and administrative expenses related to corporate functions.

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



	Three Months Ended
(dollars in thousands)	Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Gross margin expenses	$	(20,042	)	$	(24,702	)	(24,219	)
% of revenue	4		%	5		%	4	%
Operating expenses	(32,649		)	(34,434		)	(33,461	)
Operating expenses % of revenue	6		%	7		%	6	%

Our Unallocated Expenses for the three months ended March 31, 2020 were lower compared to the corresponding period of the prior year and the immediately preceding quarter, as performance-based compensation expenses were reduced based on our expected level of results relative to our plan targets.

Other

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



	Three Months Ended
(in thousands)	Mar 31, 2020			Mar 31, 2019			Dec 31, 2019
Interest income	$	1,277		$	2,604		$	1,352
Interest expense, net of amounts capitalized	(12,462		)	(9,424		)	(11,706		)
Equity in income (losses) of unconsolidated affiliates	1,197			(164		)	941
Other income (expense), net	(7,128		)	719			(3,687		)
Provision (benefit) for income taxes	(30,275		)	(3,152		)	(4,358		)

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 are the principal component of other income (expense), net. In the three-month periods ended March 31, 2020 and 2019, ~~annual~~we incurred foreign currency transaction gains (losses) of $(7.1) million and $0.6 million, respectively. The currency losses in 2020 primarily related to declining exchange rates for the Angolan kwanza and the Brazilian real relative to the U.S. dollar. We did not incur any significant currency transaction losses in any one currency in the three-month period ended March 31, 2019. We could incur further foreign currency exchange losses in Angola and Brazil if further currency devaluations occur.

In the three-month period ended March 31, 2020, we provided for income taxes based on our earnings for the period using: (1) earnings and other factors that would affect the tax provision for the period; and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographic mix in the sources of our results. The effective tax rate for the three months ended March 31, 2020 was different than the federal statutory rate of 21%, primarily due to the ~~ongoing shifting~~enactment of the CARES Act, the geographic mix of ~~our~~ operating revenue and ~~results. These conditions~~results, and changes in uncertain tax positions and other discrete items. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur incremental tax consequences upon the distribution of such earnings. Therefore, we do not ~~allow for~~believe a ~~meaningful~~discussion of the effective tax rate ~~forecast.~~is meaningful.

~~During~~In the three-month period ended March 31, 2020, we recognized a tax benefit of $42.2 million from discrete items, primarily related to an $33.8 million benefit related to the CARES Act and $9.7 million of additional uncertain tax positions, partially offset by $1.0 million related to share-based compensation and $0.3 million associated with various other issues. In the three-month period ended March 31, 2019, we ~~expect~~recognized additional tax expense of $1.4 million from discrete items, primarily related to ~~generate sufficient cash flows~~share-based compensation and valuation allowances.

Our 2020 income tax payments, net of tax refunds, are anticipated to ~~service our debt and fund our anticipated maintenance and organic growth capital expenditures.~~

~~Critical Accounting Policies and Estimates~~

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts in our financial statements and accompanying notes. We disclose our significant accounting policies in Notes to Consolidated Financial Statements—Note 1—"Policies" in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2018, see Part II. Item 7. "Financial Statements and Supplementary Data—Note 1—Summary of Major Accounting Policies."

For information about our critical accounting policies and estimates, see Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our annual report on Form 10-K for the year ended December 31, 2018. As of June 30, 2019, there have been no material changes to the judgments, assumptions and estimates upon which our critical accounting policies and estimates are based.

be approximately $15 million.

Liquidity and Capital Resources

As of ~~June 30, 2019,~~March 31, 2020, we had working capital of ~~$704~~$666 million, including ~~$356~~$307 million of cash and cash equivalents. Additionally, Amendment No. 4 to the Credit Agreement (as defined below) provides for a $500 million revolving credit facility until October 25, 2021 and thereafter $450 million until January 25, 2023 with a group of banks. We consider our liquidity, cash flows and capital resources to be adequate to support our existing operations and capital commitments. However, given the uncertainty in the rapidly changing market and economic conditions related to the COVID-19 outbreak, we will continue to evaluate the nature and extent of the impact to our business and financial position.

