SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
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☑QUARTERLY REPORT PURSUANT TO SECTION 13 |
For the quarterly period ended September 30, 2017
or
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☐TRANSITION REPORT PURSUANT TO SECTION 13 |
For the transition period from__________ to__________
Commission File NumberNumber: 001-32936
HELIX ENERGY SOLUTIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
(281) 618–0400
(Registrant'sRegistrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | | HLX | | 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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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 | 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).
As of October 20, 2017, 147,720,399April 22, 2022, 151,651,384 shares of common stock were outstanding.
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| | Condensed Consolidated Statements of Cash Flows (Unaudited) – | |
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2
Item 1.
Financial StatementsHELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
(in thousands)
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 356,889 | $ | 356,647 | |||
Accounts receivable: | |||||||
Trade, net of allowance for uncollectible accounts of $2,752 and $1,778, respectively | 90,480 | 101,825 | |||||
Unbilled revenue and other | 45,816 | 10,328 | |||||
Current deferred tax assets | — | 16,594 | |||||
Other current assets | 38,172 | 37,388 | |||||
Total current assets | 531,357 | 522,782 | |||||
Property and equipment | 2,612,407 | 2,450,890 | |||||
Less accumulated depreciation | (878,248 | ) | (799,280 | ) | |||
Property and equipment, net | 1,734,159 | 1,651,610 | |||||
Other assets, net | 100,974 | 72,549 | |||||
Total assets | $ | 2,366,490 | $ | 2,246,941 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 91,412 | $ | 60,210 | |||
Accrued liabilities | 60,761 | 58,614 | |||||
Income tax payable | 1,756 | — | |||||
Current maturities of long-term debt | 108,611 | 67,571 | |||||
Total current liabilities | 262,540 | 186,395 | |||||
Long-term debt | 395,345 | 558,396 | |||||
Deferred tax liabilities | 154,158 | 167,351 | |||||
Other non-current liabilities | 42,736 | 52,985 | |||||
Total liabilities | 854,779 | 965,127 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common stock, no par, 240,000 shares authorized, 147,713 and 120,630 shares issued, respectively | 1,281,747 | 1,055,934 | |||||
Retained earnings | 302,326 | 322,854 | |||||
Accumulated other comprehensive loss | (72,362 | ) | (96,974 | ) | |||
Total shareholders’ equity | 1,511,711 | 1,281,814 | |||||
Total liabilities and shareholders’ equity | $ | 2,366,490 | $ | 2,246,941 |
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| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
| | (Unaudited) | | | | |
ASSETS |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 229,744 | | $ | 253,515 |
Restricted cash | |
| 72,934 | |
| 73,612 |
Accounts receivable, net of allowance for credit losses of $1,351 and $1,477, respectively | |
| 141,778 | |
| 144,137 |
Other current assets | |
| 59,274 | |
| 58,274 |
Total current assets | |
| 503,730 | |
| 529,538 |
Property and equipment | |
| 2,916,214 | |
| 2,938,154 |
Less accumulated depreciation | |
| (1,306,162) | |
| (1,280,509) |
Property and equipment, net | |
| 1,610,052 | |
| 1,657,645 |
Operating lease right-of-use assets | |
| 150,894 | |
| 104,190 |
Other assets, net | |
| 42,694 | |
| 34,655 |
Total assets | | $ | 2,307,370 | | $ | 2,326,028 |
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LIABILITIES AND SHAREHOLDERS' EQUITY | |
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Current liabilities: | |
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Accounts payable | | $ | 97,531 | | $ | 87,959 |
Accrued liabilities | |
| 74,873 | |
| 91,712 |
Current maturities of long-term debt | |
| 43,117 | |
| 42,873 |
Current operating lease liabilities | |
| 41,464 | |
| 55,739 |
Total current liabilities | |
| 256,985 | |
| 278,283 |
Long-term debt | |
| 258,496 | |
| 262,137 |
Operating lease liabilities | |
| 112,507 | |
| 50,198 |
Deferred tax liabilities | |
| 86,244 | |
| 86,966 |
Other non-current liabilities | |
| 392 | |
| 975 |
Total liabilities | |
| 714,624 | |
| 678,559 |
Commitments and contingencies | | | | | | |
Shareholders’ equity: | |
|
| |
|
|
Common stock, 0 par, 240,000 shares authorized, 151,637 and 151,124 shares issued, respectively | |
| 1,292,935 | |
| 1,292,479 |
Retained earnings | |
| 369,041 | |
| 411,072 |
Accumulated other comprehensive loss | |
| (69,230) | |
| (56,082) |
Total shareholders’ equity | |
| 1,592,746 | |
| 1,647,469 |
Total liabilities and shareholders’ equity | | $ | 2,307,370 | | $ | 2,326,028 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
(UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net revenues | $ | 163,260 | $ | 161,245 | |||
Cost of sales | 142,119 | 121,061 | |||||
Gross profit | 21,141 | 40,184 | |||||
Selling, general and administrative expenses | (16,374 | ) | (18,714 | ) | |||
Income from operations | 4,767 | 21,470 | |||||
Equity in losses of investment | (153 | ) | (122 | ) | |||
Net interest expense | (3,615 | ) | (6,843 | ) | |||
Gain on early extinguishment of long-term debt | — | 244 | |||||
Other income (expense), net | (551 | ) | 830 | ||||
Other income (expense) – oil and gas | 303 | (468 | ) | ||||
Income before income taxes | 751 | 15,111 | |||||
Income tax provision (benefit) | (1,539 | ) | 3,649 | ||||
Net income | $ | 2,290 | $ | 11,462 | |||
Earnings per share of common stock: | |||||||
Basic | $ | 0.02 | $ | 0.10 | |||
Diluted | $ | 0.02 | $ | 0.10 | |||
Weighted average common shares outstanding: | |||||||
Basic | 145,958 | 113,680 | |||||
Diluted | 145,958 | 113,680 |
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| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Net revenues | | $ | 150,125 | | $ | 163,415 |
Cost of sales | |
| 168,734 | |
| 148,791 |
Gross profit (loss) | |
| (18,609) | |
| 14,624 |
Selling, general and administrative expenses | |
| (14,368) | |
| (15,179) |
Loss from operations | |
| (32,977) | |
| (555) |
Net interest expense | |
| (5,174) | |
| (6,053) |
Other income (expense), net | |
| (3,881) | |
| 1,617 |
Royalty income and other | |
| 2,141 | |
| 2,057 |
Loss before income taxes | |
| (39,891) | |
| (2,934) |
Income tax provision | |
| 2,140 | |
| 116 |
Net loss | |
| (42,031) | |
| (3,050) |
Net loss attributable to redeemable noncontrolling interests | |
| — | |
| (172) |
Net loss attributable to common shareholders | | $ | (42,031) | | $ | (2,878) |
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Loss per share of common stock: | |
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Basic | | $ | (0.28) | | $ | (0.02) |
Diluted | | $ | (0.28) | | $ | (0.02) |
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Weighted average common shares outstanding: | |
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Basic | |
| 151,142 | |
| 149,935 |
Diluted | |
| 151,142 | |
| 149,935 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
(UNAUDITED)
(in thousands, except per share amounts)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net revenues | $ | 418,117 | $ | 359,551 | |||
Cost of sales | 379,434 | 330,639 | |||||
Gross profit | 38,683 | 28,912 | |||||
Loss on disposition of assets, net | (39 | ) | — | ||||
Selling, general and administrative expenses | (46,532 | ) | (47,493 | ) | |||
Loss from operations | (7,888 | ) | (18,581 | ) | |||
Equity in losses of investment | (457 | ) | (366 | ) | |||
Net interest expense | (15,480 | ) | (25,007 | ) | |||
Gain (loss) on early extinguishment of long-term debt | (397 | ) | 546 | ||||
Other income (expense), net | (619 | ) | 4,018 | ||||
Other income – oil and gas | 3,196 | 2,500 | |||||
Loss before income taxes | (21,645 | ) | (36,890 | ) | |||
Income tax provision (benefit) | (1,117 | ) | (9,858 | ) | |||
Net loss | $ | (20,528 | ) | $ | (27,032 | ) | |
Loss per share of common stock: | |||||||
Basic | $ | (0.14 | ) | $ | (0.25 | ) | |
Diluted | $ | (0.14 | ) | $ | (0.25 | ) | |
Weighted average common shares outstanding: | |||||||
Basic | 145,057 | 109,135 | |||||
Diluted | 145,057 | 109,135 |
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| | Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Net loss | | $ | (42,031) |
| $ | (3,050) |
Other comprehensive income (loss), net of tax: | |
|
|
| |
|
Foreign currency translation gain (loss) | |
| (13,148) |
| | 4,613 |
Other comprehensive income (loss), net of tax | |
| (13,148) |
| | 4,613 |
Comprehensive income (loss) | |
| (55,179) |
| | 1,563 |
Less comprehensive loss attributable to redeemable noncontrolling interests: | |
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|
| |
|
Net loss | |
| — |
| | (172) |
Foreign currency translation gain | |
| — |
| | 36 |
Comprehensive loss attributable to redeemable noncontrolling interests | |
| — |
| | (136) |
Comprehensive income (loss) attributable to common shareholders | | $ | (55,179) |
| $ | 1,699 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
(UNAUDITED)
(in thousands)
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net income | $ | 2,290 | $ | 11,462 | |||
Other comprehensive income, net of tax: | |||||||
Unrealized gain on hedges arising during the period | 2,297 | 4,418 | |||||
Reclassification adjustments for loss on hedges included in net income | 3,383 | 3,157 | |||||
Income taxes on unrealized gain on hedges | (1,992 | ) | (2,683 | ) | |||
Unrealized gain on hedges, net of tax | 3,688 | 4,892 | |||||
Foreign currency translation gain (loss) | 5,513 | (3,611 | ) | ||||
Other comprehensive income, net of tax | 9,201 | 1,281 | |||||
Comprehensive income | $ | 11,491 | $ | 12,743 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net loss | $ | (20,528 | ) | $ | (27,032 | ) | |
Other comprehensive income (loss), net of tax: | |||||||
Unrealized gain on hedges arising during the period | 4,141 | 5,450 | |||||
Reclassification adjustments for loss on hedges included in net loss | 10,822 | 9,651 | |||||
Income taxes on unrealized gain on hedges | (5,256 | ) | (5,236 | ) | |||
Unrealized gain on hedges, net of tax | 9,707 | 9,865 | |||||
Foreign currency translation gain (loss) arising during the period | 14,905 | (24,827 | ) | ||||
Reclassification adjustment for translation loss realized upon liquidation | — | 289 | |||||
Foreign currency translation gain (loss) | 14,905 | (24,538 | ) | ||||
Other comprehensive income (loss), net of tax | 24,612 | (14,673 | ) | ||||
Comprehensive income (loss) | $ | 4,084 | $ | (41,705 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | |
| |
| | | | | | | | | | Other | | Total | | Redeemable | |||
| | Common Stock | | Retained | | Comprehensive | | Shareholders’ | | Noncontrolling | |||||||
|
| Shares |
| Amount |
| Earnings |
| Loss |
| Equity |
| Interests | |||||
Balance, December 31, 2021 |
| 151,124 | | $ | 1,292,479 | | $ | 411,072 | | $ | (56,082) | | $ | 1,647,469 |
| $ | — |
Net loss |
| — | |
| — | |
| (42,031) | |
| — | |
| (42,031) |
| | — |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| (13,148) | |
| (13,148) |
| | — |
Activity in company stock plans, net and other |
| 513 | |
| (1,178) | |
| — | |
| — | |
| (1,178) |
| | — |
Share-based compensation |
| — | |
| 1,634 | |
| — | |
| — | |
| 1,634 |
| | — |
Balance, March 31, 2022 |
| 151,637 | | $ | 1,292,935 | | $ | 369,041 | | $ | (69,230) | | $ | 1,592,746 |
| $ | — |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | |
| |
| | | | | | | | | | Other | | Total | | Redeemable | |||
| | Common Stock | | Retained | | Comprehensive | | Shareholders’ | | Noncontrolling | |||||||
|
| Shares |
| Amount |
| Earnings |
| Loss |
| Equity |
| Interests | |||||
Balance, December 31, 2020 |
| 150,341 | | $ | 1,327,592 | | $ | 464,524 | | $ | (51,620) | | $ | 1,740,496 |
| $ | 3,855 |
Net loss |
| — | |
| — | |
| (2,878) | |
| — | |
| (2,878) |
| | (172) |
Cumulative-effect adjustments upon adoption of ASU No. 2020-06 |
| — | |
| (41,456) | |
| 6,682 | |
| — | |
| (34,774) |
| | — |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| 4,613 | |
| 4,613 |
| | 36 |
Accretion of redeemable noncontrolling interests |
| — | |
| — | |
| (241) | |
| — | |
| (241) |
| | 241 |
Activity in company stock plans, net and other |
| 374 | |
| (1,600) | |
| — | |
| — | |
| (1,600) |
| | — |
Share-based compensation |
| — | |
| 1,844 | |
| — | |
| — | |
| 1,844 |
| | — |
Balance, March 31, 2021 |
| 150,715 | | $ | 1,286,380 | | $ | 468,087 | | $ | (47,007) | | $ | 1,707,460 |
| $ | 3,960 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
(UNAUDITED)
(in thousands)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (20,528 | ) | $ | (27,032 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 82,670 | 84,846 | |||||
Amortization of debt discount | 3,487 | 4,655 | |||||
Amortization of debt issuance costs | 5,238 | 6,430 | |||||
Share-based compensation | 7,613 | 4,351 | |||||
Deferred income taxes | (3,019 | ) | (6,726 | ) | |||
Equity in losses of investment | 457 | 366 | |||||
Loss on disposition of assets, net | 39 | — | |||||
(Gain) loss on early extinguishment of long-term debt | 397 | (546 | ) | ||||
Unrealized gain and ineffectiveness on derivative contracts, net | (4,291 | ) | (9,282 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (21,709 | ) | (27,346 | ) | |||