Cash flows for the ~~six~~three months ended ~~June 30,~~ March 31, 2020 and 2019 ~~and 2018~~ are summarized as follows:

Six Months Ended
(in thousands) Jun 30, 2019 Jun 30, 2018
Changes in Cash:
Net Cash Provided by Operating Activities $ 72,709
$ 15,685
Net Cash Used in Investing Activities (68,119 ) (94,773 )
Net Cash Used in Financing Activities (2,682 ) (5,778 )
Effect of exchange rates on cash (329 ) (5,909 )
Net Increase (Decrease) in Cash and Cash Equivalents $ 1,579
$ (90,775 )



		Three Months Ended
	(in thousands)	Mar 31, 2020			Mar 31, 2019
Changes in Cash:
	Net Cash Provided by Operating Activities	$	(32,150	)	$	19,124
	Net Cash Used in Investing Activities	(26,706		)	(29,914		)
	Net Cash Used in Financing Activities	(1,668		)	(2,338		)
	Effect of exchange rates on cash	(5,671		)	632
	Net Increase (Decrease) in Cash and Cash Equivalents	$	(66,195	)	$	(12,496	)

Operating activities

Our primary sources and uses of cash flows from operating activities for the ~~six~~three months ended ~~June 30,~~ March 31, 2020 and 2019 ~~and 2018~~ are as follows:

Six Months Ended
(in thousands) Jun 30, 2019 Jun 30, 2018
Cash Flows from Operating Activities:
Net income (loss) $ (60,009 ) $ (82,209 )
Depreciation and amortization 102,790
113,971
Noncash compensation 5,835
5,985
Accounts receivable and contract assets 53,913
(12,161 )
Inventory (18,687 ) (3,901 )
Current liabilities (18,669 ) 3,941
Other changes 7,536
(9,941 )
Net Cash Provided by Operating Activities $ 72,709
$ 15,685



		Three Months Ended
	(in thousands)	Mar 31, 2020			Mar 31, 2019
Cash Flows from Operating Activities:
	Net income (loss)	$	(367,598	)	$	(24,827	)
	Non-cash items, net	420,333			52,548
	Accounts receivable and contract assets	30,303			22,181
	Inventory	8,384			(15,026		)
	Current liabilities	(102,784		)	(15,058		)
	Other changes	(20,788		)	(694		)
	Net Cash Provided by (Used in) Operating Activities	$	(32,150	)	$	19,124

~~Net cash provided by operating activities for the six months ended June 30, 2019 and 2018 was $73 million and $16 million, respectively.~~ The increase in cash related to accounts receivable and contract assets in the ~~six~~three months ended ~~June 30, 2019 was due to an increased focus on managing our working capital, including increased collection efforts, as well as receiving various expected income tax refunds.~~March 31, 2020 reflects the timing of project milestones and customer payments. The ~~decrease~~increase in cash related to inventory ~~as of June 30, 2019 was based on an increase~~ in ~~Manufactured Products' inventory related to an increase~~the three months ended March 31, 2020 corresponds with a decrease in our backlog. The decrease in cash related to current liabilities asin the three months ended March 31, 2020 reflects the timing of ~~June 30, 2019 was based on a decrease~~vendor payments and the annual employee incentive payments related to attainment of specific performance goals in ~~contract liabilities, as revenue recognized exceeded advanced billings.~~prior periods.

Investing activities

Our capital expenditures were ~~$71~~relatively flat at $27 million during the first ~~six~~three months of ~~2019~~2020, as compared to ~~$54~~$30 million in the first ~~six~~three months of 2018, excluding the $68 million purchase price for the Ecosse acquisition. We acquired Ecosse in March 2018, reflecting our commitment to expand our service line capabilities, grow our market position within the offshore renewable energy market, and provide our customers with proven tools to optimize installation projects. Ecosse builds and operates seabed preparation, route clearance and trenching tools for submarine cables and pipelines on an integrated basis that includes vessels, ROVs and survey services.2019.