Other current assets | (12,145 | ) | (10,853 | ) | |||
Income tax receivable | 2,742 | 20,576 | |||||
Accounts payable and accrued liabilities | 30,675 | (1,794 | ) | ||||
Other non-current, net | (40,303 | ) | (22,201 | ) | |||
Net cash provided by operating activities | 31,323 | 15,444 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (131,428 | ) | (79,353 | ) | |||
Distribution from equity investment | — | 1,200 | |||||
Proceeds from sale of equity investment | — | 25,000 | |||||
Proceeds from sale of assets | 10,000 | 10,887 | |||||
Net cash used in investing activities | (121,428 | ) | (42,266 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from term loan | 100,000 | — | |||||
Repayment of term loan | (193,508 | ) | (30,500 | ) | |||
Repayment of Nordea Q5000 Loan | (26,786 | ) | (26,786 | ) | |||
Repayment of MARAD Debt | (6,222 | ) | (5,926 | ) | |||
Repurchase of Convertible Senior Notes due 2032 | — | (13,400 | ) | ||||
Debt issuance costs | (3,694 | ) | (1,230 | ) | |||
Net proceeds from issuance of common stock | 219,504 | 94,538 | |||||
Payments related to tax withholding for share-based compensation | (1,306 | ) | (187 | ) | |||
Proceeds from issuance of ESPP shares | 432 | 708 | |||||
Net cash provided by financing activities | 88,420 | 17,217 | |||||
Effect of exchange rate changes on cash and cash equivalents | 1,927 | (2,481 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 242 | (12,086 | ) | ||||
Cash and cash equivalents: | |||||||
Balance, beginning of year | 356,647 | 494,192 | |||||
Balance, end of period | $ | 356,889 | $ | 482,106 |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: |
| |
| | |
|
Net loss | | $ | (42,031) | | $ | (3,050) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |
| | |
|
|
Depreciation and amortization | |
| 33,488 | |
| 34,566 |
Amortization of debt issuance costs | |
| 590 | |
| 810 |
Share-based compensation | |
| 1,672 | |
| 1,904 |
Deferred income taxes | |
| (722) | |
| (892) |
Unrealized foreign currency (gain) loss | |
| 2,603 | |
| (951) |
Changes in operating assets and liabilities: | |
|
| |
|
|
Accounts receivable, net | |
| 906 | |
| (463) |
Income tax receivable | | | 1,230 | | | 6,256 |
Other current assets | | | (534) | | | 9,361 |
Accounts payable and accrued liabilities | |
| (4,646) | |
| (4,881) |
Other, net | |
| (9,969) | |
| (2,791) |
Net cash provided by (used in) operating activities | |
| (17,413) | |
| 39,869 |
| | | | | | |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (623) | |
| (1,329) |
Net cash used in investing activities | |
| (623) | |
| (1,329) |
| | | | | | |
Cash flows from financing activities: | |
|
| |
|
|
Repayment of Term Loan | |
| — | |
| (875) |
Repayment of Nordea Q5000 Loan | |
| — | |
| (53,572) |
Repayment of MARAD Debt | |
| (3,920) | |
| (3,734) |
Debt issuance costs | |
| (136) | |
| (43) |
Payments related to tax withholding for share-based compensation | |
| (1,525) | |
| (1,878) |
Proceeds from issuance of ESPP shares | |
| 173 | |
| 217 |
Net cash used in financing activities | |
| (5,408) | |
| (59,885) |
| | | | | | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | |
| (1,005) | |
| 406 |
Net decrease in cash and cash equivalents and restricted cash | |
| (24,449) | |
| (20,939) |
Cash and cash equivalents and restricted cash: | |
|
| |
|
|
Balance, beginning of year | |
| 327,127 | |
| 291,320 |
Balance, end of period | | $ | 302,678 | | $ | 270,381 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Note 1 — Basis of Presentation and New Accounting Standards
The accompanying condensed consolidated financial statements include the accounts of Helix Energy Solutions Group, Inc. and its subsidiaries (collectively, “Helix” or the “Company”). Unless the context indicates otherwise, the terms “we,” “us” and “our” in this report refer collectively to Helix and its subsidiaries. All material intercompany accounts and transactions have been eliminated. These unaudited condensed consolidated financial statements have been prepared pursuant to instructions for the Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission (the “SEC”), and do not include all information and footnotes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP in U.S. GAAPdollars and are consistent in all material respects with those applied in our 20162021 Annual Report on Form 10-K (“2016(our “2021 Form 10-K”). The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements and the related disclosures. Actual results may differ from our estimates. We have made all adjustments, (which werewhich, unless otherwise disclosed, are of normal recurring adjustments)nature, that we believe are necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income (loss), statements of shareholders’ equity and statements of cash flows, as applicable. The operating results for the three- and nine-month periodsthree-month period ended September 30, 2017March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022. Our balance sheet as of December 31, 20162021 included herein has been derived from the audited balance sheet as of December 31, 20162021 included in our 20162021 Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual audited consolidated financial statements and notes thereto included in our 20162021 Form 10-K.
Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current presentation format.
We do not expect the new revenue standardany recently issued accounting standards to have a material impact on our consolidated financial statements upon adoption. We continue working on expanded disclosure requirements and documentationposition, results of new policies, procedures and controls. We currently intend on adopting this guidance using the modified retrospective method.
Note 2 — Company Overview
We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. We seek to provideTraditionally, our services and methodologies thathave covered the lifecycle of an offshore oil or gas field. In recent years, we believe are critical to maximizing production economics.have seen an increasing demand for our services from the offshore renewable energy market. We provide services primarily in deepwater in the U.S. Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions,regions. Our North Sea operations are subject to seasonal changes in demand, which generally peaks in the summer months and have expanded our operations into Brazil withdeclines in the commencement of operations of the
Our Well Intervention segment includesprovides services enabling our vesselscustomers to safely access offshore wells for the purpose of performing production enhancement or decommissioning operations, thereby avoiding drilling new wells by extending the useful lives of existing wells and equipment used to performpreserving the environment by preventing uncontrolled releases of oil and gas. Our well intervention services primarily invessels include the U.S. Gulf of Mexico, North SeaQ4000, the Q5000, the Q7000, the Seawell, the Well Enhancer, and Brazil.2 chartered monohull vessels, the Siem Helix 1 and the Siem Helix 2. Our Well Intervention segment alsowell intervention equipment includes intervention systems such as intervention riser systems (“IRSs”), some of which we rent out on a stand-alone basis, and subsea intervention lubricators (“SILs”). and the Riserless Open-water Abandonment Module, some of which we provide on a stand-alone basis.
Our Robotics segment provides offshore construction, trenching, seabed clearance, and inspection, repair and maintenance (“IRM”) services to both the oil and gas and the renewable energy markets globally, thereby assisting the delivery of affordable and reliable energy and supporting the responsible transition away from a carbon-based economy. Additionally, our Robotics services are used in and complement our well intervention vessels include the
8
Our Production Facilities segment includes the Helix ProducerI (the “HP I”I”), a ship-shaped dynamic positioningdynamically positioned floating production vessel, and the Helix Fast Response System (the “HFRS”), which provides certain operators access to and our Q4000ownership of oil and HP I vessels in the eventgas properties. All of a well control incidentour current Production Facilities activities are located in the Gulf of Mexico. The HP I has been under contract since February 2013 to process production from the Phoenix field for the field operator. We currently operate under a fixed fee agreement for the HP I for service to the Phoenix field until at least June 1, 2023. We are party to an agreement providing various operators with access to the HFRS for well control purposes, which agreement was amended effective February 1, 2017 to reduce the retainer fee and to extend the term of the agreement by one year to March 31, 2019. The Production Facilities segment also includes our ownership interest in Independence Hub, LLC (“Independence Hub”) and previously included our former ownership interest in Deepwater Gateway, L.L.C. (“Deepwater Gateway”) that we sold in February 2016 (Note 5).
Other current assets consist of the following (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Note receivable (1) | $ | — | $ | 10,000 | |||
Prepaid insurance | 2,432 | 4,426 | |||||
Other prepaids | 10,021 | 9,547 | |||||
Deferred costs (2) | 20,704 | 7,971 | |||||
Spare parts inventory | 1,598 | 2,548 | |||||
Income tax receivable | — | 880 | |||||
Value added tax receivable | 2,169 | 1,345 | |||||
Other | 1,248 | 671 | |||||
Total other current assets | $ | 38,172 | $ | 37,388 |
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Contract assets (Note 7) | | $ | 166 |
| $ | 639 |
Prepaids | |
| 16,806 |
| | 18,228 |
Deferred costs (Note 7) | |
| 5,993 |
| | 2,967 |
Income tax receivable | |
| 68 |
| | 1,116 |
Other receivable (Note 11) | |
| 29,522 |
| | 28,805 |
Other | |
| 6,719 |
| | 6,519 |
Total other current assets | | $ | 59,274 |
| $ | 58,274 |
Other assets, net consist of the following (in thousands):
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Deferred recertification and dry dock costs, net | | $ | 24,163 |
| $ | 16,291 |
Deferred costs (Note 7) | |
| 222 |
| | 381 |
Prepaid charter (1) | |
| 12,544 |
| | 12,544 |
Intangible assets with finite lives, net | |
| 3,339 |
| | 3,472 |
Other | |
| 2,426 |
| | 1,967 |
Total other assets, net | | $ | 42,694 |
| $ | 34,655 |
September 30, 2017 | December 31, 2016 | ||||||
Note receivable, net (1) | $ | 3,129 | $ | 2,827 | |||
Prepaids | 8,112 | 6,418 | |||||
Deferred dry dock costs, net | 14,260 | 14,766 | |||||
Deferred costs (2) | 57,934 | 30,738 | |||||
Deferred financing costs, net (3) | 2,814 | 3,745 | |||||
Charter fee deposit (4) | 12,544 | 12,544 | |||||
Other | 2,181 | 1,511 | |||||
Total other assets, net | $ | 100,974 | $ | 72,549 |
(1) |
Accrued liabilities consist of the following (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
�� | |||||||
Accrued payroll and related benefits | $ | 29,682 | $ | 20,705 | |||
Deferred revenue | 8,664 | 8,911 | |||||
Accrued interest | 2,997 | 3,758 | |||||
Derivative liability (Note 14) | 9,927 | 18,730 | |||||
Taxes payable excluding income tax payable | 1,209 | 1,214 | |||||
Other | 8,282 | 5,296 | |||||
Total accrued liabilities | $ | 60,761 | $ | 58,614 |
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Accrued payroll and related benefits | | $ | 19,661 |
| $ | 28,657 |
Accrued interest | | | 2,761 | | | 6,746 |
Deferred revenue (Note 7) | |
| 5,559 |
| | 8,272 |
Asset retirement obligations (Note 11) | |
| 30,399 |
| | 29,658 |
Other | |
| 16,493 |
| | 18,379 |
Total accrued liabilities | | $ | 74,873 |
| $ | 91,712 |
Other non-current liabilities consist of the following (in thousands):
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Deferred revenue (Note 7) | | $ | 191 |
| $ | 476 |
Other | |
| 201 |
| | 499 |
Total other non-current liabilities | | $ | 392 |
| $ | 975 |
9
September 30, 2017 | December 31, 2016 | ||||||
Investee losses in excess of investment (Note 5) | $ | 8,845 | $ | 10,238 | |||
Deferred gain on sale of property (1) | 5,910 | 5,761 | |||||
Deferred revenue | 8,827 | 8,598 | |||||
Derivative liability (Note 14) | 9,663 | 20,191 | |||||
Other | 9,491 | 8,197 | |||||
Total other non-current liabilities | $ | 42,736 | $ | 52,985 |
Note 4 — StatementLeases
We charter vessels and lease facilities and equipment under non-cancelable contracts that expire on various dates through 2031. We also sublease some of Cash Flow Information
The following table provides supplemental cash flow informationdetails the components of our lease cost (in thousands):
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Interest paid, net of interest capitalized | $ | 9,002 | $ | 17,970 | |||
Income taxes paid | $ | 3,967 | $ | 4,674 |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Operating lease cost | | $ | 14,462 |
| $ | 16,216 |
Variable lease cost | |
| 4,922 |
| | 3,484 |
Short-term lease cost | |
| 5,438 |
| | 1,732 |
Sublease income | |
| (249) |
| | (349) |
Net lease cost | | $ | 24,573 |
| $ | 21,083 |
Maturities of our operating lease liabilities as of September 30, 2017 and $10.1 millionMarch 31, 2022 are as follows (in thousands):
| | | | | | | | | |
|
| | |
| Facilities and |
| | | |
|
| Vessels |
| Equipment |
| Total | |||
Less than one year | | $ | 42,951 | | $ | 5,441 |
| $ | 48,392 |
One to two years | |
| 37,056 | |
| 4,752 |
| | 41,808 |
Two to three years | |
| 38,279 | |
| 4,297 |
| | 42,576 |
Three to four years | |