~~We currently estimate~~For 2020, we expect our capital expenditures ~~for 2019, excluding~~to be in the range of $45 million to $65 million, exclusive of business ~~acquisitions, will be~~acquisitions. This includes approximately ~~$125~~$15 million ~~including approximately $50~~to $25 million of maintenance capital expenditures and ~~$75~~$30 million to $40 million of growth capital expenditures. ~~We placed our new-build Jones Act multiservice subsea support vessel~~ ~~Ocean Evolution~~ ~~into service during the second quarter of 2019.~~

~~The~~ ~~Ocean Evolution~~ is U.S.-flagged and documented with a coastwise endorsement by the U.S. Coast Guard. The vessel has an overall length of 353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-ton active heave-compensated crane, a working moonpool, and two of our high specification 4,000 meter work-class ROVs. The vessel is also equipped with a satellite communications system capable of transmitting streaming video for real-time work observation by shore-based personnel. The vessel is being used to augment our ability to provide subsea intervention services in the U.S. Gulf of Mexico. These services are required to perform inspection, maintenance and repair projects and hardware installations.

We previously had several deepwater vessels under long-term charter. The last of our long-term ~~deepwater vessel~~ charters expired in March 2018. With the current vessel market conditions, we ~~attempt to~~have entered into some minimum-day, short-term, time charter ~~vessels~~party agreements and, for specific projects, we continue to charter on a back-to-back basis ~~or guaranteed minimum utilization arrangements~~ with the vessel owners. This generally minimizes our contract exposure by closely matching our obligations with our revenue. ~~We also charter vessels on a short-term basis as necessary to augment our fleet.~~

Financing activities

In the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we used ~~$2.7~~$1.7 million of cash in financing activities. In the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, we used ~~$5.8~~$2.3 million in financing activities, as a result of the repayment of the $300 million term loan facility under the Credit Agreement, substantially offset by the net proceeds from the issuance of the 2028 Senior Notes, net of issuance costs, of $296 million.activities.

As of ~~June 30, 2019,~~March 31, 2020, 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 February 2018, we entered into Agreement and Amendment No. 4 to the Credit Agreement ("Amendment No. 4"). Amendment No. 4 amended the Credit Agreement to, among other things, extend the maturity of the Revolving Credit Facility to January 25, 2023 with the extending ~~Lenders,~~lenders, which represent 90% of the existing commitments of the ~~Lenders,~~lenders, such that the total commitments for the Revolving Credit Facility will be $500 million until October 25, 2021, and thereafter $450 million until January 25, 2023.

The Credit Agreement contains various covenants that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets and enter into certain restrictive agreements. We are also subject to a maximum adjusted total Capitalization Ratio (as defined in the Credit ~~Agreement)~~Agreement which stipulates, that among other items, we exclude any impacts associated with current and prior period impairments) of 55%. The Credit Agreement includes customary events of default and associated remedies. As of ~~June 30, 2019,~~March 31, 2020, we were in compliance with all the covenants set forth in the Credit Agreement. As of March 31, 2020, we had no borrowings outstanding under the Revolving Credit Facility and the option of utilizing the entire $500 million of available borrowing capacity under the Revolving Credit Facility while remaining in compliance with the maximum adjusted Capitalization Ratio.

We may redeem some or all of the 2024 Senior Notes and 2028 Senior Notes at specified redemption prices.

~~We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of June 30, 2019, 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. In 2015, we repurchased 2.0 million shares ~~of our common stock for $100 million~~ under this plan. We ~~did~~have not ~~repurchase~~repurchased any shares ~~during 2016 through June 30, 2019.~~under this plan since December 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.

~~Results of Operations~~

~~products provided to non-energy industries ("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 Six Months Ended
(dollars in thousands) Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Revenue $ 495,781
$ 478,674
$ 493,886
$ 989,667
$ 895,087
Gross Margin 41,983
29,728
27,587
69,570
48,556
Gross Margin % 8 % 6 % 6 % 7 % 5 %
Operating Income (Loss) (9,635 ) (19,637 ) (21,714 ) (31,349 ) (46,786 )
Operating Income (Loss) % (2 )% (4 )% (4 )% (3 )% (5 )%

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 lowest 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. Revenue in our Subsea Products and Advanced Technologies segments generally has not been seasonal.

~~Energy Services and Products~~

The primary focus of our Energy Services and Products business over the last several years has been toward leveraging our asset base and capabilities for providing services and products for offshore energy operations and subsea completions. In recent years, we have focused on redirecting our service and product offerings toward our energy customers' operating expenses and the offshore renewable energy market.