| 17,155 | |
| 1,712 |
| | 18,867 |
Four to five years | |
| 21,124 | |
| 1,044 |
| | 22,168 |
Over five years | |
| — | |
| 3,812 |
| | 3,812 |
Total lease payments | | $ | 156,565 | | $ | 21,058 |
| $ | 177,623 |
Less: imputed interest | |
| (20,297) | |
| (3,355) |
| | (23,652) |
Total operating lease liabilities | | $ | 136,268 | | $ | 17,703 |
| $ | 153,971 |
| | | | | | | | | |
Current operating lease liabilities | | $ | 36,843 | | $ | 4,621 |
| $ | 41,464 |
Non-current operating lease liabilities | |
| 99,425 | |
| 13,082 |
| | 112,507 |
Total operating lease liabilities | | $ | 136,268 | | $ | 17,703 |
| $ | 153,971 |
Maturities of our operating lease liabilities as of December 31, 2016.2021 are as follows (in thousands):
| | | | | | | | | |
|
| | |
| Facilities and |
| | | |
|
| Vessels |
| Equipment |
| Total | |||
Less than one year | | $ | 55,573 | | $ | 5,601 |
| $ | 61,174 |
One to two years | |
| 34,580 | |
| 4,844 |
| | 39,424 |
Two to three years | |
| 2,470 | |
| 4,514 |
| | 6,984 |
Three to four years | |
| — | |
| 2,462 |
| | 2,462 |
Four to five years | |
| — | |
| 1,074 |
| | 1,074 |
Over five years | |
| — | |
| 4,193 |
| | 4,193 |
Total lease payments | | $ | 92,623 | | $ | 22,688 |
| $ | 115,311 |
Less: imputed interest | |
| (5,633) | |
| (3,741) |
| | (9,374) |
Total operating lease liabilities | | $ | 86,990 | | $ | 18,947 |
| $ | 105,937 |
| | | | | | | | | |
Current operating lease liabilities | | $ | 51,035 | | $ | 4,704 |
| $ | 55,739 |
Non-current operating lease liabilities | |
| 35,955 | |
| 14,243 |
| | 50,198 |
Total operating lease liabilities | | $ | 86,990 | | $ | 18,947 |
| $ | 105,937 |
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The following table presents the weighted average remaining lease term and discount rate:
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 | | 2021 | ||
Weighted average remaining lease term |
| 4.0 | years | | 2.4 | years |
Weighted average discount rate |
| 6.99 | % | | 7.57 | % |
The following table presents other information related to our operating leases (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash paid for operating lease liabilities | | $ | 16,010 |
| $ | 16,502 |
Right-of-use assets obtained in exchange for new operating lease obligations (1) | |
| 60,699 |
| | 113 |
(1) | Amount in 2022 primarily relates to the charter extensions for the Siem Helix1 and the Siem Helix2 (Note 12). |
Note 5 — Equity Investments
Scheduled maturities of our long-term debt outstanding as of September 30, 2017March 31, 2022 are as follows (in thousands):
| | | | | | | | | | | | | | | |
| | 2022 | | 2023 | | 2026 | | MARAD | | |
| ||||
|
| Notes |
| Notes |
| Notes |
| Debt |
| Total | |||||
Less than one year | | $ | 35,000 | | $ | — | | $ | — | | $ | 8,133 |
| $ | 43,133 |
One to two years | |
| — | |
| 30,000 | |
| — | |
| 8,539 |
| | 38,539 |
Two to three years | |
| — | |
| — | |
| — | |
| 8,965 |
| | 8,965 |
Three to four years | |
| — | |
| — | |
| 200,000 | |
| 9,412 |
| | 209,412 |
Four to five years | |
| — | |
| — | |
| — | |
| 9,881 |
| | 9,881 |
Gross debt | |
| 35,000 | |
| 30,000 | |
| 200,000 | |
| 44,930 |
| | 309,930 |
Unamortized debt issuance costs (1) | |
| (16) | |
| (270) | |
| (5,592) | |
| (2,439) |
| | (8,317) |
Total debt | |
| 34,984 | |
| 29,730 | |
| 194,408 | |
| 42,491 |
| | 301,613 |
Less current maturities | |
| (34,984) | |
| — | |
| — | |
| (8,133) |
| | (43,117) |
Long-term debt | | $ | — | | $ | 29,730 | | $ | 194,408 | | $ | 34,358 |
| $ | 258,496 |
Term Loan (1) | 2022 Notes | 2032 Notes (2) | MARAD Debt | Nordea Q5000 Loan | Total | ||||||||||||||||||
Less than one year | $ | 6,250 | $ | — | $ | 60,115 | $ | 6,532 | $ | 35,714 | $ | 108,611 | |||||||||||
One to two years | 11,250 | — | — | 6,858 | 35,714 | 53,822 | |||||||||||||||||
Two to three years | 81,250 | — | — | 7,200 | 98,215 | 186,665 | |||||||||||||||||
Three to four years | — | — | — | 7,560 | — | 7,560 | |||||||||||||||||
Four to five years | — | 125,000 | — | 7,937 | — | 132,937 | |||||||||||||||||
Over five years | — | — | — | 40,913 | — | 40,913 | |||||||||||||||||
Total debt | 98,750 | 125,000 | 60,115 | 77,000 | 169,643 | 530,508 | |||||||||||||||||
Current maturities | (6,250 | ) | — | (60,115 | ) | (6,532 | ) | (35,714 | ) | (108,611 | ) | ||||||||||||
Long-term debt, less current maturities | 92,500 | 125,000 | — | 70,468 | 133,929 | 421,897 | |||||||||||||||||
Unamortized debt discount (3) | — | (14,555 | ) | (1,052 | ) | — | — | (15,607 | ) | ||||||||||||||
Unamortized debt issuance costs (4) | (1,815 | ) | (2,427 | ) | (92 | ) | (4,635 | ) | (1,976 | ) | (10,945 | ) | |||||||||||
Long-term debt | $ | 90,685 | $ | 108,018 | $ | (1,144 | ) | $ | 65,833 | $ | 131,953 | $ | 395,345 |
(1) |
Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement. |
Below is a summary of certain components of our indebtedness:
Credit Agreement
On JuneSeptember 30, 2017,2021, we entered into an Amended and Restated Credit Agreementasset-based credit agreement (the “Credit Agreement”“ABL Facility”) with a group of lenders led by Bank of America, N.A. (“Bank of America”)., Wells Fargo Bank, N.A. and Zions Bancorporation. The amended and restated credit facility is comprised of a $100ABL Facility provides for an $80 million term loan (the “Term Loan”) and aasset-based revolving credit facility, (the “Revolving Credit Facility”)which matures on September 30, 2026, with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $50 million. The ABL Facility also permits us to request an increase of the facility by up to $150$70 million, (the “Revolving Loans”).subject to certain conditions.
Commitments under the ABL Facility are comprised of separate U.S. and U.K. revolving credit facility commitments of $45 million and $35 million, respectively. The Revolving CreditABL Facility permitsprovides funding based on a borrowing base calculation that includes eligible U.S. and U.K. customer accounts receivable and cash, and provides for a $10 million sub-limit for the Company to obtainissuance of letters of credit up to a sublimitcredit. As of $25 million. Pursuant to the Credit Agreement, subject to existing lender participation and/or the participation of new lenders, and subject to standard conditions precedent, we may request aggregate commitments up to $100 million with respect to an increase in the Revolving Credit Facility, additional term loans, or a combination thereof. The $100 million proceeds from the Term Loan as well as cash on hand were used to repay the approximately $180 million term loan then outstanding under the credit facility prior to its June 2017 amendment and restatement. At September 30, 2017,March 31, 2022, we had no0 borrowings under the Revolving CreditABL Facility, and our available borrowing capacity under that facility, based on the applicable leverage ratio covenant,borrowing base, totaled $69.9$41.2 million, net of $4.0$2.3 million of letters of credit issued under that facility.
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We and certain of our U.S. and U.K. subsidiaries are the Revolving Loans (together,initial borrowers under the “Loans”ABL Facility, whose obligations under the ABL Facility are guaranteed by those borrowers and certain other U.S. and U.K. subsidiaries, excluding Cal Dive I – Title XI, Inc. (“CDI Title XI”), at our election,Helix Offshore Services Limited and certain other enumerated subsidiaries. Other subsidiaries may be added as guarantors of the facility in the future. The ABL Facility is secured by all accounts receivable and designated deposit accounts of the U.S. borrowers and guarantors, and by substantially all of the assets of the U.K. borrowers and guarantors.
U.S. borrowings under the ABL Facility initially bear interest either in relation to Bank of America’s base rate or to a LIBOR rate. The Term Loan or portions thereof bearing interest at the base rate will bear interest at a per annum rate equal to the base rate plus 3.25%. The Term Loan or portions thereof bearing interest at a LIBOR rate will bear interest per annum at the LIBOR rate selected by us plus a margin of 4.25%. The Revolving Loans1.50% to 2.00% or portions thereof bearing interest at the base rate will bear interest at a per annum rate equal to the base rate plus a margin ranging from 1.75%of 0.50% to 3.25%1.00%. The Revolving Loans or portions thereof bearingU.K. borrowings under the ABL Facility denominated in U.S. dollars initially bear interest at a the LIBORrate will and U.K. borrowings denominated in the British pound initially bear interest per annum at the LIBORSONIA daily rate, selected by useach plus a margin ranging from 2.75%of 1.50% to 4.25%2.00%. A letter of credit fee is payable by us equal to its applicable margin for LIBOR rate Loans times the daily amount available to be drawn under the applicable letter of credit. Margins on the Revolving Loans will vary in relation to the consolidated total leverage ratio provided for in the Credit Agreement. We also pay a fixed commitment fee of 0.375% to 0.50% per annum on the unused portion of our Revolving Credit Facility.
The Credit Agreement and the other documents entered into in connection with the Credit Agreement include terms and conditions, including covenants, which we consider customary for this type of transaction. The covenants includeABL Facility includes certain restrictionslimitations on our and our subsidiaries’ ability to incur additional indebtedness, grant liens incur indebtedness, make investments, merge or consolidate, sell or transferon assets, pay dividends and make capital expenditures. In addition, the Credit Agreement obligatesdistributions on equity interests, dispose of assets, make investments, repay certain indebtedness, engage in mergers, and other matters, in each case subject to certain exceptions. The ABL Facility contains customary default provisions which, if triggered, could result in acceleration of all amounts then outstanding. The ABL Facility requires us to meet minimum financial ratio requirements of EBITDA to interest charges (“Consolidated Interest Coverage Ratio”)satisfy and funded debt to EBITDA (“Consolidated Total Leverage Ratio”), and provided that if there are no Loans outstanding, the funded debt ratio requirement permits us to offsetmaintain a certain amount of cash against the funded debt used in the calculation (“Consolidated Net Leverage Ratio”). After the initial Term Loan is repaid in full, if there are any Loans outstanding including unreimbursed draws under letters of credit issued under the Revolving Credit Facility, we are also required to ensure that thefixed charge coverage ratio of our total secured indebtednessnot less than 1.0 to EBITDA (“Consolidated Secured Leverage Ratio”) does not exceed1.0 if availability is less than the maximum permitted ratio.greater of 10% of the borrowing base or $8 million. The Credit AgreementABL Facility also obligatesrequires us to maintain certain cash levels depending ona pro forma minimum excess availability of $16 million for the type91 days prior to the maturity of indebtedness outstanding. These financial covenant requirements are detailed as follows:
2022 Notes were $121.7 million after deducting the underwriter’s discounts and commissions and offering expenses. We used net proceeds from the issuance of the 2022 Notes as well as cash on hand to repurchase and retire $125 million in principal of the 2032 Notes (see “Convertible Senior Notes Due 2032” below) in separate, privately negotiated transactions.
The 2022 Notes bear interest at a coupon interest rate of 4.25% per annum and are payable semi-annually in arrears on November 1 and May 1 of each year beginning on May 1, 2017.until maturity. The 2022 Notes mature on May 1, 2022 unless earlier converted, redeemed or repurchased. During certain periods and subject to certain conditions (as described in the Indenture governing the 2022 Notes) therepurchased by us. The 2022 Notes are convertible by thetheir holders into shares of our common stockat any time beginning February 1, 2022 at an initial conversion rate of 71.9748 shares of our common stock per $1,000 principal amount, (whichwhich currently represents 2,519,118 potentially convertible shares at an initial conversion price of approximately $13.89 per share of common stock), subjectstock. On March 28, 2022, we elected to adjustment in certain circumstances as set forth in the Indenture governingsatisfy our conversion obligation by delivering cash.
The effective interest rate for the 2022 Notes. WeNotes is 4.8%. For each of the three-month periods ended March 31, 2022 and 2021, total interest expense related to the 2022 Notes was $0.4 million primarily from coupon interest expense.
2023 Notes
The 2023 Notes bear interest at a coupon interest rate of 4.125% per annum payable semi-annually in arrears on March 15 and September 15 of each year until maturity. The 2023 Notes mature on September 15, 2023 unless earlier converted, redeemed or repurchased by us. The 2023 Notes are convertible by their holders at any time beginning March 15, 2023 at an initial conversion rate of 105.6133 shares of our common stock per $1,000 principal amount, which currently represents 3,168,399 potentially convertible shares at an initial conversion price of approximately $9.47 per share of common stock. Upon conversion, we have the right to satisfy our conversion obligation by delivering cash, shares of our common stock or any combination thereof.