Three Months Ended Six Months Ended
(dollars in thousands) Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Remotely Operated Vehicles
Revenue $ 120,363
$ 107,426
$ 100,346
$ 220,709
$ 193,020
Gross Margin 17,360
12,176
9,421
26,781
17,131
Operating Income 8,688
4,542
1,418
10,106
2,144
Operating Income (Loss) % 7 % 4 % 1 % 5 % 1 %
Days available 25,006
25,386
24,506
49,512
50,524
Days utilized 15,423
13,654
12,942
28,365
24,688
Utilization 62 % 54 % 53 % 57 % 49 %

Subsea Products
Revenue 138,910
121,704
128,844
267,754
248,392
Gross Margin 21,029
16,075
12,315
33,344
31,080
Operating Income (Loss) 7,413
2,295
(476 ) 6,937
4,050
Operating Income (Loss) % 5 % 2 % — % 3 % 2 %
Backlog at end of period 596,000
245,000
464,000
596,000
245,000

Subsea Projects
Revenue 75,104
78,036
89,728
164,832
134,896
Gross Margin 5,472
(5,145 ) 9,033
14,505
(4,028 )
Operating Income (Loss) 87
(10,358 ) 2,892
2,979
(12,717 )
Operating Income (Loss) % — % (13 )% 3 % 2 % (9 )%

Asset Integrity
Revenue 61,156
67,422
60,689
121,845
128,710
Gross Margin 6,423
9,461
6,272
12,695
17,479
Operating Income (Loss) (1,302 ) 3,357
(713 ) (2,015 ) 5,036
Operating Income (Loss) % (2 )% 5 % (1 )% (2 )% 4 %

Total Energy Services and Products
Revenue $ 395,533
$ 374,588
$ 379,607
$ 775,140
$ 705,018
Gross Margin 50,284
32,567
37,041
87,325
61,662
Operating Income (Loss) 14,886
(164 ) 3,121
18,007
(1,487 )
Operating Income (Loss) % 4 % — % 1 % 2 % — %

In general, our energy-related business focuses on supplying services and products to the offshore energy industry. Since the downturn in oil prices in mid-2014, we have experienced lower activity levels and reduced pricing. In 2019, with oil prices stabilizing and activity in some areas improving, we believe that we are in the early stages of a recovery in activity in general, and in our businesses. We expect that a recovery will take time, and only after a sustained higher level of activity can the prices for our services and products be increased enough to generate satisfactory returns.

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 Energy Services and Products business operating income. Our ROV segment revenue reflects the utilization percentages, fleet sizes and average pricing of the respective periods.

During the second quarter of 2019, ROV operating income increased compared to the immediately preceding quarter, due to increased days on hire resulting in improved fleet utilization to 62% from 53%, as well as a stable

~~average revenue per day on hire. We added two new ROVs to our fleet during the~~ ~~three months~~ ended June 30, 2019 and retired one, resulting in a total of 276 ROVs in our ROV fleet. Our operating income increased in the three- and six-month periods ended June 30, 2019, compared to the corresponding periods of the prior year as a result of increased days on hire. We expect our third quarter 2019 ROV operating income to decline slightly from the second quarter, due to a change in operational mix. For the second half of the year, we expect revenue and operating results to be similar to the first half of the year. For the full year of 2019, we continue to project increased days on hire in both drill support and vessel-based activity. Although we endeavor to maintain and increase our drill support market share and place more ROVs on vessels, we need a sizable increase in our customers' offshore activity, longer term contract durations and spending levels for there to be a discernible increase in ROV pricing and profitability.

Our Subsea Products segment consists of two business units: (1) Manufactured Products; and (2) Service and Rental. Manufactured Products includes production control umbilicals and specialty subsea hardware, while Service and Rental includes tooling, subsea work systems and installation and workover control systems. The following table presents revenue from Manufactured Products and Service and Rental, as their respective percentages of total Subsea Products revenue:

Three Months Ended Six Months Ended
Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Manufactured Products 63 % 50 % 51 % 57 % 55 %

Service and Rental 37 % 50 % 49 % 43 % 45 %

Our Subsea Products operating income in the second quarter of 2019 was significantly higher than that of the immediately preceding quarter. This improvement was largely due to increases in our Manufactured Products business pertaining to projects awarded in late 2018 and early 2019. Our Service and Rental business returned an exceptional operating margin on lower revenue, due to efficient operations and completion of a substantial project. Subsea Products operating income increased in the ~~three- and six-month periods ended~~ ~~June 30, 2019 compared to the corresponding periods of the prior year, mainly due to increased throughput in Manufactured Products.~~

Our Subsea Products backlog was $596 million as of June 30, 2019, compared to $332 million as of December 31, 2018. The backlog increase was largely attributable to increased umbilical and related hardware order intake in our Manufactured Products business. This includes the recently announced award for umbilicals, hardware and aftermarket services related to the Mozambique LNG project. Our book-to-bill ratio for the trailing 12 months was 1.65. We expect Subsea Products operating results to be lower in the third quarter of 2019 compared to the second quarter, as a greater proportion of segment revenue is coming from manufacturing activities. We expect operating margins for the second half of 2019 to average in the mid-single digit range with a higher projected revenue run rate and additional anticipated order intake. Our Subsea Products book-to-bill ratio is expected to be in the range of 1.25 to 1.4 for the full year.

Our Subsea Projects operating income decreased in the three-month period ended June 30, 2019 compared to the immediately preceding quarter, driven by a reduction in call-out work and lower than expected margins due to operational issues on a couple of projects. Our Subsea Projects operating income increased in the ~~three- and six-month periods ended~~ June 30, 2019, compared to the corresponding periods of the prior year, driven mainly by improved results for the first quarter of 2019. In addition, the second quarter 2018 operating results included a write-off of certain equipment and intangible assets associated with exiting the land survey business. In the third quarter of 2019, we expect Subsea Projects operating income to be flat when compared to the second quarter of 2019. We expect operating results to decline in the second half of 2019 when compared to the first half of the year due to a combination of lower expected project call-out work and a typical seasonal decline in activity during the fourth quarter.

~~Asset Integrity's operating results in the three-month period ended June 30, 2019, compared to the immediately preceding quarter were lower due to reduced pricing levels. For the~~ ~~three- and six-month periods ended~~ June 30, 2019, compared to the corresponding periods of the prior year, operating results were lower due to reduced revenue and lower pricing for inspection services which remains very competitive. For the third quarter of 2019, we expect Asset Integrity's revenue and operating results will be relatively flat compared to the second quarter of 2019. We expect our operating results in the second half of the year to be similar to the first half of 2019.Off-Balance Sheet Arrangements

~~Advanced Technologies~~We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of March 31, 2020, and we do not have any off-balance sheet arrangements, as defined by SEC rules.

~~Revenue, gross margin~~Critical Accounting Policies and ~~operating income information was as follows:~~

Three Months Ended Six Months Ended
(dollars in thousands) Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Revenue $ 100,248
$ 104,086
$ 114,279
$ 214,527
$ 190,069
Gross Margin $ 13,386
$ 13,999
$ 15,248
$ 28,634
$ 21,821
Operating Income 7,241
7,886
9,599
16,840
9,554
Operating Income % 7 % 8 % 8 % 8 % 5 %

~~Advanced Technologies operating income for the~~ ~~three-month period ended~~ June 30, 2019 was lower than that of the immediately preceding quarter, predominantly due to production associated with certain theme park projects being delayed. Operating income for the three-month period ended June 30, 2019 was lower compared to the corresponding period of the prior year, due to reduced levels of activity in our theme park related business. The operating income for the six-month period ended June 30, 2019 increased compared to the corresponding period of the prior year driven by improved results within our AGV ("Automated Guided Vehicles") business. We expect an increase in our Advanced Technologies operating income in the third quarter of 2019 compared to the second quarter, as a result of increased activity and improved operating margins in both our government and commercial businesses. For Advanced Technologies, operating profit during the second half is expected to significantly improve on increased revenue due to increased throughput and deliveries in our commercial theme park business and increased activity from backlog in our government-related businesses. We expect operating margins to improve to the low double-digit range for the second half of the year.

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

Three Months Ended Six Months Ended
Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Government 75 % 69 % 71 % 73 % 69 %

Commercial 25 % 31 % 29 % 27 % 31 %

~~Unallocated Expenses~~

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

The ~~following table sets forth~~discussion and analysis of our ~~Unallocated Expenses~~financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts in our financial statements and accompanying notes. We disclose our significant accounting policies in Notes to Consolidated Financial Statements—Note 1—"Summary of Major Accounting Policies" in this quarterly report and in our annual report on Form 10-K for the ~~periods indicated:~~year ended December 31, 2019, in Part II. Item 7. "Financial Statements and Supplementary Data—Note 1—Summary of Major Accounting Policies."