12
Prior to March 15, 2023, holders of the 2023 Notes may convert their notes if the closing price of our common stock exceeds 130% of the conversion price for at least 20 days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter (share price condition) or if the trading price of the 2023 Notes is equal to or less than 97% of the conversion value of the notes during the 5 consecutive business days immediately after any 10 consecutive trading day period (trading price condition). Holders of the 2023 Notes may also convert their notes if we make certain distributions on shares of our common stock or engage in certain corporate transactions, in which case the holders may be entitled to an increase in the conversion rate, depending on the price of our common shares and the intentiontime remaining to settle any such future conversions in cash.
Prior to November 1, 2019,March 15, 2021, the 20222023 Notes arewere not redeemable. On or after November 1, 2019,March 15, 2021, we may redeem all or any portion of the 20222023 Notes if the price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period preceding our option, subject to certain conditions, at a redemption pricenotice. Any redemption would be payable in cash equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest and a “make-whole premium” with a value equal tocalculated as the present value of theall remaining scheduled interest payments of the 2022 Notes to be redeemed through May 1, 2022.payments. Holders of the 20222023 Notes may convert any of their notes if we call the notes for redemption. Holders of the 2023 Notes may also require us to repurchase the notes following a “fundamental change,” aswhich includes a change of control or a termination of trading of our common stock (as defined in the 2022 Notes documentation.
The indenture governing the 2023 Notes contains customary terms and covenants, including that upon certain events of default, occurring and continuing, either the trustee under the Indenture or the holders of not less than 25% in aggregate principal amount then outstanding under the 2022 Notes may declare the entire principal amount of alland any accrued interest on the notes and the interest accrued on such notes, if any, tomay be declared immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a principalsignificant subsidiary, the principal amount of the 20222023 Notes together with any accrued and unpaid interest thereon will automatically be and become immediately due and payable.
The effective interest rate for the 20222023 Notes is 7.3% after considering the effect4.8%. For each of the accretion of the related debt discount that represented the equity component of thethree-month periods ended March 31, 2022 Notes at their inception. We recorded $11.0 million, net of tax,and 2021, total interest expense related to the carrying amount of the equity component of the 2022 Notes. The remaining unamortized amount of the debt discount of the 20222023 Notes was $14.6$0.4 million, at September 30, 2017with coupon interest expense of $0.3 million and $16.5 million at December 31, 2016.
2026 Notes Due 2032
The 20322026 Notes bear interest at a coupon interest rate of 3.25%6.75% per annum and are payable semi-annually in arrears on MarchFebruary 15 and SeptemberAugust 15 of each year, beginning on SeptemberFebruary 15, 2012.2021 until maturity. The 20322026 Notes mature on MarchFebruary 15, 20322026 unless earlier converted, redeemed or repurchased.repurchased by us. The 20322026 Notes are convertible in certain circumstances and during certain periodsby their holders at any time beginning November 17, 2025 at an initial conversion rate of 39.9752143.3795 shares of our common stock per $1,000 principal amount, (whichwhich currently represents 28,675,900 potentially convertible shares at an initial conversion price of approximately $25.02$6.97 per share of common stock), subject to adjustment in certain circumstances as set forth in the Indenture governing the 2032 Notes. Westock. Upon conversion, we have the right to satisfy our conversion obligation by delivering cash, shares of our common stock or any combination thereof.
Prior to November 17, 2025, holders of the 2026 Notes may convert their notes if the closing price of our common stock exceeds 130% of the conversion price for at least 20 days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter (share price condition) or if the trading price of the 2026 Notes is equal to or less than 97% of the conversion value of the notes during the 5 consecutive business days immediately after any 10 consecutive trading day period (trading price condition). Holders of the 2026 Notes may also convert their notes if we make certain distributions on shares of our common stock or engage in certain corporate transactions, in which case the holders may be entitled to an increase in the conversion rate, depending on the price of our common shares and the intentiontime remaining to settle any such future conversions in cash.
Prior to March 20, 2018,August 15, 2023, the 20322026 Notes are not redeemable. On or after March 20, 2018,August 15, 2023, we at our option, may redeem someall or allany portion of the 20322026 Notes in cash, at any time uponif the price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 days’ notice, at a priceconsecutive trading day period preceding our redemption notice. Any redemption would be payable in cash equal to 100% of the principal amount plus accrued and unpaid interest (including contingentand a “make-whole premium” calculated as the present value of all remaining scheduled interest if any) up to but excluding the redemption date. In addition, the holderspayments. Holders of the 20322026 Notes may convert any of their notes if we call the notes for redemption. Holders of the 2026 Notes may also require us to purchaserepurchase the notes following a “fundamental change,” which includes a change of control or a termination of trading of our common stock (as defined in cash somethe indenture governing the 2026 Notes).
13
The indenture governing the 2026 Notes contains customary terms and covenants, including that upon certain events of default, the entire principal amount of and any accrued interest on the notes may be declared immediately due and payable. In the case of certain events of bankruptcy, insolvency or all of their 2032 Notes atreorganization relating to us or a repurchase price equal to 100% ofsignificant subsidiary, the principal amount of the 20322026 Notes plustogether with any accrued interest will become immediately due and unpaid interest (including contingent interest, if any) up to but excluding the applicable repurchase date, on March 15, 2018, March 15, 2022 and March 15, 2027, or, subject to specified exceptions, at any time prior to the 2032 Notes’ maturity following a Fundamental Change (either a Change of Control or a Termination of Trading, as those terms are defined in the Indenture governing the 2032 Notes). We elected to repurchase $7.3 million, $7.6 million and $125 million, respectively, in aggregate principal amount of the 2032 Notes in June, July and November of 2016, respectively. For the three- and nine-month periods ended September 30, 2016, we recognized gains related to the repurchase of the 2032 Notes of $0.2 million and $0.5 million, respectively, which are presented as “Gain on early extinguishment of long-term debt” in the accompanying consolidated statements of operations.
The effective interest rate for the 20322026 Notes is 6.9% after considering the effect7.6%. For each of the accretion of the related debt discount that represented the equity component of the 2032 Notes at their inception. We recorded $22.5 million, net of tax,three-month periods ended March 31, 2022 and 2021, total interest expense related to the carrying amount2026 Notes was $3.7 million, with coupon interest expense of $3.4 million and the amortization of debt issuance costs of $0.3 million.
2026 Capped Calls
In connection with the 2026 Notes offering, we entered into capped call transactions (the “2026 Capped Calls”) with three separate option counterparties. The 2026 Capped Calls are for an aggregate of 28,675,900 shares of our common stock, which corresponds to the shares into which the 2026 Notes are initially convertible. The capped call shares are subject to certain anti-dilution adjustments. Each capped call option has an initial strike price of approximately $6.97 per share, which corresponds to the initial conversion price of the equity component2026 Notes, and an initial cap price of approximately $8.42 per share. The strike and cap prices are subject to certain adjustments. The 2026 Capped Calls are intended to offset some or all of the 2032 Notes. The remaining unamortized amountpotential dilution to Helix common shares caused by any conversion of the debt discount2026 Notes up to the cap price. The 2026 Capped Calls can be settled in either net shares or cash at our option in components commencing December 15, 2025 and ending February 12, 2026, which could be extended under certain circumstances.
The 2026 Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting Helix, including a merger, tender offer, nationalization, insolvency or delisting. In addition, certain events may result in a termination of the 2032 Notes was $1.12026 Capped Calls, including changes in law, insolvency filings and hedging disruptions. The 2026 Capped Calls are recorded at their aggregate cost of $10.6 million at September 30, 2017 and $2.6 million at December 31, 2016.
MARAD Debt
In 2005, Helix’s subsidiary CDI – Title XI issued its U.S. government guaranteedGovernment Guaranteed Ship Financing Bonds, Q4000 Series, to refinance the construction financing originally granted in 2002 of the Q4000 vessel (the “MARAD Debt”),. The MARAD Debt is guaranteed by the U.S. government pursuant to Title XI of the Merchant Marine Act of 1936, administered by the Maritime Administration was used(“MARAD”). The obligation of CDI Title XI to financereimburse MARAD in the construction ofevent CDI Title XI fails to repay the
Other
We previously had a credit agreement (the “Nordea Credit Agreement”) with a syndicated bank lending group for a term loan (the “Nordea Q5000 Loan”) in an amountto finance the construction of up to $250 million. The Nordea Q5000 Loan was funded in the amount of $250 million in April 2015 at the time the
We previously had another credit agreement (and the amendments made thereafter, collectively the “Credit Agreement”) with a group of lenders led by Bank of America. The Credit Agreement was comprised of a pledgeterm loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”) with a maximum availability of $175 million and had a maturity date of December 31, 2021. Concurrent with our entering into the ABL Facility, the Credit Agreement was terminated. The $28 million remaining balance of the sharesTerm Loan was repaid in full and the letters of Q5000 Holdings. This indebtedness is non-recourse to Helix.
14
In accordance with our Credit Agreement,the ABL Facility, the 2022 Notes, the 20322023 Notes, the MARAD Debt agreements2026 Notes and the Nordea Credit Agreement,MARAD Debt, we are required to comply with certain covenants, including certain financial ratios such as a consolidated interestspringing fixed charge coverage ratio and various leverage ratios, as well asminimum liquidity with respect to the ABL Facility and the maintenance of minimum cash balance, net worth, working capital and debt-to-equity requirements.requirements with respect to the MARAD Debt. As of September 30, 2017,March 31, 2022, we were in compliance with these covenants.
The following table details the components of our net interest expense (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest expense | $ | 8,336 | $ | 10,745 | $ | 30,183 | $ | 34,224 | |||||||
Interest income | (792 | ) | (833 | ) | (2,056 | ) | (1,713 | ) | |||||||
Capitalized interest | (3,929 | ) | (3,069 | ) | (12,647 | ) | (7,504 | ) | |||||||
Net interest expense | $ | 3,615 | $ | 6,843 | $ | 15,480 | $ | 25,007 |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Interest expense | | $ | 5,307 |
| $ | 6,112 |
Interest income | |
| (133) |
| | (59) |
Net interest expense | | $ | 5,174 |
| $ | 6,053 |
Note 76 — Income Taxes
We operate in multiple jurisdictions with complex tax laws subject to interpretation and judgment. We believe that our recorded deferred tax assets and liabilities are reasonable. However, taxapplication of such laws and regulationsthe tax impact thereof are subject to interpretationreasonable and fairly presented in our condensed consolidated financial statements.
For the outcomesthree-month periods ended March 31, 2022 and 2021, we recognized income tax expense of tax disputes are inherently uncertain,$2.1 million and therefore our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.
Note 7 — Revenue from Contracts with Customers
Disaggregation of 35%Revenue
Our revenues are primarily derived from short-term and long-term service contracts with customers. Our service contracts generally contain either provisions for specific time, material and equipment charges that are billed in accordance with the terms of such contracts (dayrate contracts) or lump sum payment provisions (lump sum contracts). We record revenues net of taxes collected from customers and remitted to governmental authorities. Contracts are classified as long-term if all or part of the contract is to be performed over a period extending beyond 12 months from the effective date of the contract. Long-term contracts may include multi-year agreements whereby the commitment for services in any one year may be short in duration. The following table provides information about disaggregated revenue by contract duration (in thousands):
| | | | | | | | | | | | | | | |
| | Well | | | | Production | | Intercompany | | Total | |||||
|
| Intervention |
| Robotics |
| Facilities |
| Eliminations |
| Revenue | |||||
Three months ended March 31, 2022 | |
|
| |
|
| |
|
| |
|
| |
|
|
Short-term | | $ | 91,346 | | $ | 21,137 | | $ | — | | $ | (635) | | $ | 111,848 |
Long-term | |
| 15,021 | |
| 16,214 | |
| 18,294 | |
| (11,252) | |
| 38,277 |
Total | | $ | 106,367 | | $ | 37,351 | | $ | 18,294 | | $ | (11,887) | | $ | 150,125 |
| | | | | | | | | | | | | | | |
Three months ended March 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
|
Short-term | | $ | 49,217 | | $ | 9,407 | | $ | — | | $ | — | | $ | 58,624 |
Long-term | |
| 84,551 | |
| 12,749 | |
| 16,447 | |
| (8,956) | |
| 104,791 |
Total | | $ | 133,768 | | $ | 22,156 | | $ | 16,447 | | $ | (8,956) | | $ | 163,415 |
15
Contract Balances
Accounts receivable are recognized when our right to consideration becomes unconditional.
Contract assets are rights to consideration in exchange for services that we have provided to a customer when those rights are conditioned on our future performance. Contract assets generally consist of (i) demobilization fees recognized ratably over the contract term but invoiced upon completion of the demobilization activities and (ii) revenue recognized in excess of the amount billed to the customer for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract assets are reflected in “Other current assets” in the accompanying condensed consolidated balance sheets (Note 3). Contract assets were $0.2 million at March 31, 2022 and $0.6 million at December 31, 2021. We had 0 credit losses on our contract assets for the three-month periods ended March 31, 2022 and 2021.