Three Months Ended Six Months Ended
(dollars in thousands) Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Gross Margin $ 21,687
$ 16,838
$ 24,702
46,389
34,927
Operating Expense 31,762
27,359
34,434
66,196
54,853
Operating expense % of revenue 6 % 6 % 7 % 7 % 6 %
For information about our critical accounting policies and estimates, see Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our annual report on Form 10-K for the year ended December 31, 2019. As of March 31, 2020, there have been no material changes to the judgments, assumptions and estimates upon which our critical accounting policies and estimates are based.

~~Our Unallocated Expenses for the~~ ~~three- and six-month periods ended~~ June 30, 2019 increased compared to the corresponding periods of the prior year, primarily due to higher 2019 estimated expenses related to incentive compensation from our long-term performance units and annual bonus plan and higher expenses related to global information technology expenses. Our Unallocated Expenses for the three months ended June 30, 2019 were lower compared to the immediately preceding quarter, as we deferred expenditures into the second half of 2019. For the remainder of 2019, we expect our quarterly Unallocated Expenses to be in the mid-$30 million range per quarter.

~~Other~~

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

Three Months Ended Six Months Ended
(in thousands) Jun 30, 2019 Jun 30, 2018 Mar 31, 2019 Jun 30, 2019 Jun 30, 2018
Interest income $ 1,848
$ 2,950
$ 2,604
4,452
5,542
Interest expense, net of amounts capitalized (10,199 ) (8,802 ) (9,424 ) (19,623 ) (18,173 )
Equity in income (losses) of unconsolidated affiliates —
(737 ) (164 ) (164 ) (1,580 )
Other income (expense), net 7
(3,556 ) 719
726
(12,030 )
Provision (benefit) for income taxes 17,203
3,294
(3,152 ) 14,051
9,182

~~Foreign currency transaction gains and losses are the principal component of other income (expense), net. In the three- and~~ ~~six-month periods ended~~ June 30, 2019, we incurred foreign currency transaction gains of less than $0.1 million and $0.7 million, respectively. We did not incur any significant currency transaction losses in any one currency in 2019. In the three- and ~~six-month periods ended~~ June 30, 2018, we incurred foreign currency transaction losses of $3.4 million and $11.7 million, respectively. The currency losses in 2018 primarily related to the Angolan kwanza and its declining exchange rate relative to the U.S. dollar, and related primarily to our cash balances in Angola. We could incur further foreign currency exchange losses in Angola if further currency devaluations occur. However, in 2019, we expect lower foreign currency exchange losses, due to lower cash balances in Angolan kwanza.

The provisions for income taxes were related to 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. Factors that could affect our estimated tax rate include our profitability levels in general and the geographic mix in the sources of our results. The effective tax rate for the ~~six months ended~~ June 30, 2019 was different than the federal statutory rate of 21%, primarily due to the geographic mix of operating revenue and results that generated taxes in certain jurisdictions that exceeded the tax benefit from losses and credits in other jurisdictions, which could not be realized in the quarter due to additional uncertain tax positions and other discrete items. It is our intention to continue to indefinitely reinvest in certain of our international operations. Therefore, we do not provide withholding taxes on the possible distribution of earnings from those operations. We do not believe the effective tax rate before discrete items is meaningful, due to the ongoing shifting of geographic mix of our operating revenue and results. Our 2019 income tax payments, net of tax refunds, are anticipated to be approximately $18 million. The effective tax rate for the ~~six months ended~~ June 30, 2018 was lower than the statutory rate of 21.0%, primarily due to our intention to indefinitely reinvest in certain of our international operations and discrete items related to the accounting for share-based compensation. In 2018, we did not provide for U.S. taxes on the portion of our foreign earnings that we deemed indefinitely reinvested.