Contract liabilities are obligations to provide future services to a customer for which we have already received, or have the unconditional right to receive, the consideration for those services from the customer. Contract liabilities may consist of (i) advance payments received from customers, including upfront mobilization fees allocated to a single performance obligation and recognized ratably over the contract term and/or (ii) amounts billed to the customer in excess of revenue recognized for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract liabilities are reflected as “Deferred revenue,” a component of “Accrued liabilities” and “Other non-current liabilities” in the accompanying condensed consolidated balance sheets (Note 3). Contract liabilities totaled $5.7 million at March 31, 2022 and $8.7 million at December 31, 2021. Revenue recognized for the three-month periods ended March 31, 2022 and 2021 included $4.3 million and $2.5 million, respectively, that were included in the contract liability balance at the local statutory ratebeginning of each period.
We report the net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period.
Performance Obligations
As of March 31, 2022, $548.1 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $263.4 million, $203.4 million and $81.3 million in 2022, 2023 and 2024, respectively. These amounts include fixed consideration and estimated variable consideration for each foreign jurisdiction adjusted for items thatboth wholly and partially unsatisfied performance obligations, including mobilization and demobilization fees. These amounts are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes. The primary differences betweenderived from the U.S. statutory rate and our effective rate are as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
U.S. statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | |||
Foreign provision | (241.5 | ) | (10.8 | ) | 2.8 | (8.8 | ) | ||||
Change in tax position (1) | — | — | (29.3 | ) | — | ||||||
Other | 1.6 | (0.1 | ) | (3.3 | ) | 0.5 | |||||
Effective rate | (204.9 | )% | 24.1 | % | 5.2 | % | 26.7 | % |
For the three-month periods ended March 31, 2022 and 2021, revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.
Contract Fulfillment Costs
Contract fulfillment costs consist of costs incurred in fulfilling a public offering pricecontract with a customer. Our contract fulfillment costs primarily relate to costs incurred for mobilization of $8.65 per share. The net proceeds frompersonnel and equipment at the Offering approximated $220beginning of a contract and costs incurred for demobilization at the end of a contract. Mobilization costs are deferred and amortized ratably over the contract term (including anticipated contract extensions) based on the pattern of the provision of services to which the contract fulfillment costs relate. Demobilization costs are recognized when incurred at the end of the contract. Deferred contract costs are reflected as “Deferred costs,” a component of “Other current assets” and “Other assets, net” in the accompanying condensed consolidated balance sheets (Note 3). Our deferred contract costs totaled $6.2 million after deducting underwriting discountsat March 31, 2022 and commissions$3.3 million at December 31, 2021. For the three-month periods ended March 31, 2022 and estimated offering expenses. We used the net proceeds from the Offering2021, we recorded $4.6 million and $10.4 million, respectively, related to amortization of these deferred contract costs. There were no associated impairment losses for general corporate purposes, including debt repayment, capital expenditures, working capitalany period presented.
For additional information regarding revenue recognition, see Notes 2 and investments in12 to our subsidiaries.2021 Form 10-K.
16
September 30, 2017 | December 31, 2016 | ||||||
Cumulative foreign currency translation adjustment | $ | (64,048 | ) | $ | (78,953 | ) | |
Unrealized loss on hedges, net (1) | (8,314 | ) | (18,021 | ) | |||
Accumulated other comprehensive loss | $ | (72,362 | ) | $ | (96,974 | ) |
We have shares of restricted stock issued and outstanding that are currently unvested. HoldersBecause holders of shares of unvested restricted stock are entitled to the same liquidation and dividend rights as the holders of our unrestricted common stock, we are required to compute basic and diluted earnings per share (“EPS”) under the shares of restricted stock are thus considered participating securities.two-class method in periods in which we have earnings. Under applicable accounting guidance, the undistributed earningstwo-class method, net income or loss attributable to common shareholders for each period areis allocated based on the participation rights of both the common shareholders and the holders of any participating securities as if earnings for the respective periods had been distributed. Because both the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, we are required to compute earnings per share (“EPS”) amounts under the two class method in periods in which we have earnings. For periods in which we have a net loss we do not use the two classtwo-class method as holders of our restricted shares are not obligated to share in such losses.
Basic EPS amounts on the face of the accompanying condensed consolidated statements of operations is computed by dividing net income or loss available to common shareholders by the weighted average shares of our common stock outstanding. The calculation of diluted EPS is similar to that for basic EPS, except that the denominator includes dilutive common stock equivalents and the income included in the numerator excludes the effects of the impact of dilutive common stock equivalents, if any. The computations of the numerator (income)(earnings or loss) and denominator (shares) to derive the basic and diluted EPS amounts presented on the face of the accompanying condensed consolidated statements of operations for the three-month periods ended September 30, 2017 and 2016 are as follows (in thousands):
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||
Income | Shares | Income | Shares | ||||||||||
Basic: | |||||||||||||
Net income | $ | 2,290 | $ | 11,462 | |||||||||
Less: Undistributed earnings allocated to participating securities | (27 | ) | (160 | ) | |||||||||
Undistributed earnings allocated to common shares | $ | 2,263 | 145,958 | $ | 11,302 | 113,680 | |||||||
Diluted: | |||||||||||||
Undistributed earnings allocated to common shares | $ | 2,263 | 145,958 | $ | 11,302 | 113,680 | |||||||
Effect of dilutive securities: | |||||||||||||
Share-based awards other than participating securities | — | — | — | — | |||||||||
Undistributed earnings reallocated to participating securities | — | — | — | — | |||||||||
Net income | $ | 2,263 | 145,958 | $ | 11,302 | 113,680 |
| | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | ||||||
| | March 31, 2022 | | March 31, 2021 | ||||||
|
| Income |
| Shares |
| Income |
| Shares | ||
Basic and Diluted: |
| |
|
|
|
| |
|
|
|
Net loss attributable to common shareholders | | $ | (42,031) | | |
| $ | (2,878) |
|
|
Less: Accretion of redeemable noncontrolling interests | |
| — | | |
| | (241) |
|
|
Net loss available to common shareholders | | $ | (42,031) | | 151,142 | | $ | (3,119) |
| 149,935 |
We had net losses for the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016.2021. Accordingly, our diluted EPS calculation for these periods was equivalent to our basic EPS calculation since diluted EPS excluded any assumed exercise or conversion of common stock equivalents. These common stock equivalents were excluded because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in the applicable periods. Shares that otherwise would have been included in the diluted per share calculations assuming we had earnings are as follows (in thousands):
Nine Months Ended September 30, | |||||
2017 | 2016 | ||||
Diluted shares (as reported) | 145,057 | 109,135 | |||
Share-based awards | 364 | 308 | |||
Total | 145,421 | 109,443 |
| | | | |
| | Three Months Ended | ||
| | March 31, | ||
|
| 2022 |
| 2021 |
Diluted shares (as reported) |
| 151,142 |
| 149,935 |
Share-based awards |
| 953 |
| 1,093 |
Total |
| 152,095 |
| 151,028 |
The following potentially dilutive shares related to the 2022 Notes, the 2023 Notes and the 20322026 Notes were excluded from the diluted EPS calculation because we have the right and the intention to settle any such future conversions in cash (Note 6)as they were anti-dilutive (in thousands):
| | | | |
| | Three Months Ended | ||
| | March 31, | ||
|
| 2022 |
| 2021 |
2022 Notes |
| 2,435 |
| 2,519 |
2023 Notes |
| 3,168 |
| 3,168 |
2026 Notes |
| 28,676 |
| 28,676 |
17
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
2022 Notes | 8,997 | — | 8,997 | — | |||||||
2032 Notes | 2,403 | 7,493 | 2,403 | 7,814 |
Long-Term Incentive Stock-Based Plan
As of September 30, 2017,March 31, 2022, there were 2.44.2 million shares of our common stock available for issuance under our long-term incentive stock-based plan, the 2005 Long-Term Incentive Plan, as amended and restated January 1, 2017 (the “2005 Incentive Plan”). During the nine-monththree-month period ended September 30, 2017,March 31, 2022, the following grants of share-based awards were made under the 2005 Incentive Plan:
| | | | | | | | | |
| | | | | | Grant Date | | | |
| | | | | | Fair Value | | | |
Date of Grant |
| Award Type |
| Shares/Units |
| Per Share/Unit |
| Vesting Period | |
January 1, 2022 (1) |
| RSU |
| 1,065,705 | | $ | 3.12 |
| 33% per year over three years |
January 4, 2022 (1) |
| PSU |
| 1,065,705 | | $ | 4.25 |
| 100% on January 4, 2025 |
January 4, 2022 (2) |
| Restricted stock |
| 15,775 | | $ | 3.12 |
| 100% on January 1, 2024 |
Date of Grant | Shares | Grant Date Fair Value Per Share | Vesting Period | ||||||||||
January 3, 2017 (1) | 671,771 | $ | 8.82 | 33% per year over three years | |||||||||
January 3, 2017 (2) | 671,771 | $ | 12.64 | 100% on January 1, 2020 | |||||||||
January 3, 2017 (3) | 9,956 | $ | 8.82 | 100% on January 1, 2019 | |||||||||
April 3, 2017 (3) | 8,004 | $ | 7.77 | 100% on January 1, 2019 | |||||||||
July 3, 2017 (3) | 14,018 | $ | 5.64 | 100% on January 1, 2019 |
(1) | Reflects grants |
(2) | Reflects grants |
Compensation cost for restricted stock is the product of the grant date fair value of each share and the number of shares granted and is recognized over the applicable vesting periodsperiod on a straight-line basis. We electedForfeitures are recognized as they occur. NaN restricted stock awards have been granted to account for forfeitures when they occur upon the adoption of the new guidance for employee share-based payment accounting (Note 1).our executive officers or other employees in 2022. For the three- and nine-monththree-month periods ended September 30, 2017, $1.7March 31, 2022 and 2021, $0.6 million and $5.4$0.8 million, respectively, were recognized as share-based compensation related to restricted stock.
Our performance share units (“PSUs”) that were granted prior to 2021 are to be settled solely in shares of our common stock and are accounted for as equity awards. Those PSUs, which contain a service and a market condition, are based on the performance of our common stock against peer group companies. Our PSUs granted beginning 2021 may be settled in either cash or shares of our common stock upon vesting at the discretion of the Compensation Committee of our Board and have been accounted for as equity awards. Those PSUs consist of 2 components: (i) 50% based on the performance of our common stock against peer group companies, which component contains a service and a market condition, and (ii) 50% based on cumulative total Free Cash Flow, which component contains a service and a performance condition. Free Cash Flow is calculated as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets. Our PSUs cliff vest at the end of a three-year period with the maximum amount of the award being 200% of the original PSU awards and the minimum amount being 0.
For PSUs that have a service and a market condition and are accounted for as equity awards, compensation cost is measured based on the grant date estimated fair value determined using a Monte Carlo simulation model and subsequently recognized over the vesting period on a straight-line basis. For PSUs that have a service and a performance condition and are accounted for as equity awards, compensation cost is initially measured based on the grant date fair value. Cumulative compensation cost is subsequently adjusted at the end of each reporting period to reflect the current estimation of achieving the performance condition. For the three- and nine-monththree-month periods ended September 30, 2016, $1.4March 31, 2022 and 2021, $1.1 million and $4.3$1.0 million, respectively, were recognized as share-based compensation related to restricted stock.
Our restricted stock units (“RSUs”) may be settled in either cash or shares of our common stock upon vesting at the discretion of the Compensation Committee and recognized over the vesting period on a straight-line basis. PSUs that arehave been accounted for as liability awardsawards. Liability RSUs are measured based on theat their estimated fair value at theeach balance sheet date, and subsequent changes in the fair value of the awards are recognized in earnings.earnings for the portion of the award for which the requisite service period has elapsed. Cumulative compensation cost for vested liability PSU awardsRSUs equals the actual cash payout amountvalue upon vesting. The 2017 awards are accounted for as equity awards whereas awards made prior to 2017 are accounted for as liability awards. For the three- and nine-monththree-month periods ended September 30, 2017, $4.0March 31, 2022 and 2021, $0.6 million and $5.8$0.2 million, respectively, were recognized as share-based compensation relatedcost.
18
In 2022 and 2021, we granted fixed-value cash awards of $5.0 million and $3.5 million, respectively, to PSUs.select management employees under the 2005 Incentive Plan. The value of these cash awards is recognized on a straight-line basis over a vesting period of three years. Compensation cost of $1.0 million was recognized for each of the three-month periods ended March 31, 2022 and 2021.
Defined Contribution Plan
We sponsor a defined contribution 401(k) retirement plan. Our discretionary contributions are in the form of cash and consist of a 50% match of each participant’s contribution up to 5% of the participant’s salary. Our discretionary contributions were suspended for 2021 and re-activated beginning January 2022. For the three- and nine-month periodsthree-month period ended September 30, 2016, $2.5 million and $5.3 million, respectively, were recognized as share-based compensation related to PSUs. The liability balance for unvested PSUs was $10.2 million at September 30, 2017 and $7.1 million at DecemberMarch 31, 2016. We paid $0.62022, we made $0.4 million in cashcontributions to settle the 2014 grant of PSUs when they vested in January 2017.
Employee Stock Purchase Plan
We have an employee stock purchase plan (the “ESPP”). The ESPP hasAs of March 31, 2022, 1.5 million shares authorized for issuance, of which 0.6 million shares were available for issuance as of September 30, 2017. In February 2016, we suspendedunder the ESPP. The ESPP purchases for the January through April 2016 purchase period and indefinitely imposedcurrently has a purchase limit of 130260 shares per employee for subsequentper purchase periods.