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. Except for our exposure in Angola, we do not believe these risks are material. We have not entered into any ~~market risk sensitive~~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 4—6—"Debt" in the Notes to Consolidated Financial Statements in this quarterly report for a description of our revolving credit facility and interest rates on our borrowings. We ~~have~~had two interest rate swaps in place onrelating to a total of $200 million of the 2024 Senior Notes. ~~The~~These agreements ~~swap~~swapped the fixed interest rate of 4.650% on $100 million of the 2024 Senior Notes to the floating rate of ~~one month~~one-month LIBOR plus 2.426% and on another $100 million to ~~one month~~one-month LIBOR plus 2.823%. In March 2020, we terminated these interest rate swaps. We believe significant interest rate changes would not have a material near-term impact on our future earnings or cash flows.

Because we operate in various ~~oil and gas exploration and production~~ regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar. The functional currency for several of our international operations is the applicable local currency. A stronger U.S. dollar against the United Kingdom 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 equity section of our Consolidated Balance Sheets. We recorded net adjustments to our equity accounts of ~~$6.4~~$(70) million and ~~$(16)~~$6.2 million in the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ 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) of ~~less than $0.1~~$(7.1) million and ~~$0.7~~$0.6 million in the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2020, and 2019, ~~and $(3.4) million and $(12) million in the~~ ~~three- and six-month periods ended~~ ~~June 30, 2018,~~ respectively. Those gains (losses) are included in other income (expense), net in our Consolidated Statements of Operations in those respective periods. Since the second quarter of 2015, the exchange rate for the Angolan kwanza relative to the U.S. dollar generally has been declining, with the exception that the exchange rate was relatively stable during 2017. As our functional currency in Angola is the U.S. dollar, we recorded foreign currency transaction ~~gains (losses)~~losses related to the kwanza of ~~$(0.6)~~$1.9 million and ~~$(4.8)~~less than $0.1 million in the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and $(0.6) million and $(12) million in the~~ ~~three- and six-month periods ended~~ ~~June 30, 2018,~~ respectively, as a component of other income (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. Any conversion of cash balances from kwanza to U.S. dollars is controlled by the central bank in Angola, and the central bank slowed this process from mid-2015 to 2017, causing our kwanza cash balances to increase during that period of time. However, beginning in 2018, the Angolan central bank has allowed us to repatriate cash from Angola. During ~~2018,~~2019, we were able to repatriate ~~$74~~$5.5 million of cash from Angola.

As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had the equivalent of approximately ~~$7.1~~$6.2 million ~~and $9.3 million, respectively,~~ of kwanza cash balances in Angola reflected on our Consolidated Balance Sheets.

December 31, ~~2018,~~2019, the difference between the fair market value and the carrying amount of the Angolan bonds was immaterial.

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 ~~June 30, 2019~~March 31, 2020 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 ~~June 30, 2019~~March 31, 2020 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

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

• performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, premises liability claims and other claims.


Item 1A.	Risk Factors

With the exception of the following, there have been no other material changes in our risk factors from those disclosed in Part I, Item 1A, of our annual report on Form 10-K for the year ended December 31, 2019.

The ongoing coronavirus (COVID-19) outbreak has adversely affected, and could continue to adversely affect, our business, financial condition and results of operations.

The ongoing coronavirus (COVID-19) outbreak, which the World Health Organization declared a pandemic and the U.S. Government declared a national emergency in March 2020, has reached more than 200 countries and has continued to be a rapidly evolving situation. The pandemic has resulted in widespread adverse impacts on the global economy and financial markets, and on our employees, customers, suppliers and other parties with whom we have business relations. We have experienced some resulting disruptions to our business operations, as the pandemic has continued to spread through most of our markets. For example, since mid-March, we have had to restrict access to our administrative offices around the world and quarantine personnel and assets as required by various governmental authorities and our own safety protocols. There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, delays in the delivery of materials and supplies that are sourced from around the globe, and have caused, and may continue to cause, milestones or deadlines relating to various projects to be missed. Further, the impact of the pandemic, including the resulting significant reduction in global demand for oil and natural gas, coupled with the sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of OPEC and other foreign, oil-exporting countries is expected to lead to significant global economic contraction generally and in our industry in particular. Oil and natural gas prices are expected to continue to be volatile as a result of these events and the ongoing COVID-19 outbreak, and as changes in oil and natural gas inventories, industry demand and economic performance are reported. We cannot predict when prices will improve and stabilize.