For more information regarding our employee benefit plans, including our long-term incentive stock-basedthe 2005 Incentive Plan and cash plans and our employee stock purchase plan,the ESPP, see Note 1214 to our 20162021 Form 10-K.
We have three3 reportable business segments: Well Intervention, Robotics and Production Facilities. Our U.S., U.K. and Brazil well intervention operating segments are aggregated into the Well Intervention business segment for financial reporting purposes. Our Well Intervention segment includesprovides services enabling our vessels and equipment usedcustomers to perform well intervention servicessafely access offshore wells for the purpose of performing production enhancement or decommissioning operations primarily in the U.S. Gulf of Mexico, Brazil, the North Sea and Brazil. Our Well Intervention segment also includes IRSs, some of which we rent out on a stand-alone basis, and SILs.West Africa. Our well intervention vessels include the
We evaluate our performance primarily based on operating income of each reportable segment. Certain financial data by reportable segment are summarized as follows (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Net revenues — | | |
|
| |
|
Well Intervention | | $ | 106,367 | | $ | 133,768 |
Robotics | |
| 37,351 | |
| 22,156 |
Production Facilities | |
| 18,294 | |
| 16,447 |
Intercompany eliminations | |
| (11,887) | |
| (8,956) |
Total | | $ | 150,125 | | $ | 163,415 |
| | | | | | |
Income (loss) from operations — | |
|
| |
|
|
Well Intervention | | $ | (31,758) | | $ | 5,243 |
Robotics | |
| 1,480 | |
| (2,934) |
Production Facilities | |
| 5,851 | |
| 6,514 |
Segment operating income (loss) | |
| (24,427) | |
| 8,823 |
Corporate, eliminations and other | |
| (8,550) | |
| (9,378) |
Total | | $ | (32,977) | | $ | (555) |
19
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net revenues — | |||||||||||||||
Well Intervention | $ | 111,522 | $ | 108,287 | $ | 299,219 | $ | 214,262 | |||||||
Robotics | 47,049 | 48,897 | 102,078 | 119,805 | |||||||||||
Production Facilities | 16,380 | 17,128 | 47,965 | 54,567 | |||||||||||
Intercompany elimination | (11,691 | ) | (13,067 | ) | (31,145 | ) | (29,083 | ) | |||||||
Total | $ | 163,260 | $ | 161,245 | $ | 418,117 | $ | 359,551 | |||||||
Income (loss) from operations — | |||||||||||||||
Well Intervention | $ | 16,906 | $ | 24,413 | $ | 37,356 | $ | 7,187 | |||||||
Robotics | (9,365 | ) | (94 | ) | (37,313 | ) | (21,667 | ) | |||||||
Production Facilities | 7,660 | 8,312 | 20,724 | 25,225 | |||||||||||
Corporate and other | (10,633 | ) | (10,288 | ) | (29,296 | ) | (28,784 | ) | |||||||
Intercompany elimination | 199 | (873 | ) | 641 | (542 | ) | |||||||||
Total | $ | 4,767 | $ | 21,470 | $ | (7,888 | ) | $ | (18,581 | ) |
Intercompany segment amounts are derived primarily from equipment and services provided to other business segments at rates consistent with those charged to third parties.segments. Intercompany segment revenues are as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Well Intervention | $ | 3,765 | $ | 2,898 | $ | 8,033 | $ | 5,740 | |||||||
Robotics | 7,926 | 10,169 | 23,112 | 23,343 | |||||||||||
Total | $ | 11,691 | $ | 13,067 | $ | 31,145 | $ | 29,083 |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Well Intervention | | $ | 3,850 | | $ | 2,587 |
Robotics | |
| 8,037 | |
| 6,369 |
Total | | $ | 11,887 | | $ | 8,956 |
Segment assets are comprised of all assets attributable to each reportable segment. Corporate and other includes all assets not directly identifiable with our business segments, most notably the majority of our cash and cash equivalents.segments. The following table reflects total assets by reportable segment (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Well Intervention | $ | 1,774,821 | $ | 1,596,517 | |||
Robotics | 179,777 | 186,901 | |||||
Production Facilities | 141,739 | 158,192 | |||||
Corporate and other | 270,153 | 305,331 | |||||
Total | $ | 2,366,490 | $ | 2,246,941 |
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Well Intervention | | $ | 2,026,522 | | $ | 2,012,214 |
Robotics | |
| 87,575 | |
| 96,249 |
Production Facilities | |
| 115,977 | |
| 119,004 |
Corporate and other | |
| 77,296 | |
| 98,561 |
Total | | $ | 2,307,370 | | $ | 2,326,028 |
Note 11 — Asset Retirement Obligations
Asset retirement obligations (“AROs”) are recorded at fair value and consist of Contents
Our AROs relate to our Droshky oil and gas properties that we acquired from Marathon Oil Corporation (“Marathon Oil”) in January 2019. In connection with assuming the P&A obligations related to those assets, we are entitled to receive agreed-upon amounts from Marathon Oil as the P&A work is completed. The following table describes the changes in our AROs (in thousands):
| | | | | | |
|
| 2022 |
| 2021 | ||
AROs at January 1, | | $ | 29,658 | | $ | 30,913 |
Accretion expense | |
| 741 | |
| 48 |
AROs at March 31, | | $ | 30,399 | | $ | 30,961 |
Note 12 — Commitments and Contingencies and Other Matters
Commitments
We have charter agreements for the
Contingencies and Claims
We believe that there are currently no contingencies that would have a material adverse effect on our financial position, results of operations or cash flows.
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Litigation
We are involved in various other legal proceedings, some involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act based on alleged negligence.Act. In addition, from time to time we incurreceive other claims, such as contract and employment-related disputes, in the normal course of business.
We are currently involved in several lawsuits filed by current and former offshore employees seeking overtime compensation. These suits are brought as collective actions and are in various stages of litigation. In one such lawsuit, during the third quarter 2021 the United States Court of Appeals for the Fifth Circuit issued a ruling adverse to us that may also have implications for some of the other cases in which we are involved, as well as the way offshore personnel are compensated throughout our industry. We further appealed that matter and continue to vigorously defend these lawsuits. Notwithstanding that we believe we retain valid defenses, we have established a liability for probable losses in certain of these matters. The final outcome of these matters remains uncertain and the ultimate liability to us could be more or less than the liability established.
Note 13 — Statement of Cash Flow Information
We define cash and cash equivalents as cash and all highly liquid financial instruments with original maturities of three months or less. We classify cash as restricted when there are legal or contractual restrictions for its withdrawal. The following table provides supplemental cash flow information (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Interest paid | | $ | 8,708 | | $ | 9,397 |
Income taxes paid | |
| 2,736 | |
| 1,790 |
Our capital additions include the acquisition of property and equipment for which payment has not been made. These non-cash capital additions totaled $0.3 million at March 31, 2022 and December 31, 2021.
Note 14 — Allowance for Credit Losses
We estimate current expected credit losses on our accounts receivable at each reporting date based on our credit loss history, adjusted for current factors including global economic and business conditions, offshore energy industry and market conditions, customer mix, contract payment terms and past due accounts receivable.
The following table sets forth the activity in our allowance for credit losses (in thousands):
| | | | | | |
|
| 2022 |
| 2021 | ||
Balance at January 1, | | $ | 1,477 | | $ | 3,469 |
Additions (reductions) (1) | |
| (126) | |
| 7 |
Write-offs (2) | | | — | | | (1,811) |
Balance at March 31, | | $ | 1,351 | | $ | 1,665 |
(1) | Additions (reductions) in allowance for credit losses reflect credit loss reserves (releases) during the respective periods. |
(2) | The write-offs of allowance for credit losses reflect certain receivables related to our Robotics segment that were previously reserved and subsequently deemed to be uncollectible. |
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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value accounting rules establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
● | Level 1. Observable inputs such as quoted prices in active markets; |
● | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
● | Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Assets and liabilities measured at fair value are based on one or more of three valuation approaches as follows:
(a) | Market Approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. |
(b) | Cost Approach. Amount that would be required to replace the service capacity of an asset (replacement cost). |
(c) | Income Approach. Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). |
Our financial instruments include cash and cash equivalents, receivables, accounts payable and long-term debt and various derivative instruments.debt. The carrying amount of cash and cash equivalents, trade and other current receivables as well as accounts payable approximates fair value due to the short-term nature of these instruments.
The net carryingprincipal amount of our long-term note receivable also approximates its fair value. The following tables provide additional information relating to other financial instruments measured at fair value on a recurring basis (in thousands):
Fair Value Measurements at September 30, 2017 Using | |||||||||||||||||
Level 1 | Level 2 (1) | Level 3 | Total | Valuation Approach | |||||||||||||
Assets: | |||||||||||||||||
Interest rate swaps | $ | — | $ | 374 | $ | — | $ | 374 | (c) | ||||||||
Liabilities: | |||||||||||||||||
Foreign exchange contracts | — | 19,508 | — | 19,508 | (c) | ||||||||||||
Interest rate swaps | — | 82 | — | 82 | (c) | ||||||||||||
Total liability | $ | — | $ | 19,216 | $ | — | $ | 19,216 |
Fair Value Measurements at December 31, 2016 Using | |||||||||||||||||
Level 1 | Level 2 (1) | Level 3 | Total | Valuation Approach | |||||||||||||
Assets: | |||||||||||||||||
Interest rate swaps | $ | — | $ | 451 | $ | — | $ | 451 | (c) | ||||||||
Liabilities: | |||||||||||||||||
Foreign exchange contracts | — | 38,170 | — | 38,170 | (c) | ||||||||||||
Interest rate swaps | — | 751 | — | 751 | (c) | ||||||||||||
Total net liability | $ | — | $ | 38,470 | $ | — | $ | 38,470 |
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||||||||
| | Principal | | Fair | | Principal | | Fair | ||||
|
| Amount (1) |
| Value (2) |
| Amount (1) |
| Value (2) | ||||
MARAD Debt (matures February 2027) | | $ | 44,930 | | $ | 46,688 | | $ | 48,850 | | $ | 52,481 |
2022 Notes (mature May 2022) | |
| 35,000 | |
| 35,022 | |
| 35,000 | |
| 34,794 |
2023 Notes (mature September 2023) | |
| 30,000 | |
| 29,693 | |
| 30,000 | |
| 29,054 |
2026 Notes (mature February 2026) | |
| 200,000 | |
| 226,816 | |
| 200,000 | |
| 200,562 |
Total debt | | $ | 309,930 | | $ | 338,219 | | $ | 313,850 | | $ | 316,891 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Value (1) | Fair Value (2) | Carrying Value (1) | Fair Value (2) | ||||||||||||
Term Loan (previously scheduled to mature June 2018) | $ | — | $ | — | $ | 192,258 | $ | 192,258 | |||||||
Nordea Q5000 Loan (matures April 2020) | 169,643 | 168,583 | 196,429 | 192,746 | |||||||||||
Term Loan (matures June 2020) | 98,750 | 99,120 | — | — | |||||||||||
MARAD Debt (matures February 2027) | 77,000 | 83,928 | 83,222 | 92,049 | |||||||||||
2022 Notes (mature May 2022) | 125,000 | 123,281 | 125,000 | 130,156 | |||||||||||
2032 Notes (mature March 2032) | 60,115 | 60,077 | 60,115 | 59,965 | |||||||||||
Total debt | $ | 530,508 | $ | 534,989 | $ | 657,024 | $ | 667,174 |
(1) |
(2) | The estimated fair value of the 2022 Notes, the 2023 Notes and the |
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September 30, 2017 | December 31, 2016 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Asset Derivative Instruments: | |||||||||||
Interest rate swaps | Other assets, net | $ | 374 | Other assets, net | $ | 451 | |||||
$ | 374 | $ | 451 | ||||||||
Liability Derivative Instruments: | |||||||||||
Foreign exchange contracts | Accrued liabilities | $ | 6,945 | Accrued liabilities | $ | 14,056 | |||||
Interest rate swaps | Accrued liabilities | 82 | Accrued liabilities | 751 | |||||||
Foreign exchange contracts | Other non-current liabilities | 6,123 | Other non-current liabilities | 13,383 | |||||||
$ | 13,150 | $ | 28,190 |
September 30, 2017 | December 31, 2016 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Liability Derivative Instruments: | |||||||||||
Foreign exchange contracts | Accrued liabilities | $ | 2,900 | Accrued liabilities | $ | 3,923 | |||||
Foreign exchange contracts | Other non-current liabilities | 3,540 | Other non-current liabilities | 6,808 | |||||||
$ | 6,440 | $ | 10,731 |
Gain (Loss) Recognized in OCI on Derivative Instruments, Net of Tax (Effective Portion) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Foreign exchange contracts | $ | 3,620 | $ | 4,249 | $ | 9,341 | $ | 10,745 | |||||||
Interest rate swaps | 68 | 643 | 366 | (880 | ) | ||||||||||
$ | 3,688 | $ | 4,892 | $ | 9,707 | $ | 9,865 |
Location of Loss Reclassified from Accumulated OCI into Earnings | Loss Reclassified from Accumulated OCI into Earnings (Effective Portion) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Foreign exchange contracts | Cost of sales | $ | (3,288 | ) | $ | (2,663 | ) | $ | (10,280 | ) | $ | (8,033 | ) | ||||
Interest rate swaps | Net interest expense | (95 | ) | (494 | ) | (542 | ) | (1,618 | ) | ||||||||
$ | (3,383 | ) | $ | (3,157 | ) | $ | (10,822 | ) | $ | (9,651 | ) |
Location of Gain Recognized in Earnings on Derivative Instruments | Gain Recognized in Earnings on Derivative Instruments | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Foreign exchange contracts | Other income (expense), net | $ | 1,050 | $ | 1,309 | $ | 1,531 | $ | 3,375 | ||||||||
$ | 1,050 | $ | 1,309 | $ | 1,531 | $ | 3,375 |
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of OperationsFORWARD-LOOKING STATEMENTS AND ASSUMPTIONS
This Quarterly Report on Form 10-Q contains or incorporates by reference various statements that contain forward-looking information regarding Helix Energy Solutions Group, Inc. and represent our current expectations and beliefs concerningor forecasts of future events. This forward-looking information is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995 as set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). All statements included herein or incorporated herein by reference herein that are predictive in nature, that depend upon or refer to future events or conditions, or that use terms and phrases such as “achieve,” “anticipate,” “believe,” “estimate,” “budget,” “expect,” “forecast,” “plan,” “project,” “propose,” “strategy,” “predict,” “envision,” “hope,” “intend,” “will,” “continue,” “may,” “potential,” “should,” “could” and similar terms and phrases are forward-looking statements.statements although not all forward-looking statements contain such identifying words. Included in forward-looking statements are, among other things:
● | statements regarding our business strategy, corporate initiatives and any other business plans, forecasts or objectives, any or all of which are subject to change; |
● | statements regarding projections of revenues, gross margins, expenses, earnings or losses, working capital, debt and liquidity, capital expenditures or other financial items; |
● | statements regarding our backlog and commercial contracts and rates thereunder; |
● | statements regarding our ability to enter into and/or perform commercial contracts, including the scope, timing and outcome of those contracts; |
● | statements regarding the spot market, the continuation of our current backlog, our spending and cost reduction plans and our ability to manage changes, and the COVID-19 pandemic and oil price volatility and their respective effects and results on the foregoing as well as our protocols and plans; |
● | statements regarding the acquisition, construction, completion, upgrades to or maintenance of vessels, systems or equipment and any anticipated costs or downtime related thereto; |
● | statements regarding any financing transactions or arrangements, or our ability to enter into such transactions or arrangements; |
● | statements regarding potential legislative, governmental, regulatory, administrative or other public body actions, requirements, permits or decisions; |
● | statements regarding our trade receivables and their collectability; |
● | statements regarding potential developments, industry trends, performance or industry ranking; |
● | statements regarding our Environmental, Social and Governance (“ESG”) initiatives and the successes thereon or regarding our environmental efforts, including greenhouse gas emissions targets; |
● | statements regarding global, market or investor sentiment with respect to fossil fuels; |
● | statements regarding our existing activities in, and future expansion into, the offshore renewable energy market; |
● | statements regarding general economic or political conditions, whether international, national or in the regional or local markets in which we do business; |
● | statements regarding our human capital resources, including our ability to retain our senior management and other key employees; |
● | statements regarding the underlying assumptions related to any projection or forward-looking statement; and |
● | any other statements that relate to non-historical or future information. |
Although we believe that the expectations reflected in our forward-looking statements are reasonable and are based on reasonable assumptions, they do involve risks, uncertainties and other factors that could cause actual results to bediffer materially different from those in the forward-looking statements. These factors include:
● | the impact of domestic and global economic conditions and the future impact of such conditions on the offshore energy industry and the demand for our services; |
● | the general impact of oil and gas price volatility and the cyclical nature of the oil and gas market; |
● | the potential effects of regional tensions that have escalated or may escalate, including into conflicts or wars, and their impact on the global economy, oil and gas market, our operations, international trade, or our ability to do business with certain parties or in certain regions, and any governmental sanctions resulting therefrom; |
● | the results and effects of the COVID-19 pandemic and actions by governments, customers, suppliers and partners with respect thereto; |
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● | the results of corporate initiatives such as alliances, partnerships, joint ventures, mergers, acquisitions, divestitures and restructurings, or the determination not to pursue or effect such initiatives; |
● | the impact of any potential cancellation, deferral or modification of our work or contracts by our customers; |
● | the ability to effectively bid, renew and perform our contracts, including the impact of equipment problems or failure; |
● | the impact of the imposition by our customers of rate reductions, fines and penalties with respect to our operating assets; |
● | unexpected future capital expenditures, including the amount and nature thereof; |
● | the effectiveness and timing of our vessel and/or system upgrades, regulatory recertification and inspection as well as major maintenance items; |
● | unexpected delays in the delivery, chartering or customer acceptance, and terms of acceptance, of our assets; |
● | the effects of our indebtedness, our ability to comply with debt covenants and our ability to reduce capital commitments; |
● | the results of our continuing efforts to control costs and improve performance; |
● | the success of our risk management activities, including with respect to our cybersecurity initiatives; |
● | the effects of competition; |
● | the availability of capital (including any financing) to fund our business strategy and/or operations; |
● | the effectiveness of our ESG initiatives and disclosures; |
● | the impact of current and future laws and governmental regulations and how they will be interpreted or enforced, including related to litigation and similar claims in which we may be involved; |
● | the future impact of international activity and trade agreements on our business, operations and financial condition; |
● | the effect of adverse weather conditions and/or other risks associated with marine operations; |
● | the impact of foreign currency exchange controls, potential illiquidity of those currencies and exchange rate fluctuations; |
● | the effectiveness of our future hedging activities; |
● | the potential impact of a negative event related to our human capital resources, including a loss of one or more key employees; |
● | the impact of general, market, industry or business conditions; and |
● | the impact of inflation and our ability to recoup rising costs in the rates we charge to our customers. |
Our actual results could also differ materially from those anticipated in any forward-looking statements as a result of a variety of factors, including those described in Item 1A. “Risk Factors”7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20162021 Form 10-K. AllShould one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements attributablestatements.
We caution you not to us or persons actingplace undue reliance on our behalf are expressly qualified in their entirety by these risk factors.forward-looking statements. Forward-looking statements are only as of the date they are made, and other than as required under the securities laws, we assume no obligation to update or revise these forward-looking statements, all of which are expressly qualified by the statements in this section, or provide reasons why actual results may differ. All forward-looking statements, express or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We urge you to carefully review and consider the disclosures made in this Quarterly Report and our reports filed with the SEC and incorporated by reference in our 2021 Form 10-K that attempt to advise interested parties of the risks and factors that may affect our business.
24
EXECUTIVE SUMMARY
Our Business Strategy
We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. We believe that focusingThe services we offer to the oil and gas market cover the lifecycle of an offshore oil or gas field, and the services we offer to the renewable energy market are currently focused on these services will deliver favorable long-term financial returns. From time to time, we make strategic investments that expand our service capabilities or add capacity to existing services in our key operating regions.offshore wind farm projects, including trenching and cable burial and seabed clearance operations. Our well intervention fleet expanded followingincludes seven purpose-built well intervention vessels and 10 intervention systems. Our robotics equipment includes 40 work-class ROVs and four trenchers. We charter robotics support vessels on both long-term and spot bases to facilitate our ROV and trenching operations. Our well intervention and robotics operations are geographically dispersed throughout the deliveryworld. Our Production Facilities segment includes the HP I, the HFRS and our ownership of the
Economic Outlook and Industry Influences
Demand for our services is primarily influenced by the condition of the oil and gas industry,and the renewable energy markets and, in particular, the willingness of oil and gasoffshore energy companies to spend on operational activities as well asand capital projects. The performance of our business is also largely dependent onaffected by the prevailing market prices for oil and natural gas, which are impacted by domestic and global economic conditions, hydrocarbon production and capacity, geopolitical issues, weather, global health, and severalvarious other factors, including:
Oil and gas prices experienced recent highs during the first quarter 2022 as global demand continued to global capitalrecover from COVID-19 related restrictions and capital markets;
Historically, drilling rigs historically have been the asset class used for offshore well intervention work. Thiswork, and rig overhang combined with lowerday rates are a pricing indicator for our services. Our customers have used drilling rigs on existing long-term contracts (rig overhang) to perform well intervention work instead of new drilling activities. Current volumes of work, maythe day rates quoted by drilling rig contractors and existing rig overhang affect the utilization and/or rates we can achieve for our assets. In addition, despiteassets and services.
The COVID-19 pandemic resulted in new market dynamics and challenges to us, including contributing significantly to oil and gas price volatility and increased costs related to our supply chain, logistics and human capital resources. While the upward trend in global economic growth especially in emerging markets,full impact of the current volatile and uncertain macroeconomic conditions in some countries aroundCOVID-19 pandemic, including the world, such as Brazil and the U.K. following Brexit, may have a direct and/or indirectduration of its impact on economic activity, remains unknown, we expect such impact may continue into the foreseeable future, including affecting our existing contractscustomers’ willingness to commit to future spending, limiting access to and contracting opportunitiesuse of capital, disrupting supply chains and may introduce further currency volatility into our operations and/or financial results. We continue to monitorincreasing costs, and negatively affecting human capital resources.
Over the impact of Brexit and any exit agreementsnear-term, as they are negotiated, but the impact from Brexit on our business and operations will depend on the outcome of tariff, tax treaties, trade, regulatory and other negotiations, as well as the impact of Brexit on macroeconomic growth and currency volatility, which are uncertain at this time.
We expect the fundamentals for our business will remain favorable over the longer term we believe that fundamentals for our business remain favorable as the need for prolongation ofto prolong well life in oil and gas production is theand safely decommission end of life wells are primary driverdrivers of demand for our services.
25
Demand for our services in the renewable energy market is affected by various factors, including the pace of consumer shift towards renewable energy sources, global electricity demand, technological advancements that increase the production and/or reduce the cost of renewable energy, expansion of offshore renewable energy projects to deeper water, and government subsidies for renewable energy projects.
We are subject to the effects of changing prices. Inflation rates have been relatively low and stable over the previous three decades; however, in 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic, inflation rates began to rise significantly and remained high through the first quarter 2022. Although we are able to reduce some of our exposure to price increases through the rates we charge, we bear the costs of operating and maintaining our assets, including labor and material costs as well as extendingrecertification and enhancingdry dock costs. While the commercial lifecost outlook is not certain, we believe that we can manage these inflationary pressures by introducing appropriate sales price adjustments and by actively pursuing internal cost reduction efforts. However, competitive market pressures may affect our ability to recoup these price increases through the rates we charge, which may result in reductions in our operating margins and cash flows in the future. The recent high inflation rates seen in various major economies have caused concerns for central banks’ tightening of subsea wells;monetary policies. These concerns have contributed to stock market volatility as well as higher interest rates, which, combined with ongoing regional conflicts and (3) in past cycles, well interventionunrest and workover have been some ofcontinued COVID-related disruptions throughout the first activities to recover,globe, could provide a strained macroeconomic outlook and in a prolonged market downturn are important to the commercial viabilityturn affect energy markets.
Backlog
We define backlog as firm commitments represented by signed contracts. As of deepwater wells.
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
A non-GAAP financial measure is generally defined by the SEC as a numerical measure of a company’s historical or future performance, financial position or cash flows that includes or excludes amounts from the most directly comparable measure under U.S. GAAP. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, our reported results prepared in accordance with U.S. GAAP. Users of this financial information should consider the types of events and transactions that are excluded from these non-GAAP measures.
We measure our operating performance based on EBITDA, aAdjusted EBITDA and Free Cash Flow. EBITDA, Adjusted EBITDA and Free Cash Flow are non-GAAP financial measuremeasures that isare commonly used but isare not a recognized accounting termterms under U.S. GAAP. We use EBITDA, Adjusted EBITDA and Free Cash Flow to monitor and facilitate internal evaluation of the performance of our business operations, to facilitate external comparison of our business results to those of others in our industry, to analyze and evaluate financial and strategic planning decisions regarding future investments and acquisitions, to plan and evaluate operating budgets, and in certain cases, to report our results to the holders of our debt as required by our debt covenants. We believe that our measuremeasures of EBITDA, providesAdjusted EBITDA and Free Cash Flow provide useful information to the public regarding our operating performance and ability to service debt and fund capital expenditures and may help our investors understand our operating performance and compare our results to other companies that have different financing, capital and tax structures.
26
We define EBITDA as earnings before income taxes, net interest expense, gain or loss on extinguishment of long-term debt, net other income or expense, and depreciation and amortization expense. Non-cash impairment losses on goodwill and other long-lived assets and non-cash gains and losses on equity investments are also added back if applicable. To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets and the general provision (release) for current expected credit losses, if any. In addition, we include realized losses from foreign currency exchange contracts not designated as hedging instruments, which are excluded from EBITDA as a component of net other income or expense. We define Free Cash Flow as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets. In the following reconciliation, we provide amounts as reflected in the condensed consolidated financial statements unless otherwise noted.