We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences) and implemented new protocols to promote social distancing and enhance sanitary measures in our offices and facilities to conform to government restrictions and best practices encouraged by governmental and regulatory authorities. However, the quarantine of personnel or the inability to access our facilities or customer sites could adversely affect our operations. Also, we have a limited number of highly skilled employees for some of our operations. If a large proportion of our employees in those critical positions were to contract COVID-19 or be quarantined as a result of the virus, at the same time, we would rely upon our business continuity plans in an effort to continue operations at our facilities and customer sites and onboard our vessels, but there is no certainty that such measures will be sufficient to mitigate the adverse impact to our operations that could result from shortages of highly skilled employees. Many of our suppliers and other business counterparties have made similar modifications. The resources available to those of our employees who are working remotely may not enable them to maintain the same level of productivity and efficiency, and those and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. Although we have experienced only limited absenteeism from employees who are required to be on-site to perform their jobs, absenteeism may increase in the future and may harm our productivity. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, suppliers and other business counterparties. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, in which case our employees or other individuals may become sick, our ability to perform critical functions could be harmed, and we may be unable to respond to some of the needs of our global business.

worsening economic conditions could result in reductions in backlog over time, which would impact our future financial performance.

Additionally, to the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, we may need to consider alternative sources of funding for some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital. These uncertain economic conditions may also result in the inability of our customers and other counterparties to make payments to us, on a timely basis or at all, which could adversely affect our business, cash flows, liquidity, financial condition and results of operations.

We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments beyond our control, which are highly uncertain and cannot be predicted, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by members of OPEC and other foreign, oil-exporting countries, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. Furthermore, the impacts of the COVID-19 pandemic and the other factors described above make it more difficult for us to forecast demand and provide guidance for the remainder of 2020. Accordingly, any guidance we provide is likely to be less reliable than usual, and actual results are more likely to differ from any such guidance. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

Item 6. Exhibits

Index to 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
10.1+

Employment Agreement for Mr. Davison

10.2+

2019 Performance Unit Agreement for Mr. Davison

10.3+

2019 Restricted Stock Unit Agreement for Mr. Davison

10.4+

Special Restricted Stock Unit Agreement for Mr. Davison

10.5+

Retention and Severance Payments Agreement for Mr. Davison

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 - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL 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

+
Management contract or compensatory plan or arrangement.
*
Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.

Index to 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

Mar. 2020

3.01

10.01+

Form of 2020 Performance Unit Agreement

1-10945

8-K

Feb. 2020

10.1

10.02+

Form of 2020 Restricted Stock Unit Agreement

1-10945

8-K

Feb. 2020

10.2

10.03+

Form of 2020 Nonemployee Director Restricted Stock Agreement

1-10945

8-K

Feb. 2020

10.3

10.04+

2020 Annual Cash Bonus Award Program Summary

1-10945

8-K

Feb. 2020

10.4

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

Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL 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

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Management contract or compensatory plan or arrangement.

Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.

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.




~~July 30, 2019~~May 15, 2020		/S/ RODERICK A. LARSON
Date		Roderick A. Larson
		President and Chief Executive Officer
		(Principal Executive Officer)


~~July 30, 2019~~May 15, 2020		/S/ ALAN R. CURTIS
Date		Alan R. Curtis
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)


~~July 30, 2019~~May 15, 2020		/S/ WITLAND J. LEBLANC, JR.
Date		Witland J. LeBlanc, Jr.
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

3240



(in thousands)		Jun 30, 2019		Jan 1, 2019
Assets:
	Right-of-Use Operating Lease Assets	$	180,645	$	184,648

Liabilities:
Operating	Current operating	$	19,733	$	20,318
Operating	Noncurrent operating	172,090		170,190
Lease Liabilities		$	191,823	$	190,508



		Jun 30, 2019		Jan 1, 2019
Lease Term and Discount Rate:
Weighted-average remaining lease terms (years)	Weighted-average remaining lease term (years)	11.0		11.0

Weighted-average discount rate	Weighted-average discount rate	6.9	%	7.1	%



(in thousands)
For the twelve months ended June 30,
2020	$	28,938
2021	29,862
2022	30,633
2023	26,277
2024	23,692
Thereafter	148,813
Total lease payments	288,215
Less: Interest	(96,392		)
Present Value of Lease Liabilities	$	191,823