The reconciliation of our net loss to EBITDA and Adjusted EBITDA is as follows (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Net loss | | $ | (42,031) | | $ | (3,050) |
Adjustments: | |
|
| |
|
|
Income tax provision | |
| 2,140 | |
| 116 |
Net interest expense | |
| 5,174 | |
| 6,053 |
Other (income) expense, net | |
| 3,881 | |
| (1,617) |
Depreciation and amortization | |
| 33,488 | |
| 34,566 |
EBITDA | |
| 2,652 | |
| 36,068 |
Adjustments: | |
|
| |
|
|
General provision (release) for current expected credit losses | |
| (126) | |
| 100 |
Adjusted EBITDA | | $ | 2,526 | | $ | 36,168 |
The reconciliation of our cash flows from operating activities to Free Cash Flow is as follows (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities | | $ | (17,413) | | $ | 39,869 |
Less: Capital expenditures, net of proceeds from sale of assets | |
| (623) | |
| (1,329) |
Free Cash Flow | | $ | (18,036) | | $ | 38,540 |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 2,290 | $ | 11,462 | $ | (20,528 | ) | $ | (27,032 | ) | |||||
Adjustments: | |||||||||||||||
Income tax provision (benefit) | (1,539 | ) | 3,649 | (1,117 | ) | (9,858 | ) | ||||||||
Net interest expense | 3,615 | 6,843 | 15,480 | 25,007 | |||||||||||
(Gain) loss on early extinguishment of long-term debt | — | (244 | ) | 397 | (546 | ) | |||||||||
Other (income) expense, net | 551 | (830 | ) | 619 | (4,018 | ) | |||||||||
Depreciation and amortization | 26,293 | 27,607 | 82,670 | 84,846 | |||||||||||
EBITDA | 31,210 | 48,487 | 77,521 | 68,399 | |||||||||||
Adjustments: | |||||||||||||||
Loss on disposition of assets, net | — | — | 39 | — | |||||||||||
Realized losses from cash settlements of ineffective foreign currency exchange contracts | (758 | ) | (1,786 | ) | (2,759 | ) | (5,744 | ) | |||||||
Adjusted EBITDA | $ | 30,452 | $ | 46,701 | $ | 74,801 | $ | 62,655 |
Comparison of Three Months Ended September 30, 2017March 31, 2022 and 2016
We have three reportable business segments: Well Intervention, Robotics and Production Facilities. All material intercompany transactions between the segments have been eliminated in our condensed consolidated financial statements, including our condensed consolidated results of operations. The following table details various financial and operational highlights for the periods presented (dollars in thousands):
| | | | | | | | | | | | |
| | Three Months Ended | | Increase/ |
| |||||||
| | March 31, | | (Decrease) |
| |||||||
|
| 2022 |
| 2021 |
| Amount |
| Percent |
| |||
Net revenues — |
| |
|
| |
|
| |
|
|
| |
Well Intervention | | $ | 106,367 | | $ | 133,768 | | $ | (27,401) |
| (20) | % |
Robotics | |
| 37,351 | |
| 22,156 | |
| 15,195 |
| 69 | % |
Production Facilities | |
| 18,294 | |
| 16,447 | |
| 1,847 |
| 11 | % |
Intercompany eliminations | |
| (11,887) | |
| (8,956) | |
| (2,931) |
|
| |
| | $ | 150,125 | | $ | 163,415 | | $ | (13,290) |
| (8) | % |
| | | | | | | | | | | | |
Gross profit (loss) — | |
|
| |
|
| |
|
|
|
| |
Well Intervention | | $ | (28,446) | | $ | 8,726 | | $ | (37,172) |
| (426) | % |
Robotics | |
| 3,520 | |
| (933) | |
| 4,453 |
| 477 | % |
Production Facilities | |
| 6,609 | |
| 7,213 | |
| (604) |
| (8) | % |
Corporate, eliminations and other | |
| (292) | |
| (382) | |
| 90 |
|
| |
| | $ | (18,609) | | $ | 14,624 | | $ | (33,233) |
| (227) | % |
| | | | | | | | | | | | |
Gross margin — | |
|
| |
|
| |
|
|
|
| |
Well Intervention | |
| (27) | % |
| 7 | % |
|
|
| | |
Robotics | |
| 9 | % |
| (4) | % |
|
|
|
| |
Production Facilities | |
| 36 | % |
| 44 | % |
|
|
|
| |
Total company | |
| (12) | % |
| 9 | % |
|
|
|
| |
| | | | | | | | | | | | |
Number of vessels or robotics assets (1) / Utilization (2) | |
|
| |
|
| |
|
|
|
| |
Well Intervention vessels | |
| 7 / 67 | % |
| 7 / 70 | % |
|
|
|
| |
Robotics assets (3) | |
| 45 / 35 | % |
| 47 / 24 | % |
|
|
|
| |
Chartered robotics vessels | |
| 5 / 90 | % |
| 3 / 90 | % |
|
|
|
| |
Three Months Ended September 30, | Increase/ (Decrease) | ||||||||||
2017 | 2016 | ||||||||||
Net revenues — | |||||||||||
Well Intervention | $ | 111,522 | $ | 108,287 | $ | 3,235 | |||||
Robotics | 47,049 | 48,897 | (1,848 | ) | |||||||
Production Facilities | 16,380 | 17,128 | (748 | ) | |||||||
Intercompany elimination | (11,691 | ) | (13,067 | ) | 1,376 | ||||||
$ | 163,260 | $ | 161,245 | $ | 2,015 | ||||||
Gross profit (loss) — | |||||||||||
Well Intervention | $ | 20,642 | $ | 28,174 | $ | (7,532 | ) | ||||
Robotics | (6,991 | ) | 4,953 | (11,944 | ) | ||||||
Production Facilities | 7,780 | 8,413 | (633 | ) | |||||||
Corporate and other | (489 | ) | (483 | ) | (6 | ) | |||||
Intercompany elimination | 199 | (873 | ) | 1,072 | |||||||
$ | 21,141 | $ | 40,184 | $ | (19,043 | ) | |||||
Gross margin — | |||||||||||
Well Intervention | 19% | 26% | |||||||||
Robotics | (15)% | 10% | |||||||||
Production Facilities | 47% | 49% | |||||||||
Total company | 13% | 25% | |||||||||
Number of vessels or robotics assets (1) / Utilization (2) | |||||||||||
Well Intervention vessels | 5/88% | 5/76% | |||||||||
Robotics assets | 60/46% | 60/57% | |||||||||
Chartered robotics vessels | 5/80% | 3/81% |
(1) | Represents the number of vessels or robotics assets as of the end of the period, including spot vessels and those under term charters, and excluding acquired vessels prior to their in-service dates and vessels or assets disposed of and/or taken out of |
(2) | Represents the average utilization rate, which is calculated by dividing the total number of days the vessels or robotics assets generated revenues by the total number of calendar days in the applicable period. Utilization rates of chartered robotics vessels during the three-month periods ended March 31, 2022 and 2021 included 136 and three spot vessel days, respectively, at near full utilization. |
(3) | Consists of ROVs and trenchers. |
Intercompany segment amounts are derived primarily from equipment and services provided to other business segments at rates consistent with those charged to third parties.segments. Intercompany segment revenues are as follows (in thousands):
| | | | | | | | | |
| | Three Months Ended | | | | ||||
| | March 31, | | Increase/ | |||||
|
| 2022 |
| 2021 |
| (Decrease) | |||
Well Intervention | | $ | 3,850 | | $ | 2,587 | | $ | 1,263 |
Robotics | |
| 8,037 | |
| 6,369 | |
| 1,668 |
| | $ | 11,887 | | $ | 8,956 | | $ | 2,931 |
28
Three Months Ended September 30, | Increase/ (Decrease) | ||||||||||
2017 | 2016 | ||||||||||
Well Intervention | $ | 3,765 | $ | 2,898 | $ | 867 | |||||
Robotics | 7,926 | 10,169 | (2,243 | ) | |||||||
$ | 11,691 | $ | 13,067 | $ | (1,376 | ) |
Net Revenues.
OurOur Well Intervention revenues increaseddecreased by 3%20% for the three-month period ended September 30, 2017March 31, 2022 as compared to the same period in 20162021, primarily reflecting revenues generated from our well intervention operationslower rates and vessel utilization in Brazil and the North Sea, offset in part by operational downtime experienced byhigher utilization in West Africa. Our Brazil operations were on legacy contract rates with Petrobras with near full utilization during the
Our Robotics revenues decreasedincreased by 4%69% for the three-month period ended September 30, 2017March 31, 2022 as compared to the same period in 2016. The decrease2021, primarily reflected lowerreflecting higher vessel and ROV activities. Chartered vessel days increased to 323 days during the first quarter 2022 as compared to 165 days during the first quarter 2021, although vessel utilization of our robotics assets and accepting workwas flat at reduced rates, offset in part by90% during both periods. Vessel days during the addition of the
Our Production Facilities revenues decreasedincreased by 4%11% for the three-month period ended September 30, 2017March 31, 2022 as compared to the same period in 2016, which reflected reduced retainer fees from the amended HFRS agreement that became effective February 1, 2017.
Gross Profit (Loss).
OurOur Well Intervention segment decreased by 27%had a gross loss of $28.4 million for the three-month period ended September 30, 2017March 31, 2022 as compared to a gross profit of $8.7 million for the same period in 20162021, primarily reflecting lower segment revenues as well as lower margins in the $15.6 million in third quarter 2016 revenues associated withGulf of Mexico due to higher integrated project costs.
Our Robotics segment had a take-or-pay contract.
Selling, General and Administrative Expenses.
Our selling, general and administrative expensesOther Income (Expense), Net. Net other expense and an increase in capitalized interest. The decrease in interest expense was primarily attributable to a significant reduction in our debt levels including the $80 million principal reduction of our term loan in June 2017 (Note 6). Interest on debt used to finance capital projects is capitalized and thus reduces overall interest expense. Capitalized interest totaled $3.9 million for the three-month period ended September 30, 2017 as comparedMarch 31, 2022 primarily due to $3.1foreign currency transaction losses reflecting the weakening of the British pound. Net other income was $1.6 million for the same period in 2016.
Income (Expense), Net.
Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||
2017 | 2016 | ||||||||||
Net revenues — | |||||||||||
Well Intervention | $ | 299,219 | $ | 214,262 | $ | 84,957 | |||||
Robotics | 102,078 | 119,805 | (17,727 | ) | |||||||
Production Facilities | 47,965 | 54,567 | (6,602 | ) | |||||||
Intercompany elimination | (31,145 | ) | (29,083 | ) | (2,062 | ) | |||||
$ | 418,117 | $ | 359,551 | $ | 58,566 | ||||||
Gross profit (loss) — | |||||||||||
Well Intervention | $ | 47,757 | $ | 17,195 | $ | 30,562 | |||||
Robotics | (29,376 | ) | (12,008 | ) | (17,368 | ) | |||||
Production Facilities | 21,031 | 25,634 | (4,603 | ) | |||||||
Corporate and other | (1,370 | ) | (1,367 | ) | (3 | ) | |||||
Intercompany elimination | 641 | (542 | ) | 1,183 | |||||||
$ | 38,683 | $ | 28,912 | $ | 9,771 | ||||||
Gross margin — | |||||||||||
Well Intervention | 16% | 8% | |||||||||
Robotics | (29)% | (10)% | |||||||||
Production Facilities | 44% | 47% | |||||||||
Total company | 9% | 8% | |||||||||
Number of vessels or robotics assets (1) / Utilization (2) | |||||||||||
Well Intervention vessels | 5/79% | 5/52% | |||||||||
Robotics assets | 60/42% | 60/48% | |||||||||
Chartered robotics vessels | 5/61% | 3/63% |
Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||
2017 | 2016 | ||||||||||
Well Intervention | $ | 8,033 | $ | 5,740 | $ | 2,293 | |||||
Robotics | 23,112 | 23,343 | (231 | ) | |||||||
$ | 31,145 | $ | 29,083 | $ | 2,062 |
29
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition and Liquidity
The following table presents certain information useful in the analysis of our financial condition and liquidity (in thousands):
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Net working capital | | $ | 246,745 | | $ | 251,255 |
Long-term debt (1) | |
| 258,496 | |
| 262,137 |
Liquidity | |
| 270,983 | |
| 304,660 |
September 30, 2017 | December 31, 2016 | ||||||
Net working capital | $ | 268,817 | $ | 336,387 | |||
Long-term debt (1) | $ | 395,345 | $ | 558,396 | |||
Liquidity (2) | $ | 426,741 | $ | 375,504 |
(1) | Long-term debt |
Net Working Capital
Net working capital is equal to current assets minus current liabilities. It measures short-term liquidity and operational efficiency and is important for predicting cash flow and debt requirements. Our net working capital includes current maturities of our long-term debt.
Liquidity
We define liquidity as cash and cash equivalents, excluding restricted cash, plus available capacity under our credit facility. Our liquidity at March 31, 2022 included $229.7 million of cash and cash equivalents and $41.2 million of available borrowing capacity under the ABL Facility (Note 5) and excluded $72.9 million of restricted cash primarily related to a short-term project related letter of credit, the restriction from which is expected to be released upon completion of the project. Our liquidity at December 31, 2021 included $253.5 million of cash and cash equivalents and $51.1 million of available borrowing capacity under the ABL Facility and excluded $73.6 million of short-term project related restricted cash.
The COVID-19 pandemic impacted our operations and our revenues. We responded by deferring or reducing planned capital expenditures and operating costs during the past two years. This spending is expected to return with our outlook of increased activity. Furthermore, we have convertible debt including currentinstruments and other term debt maturities during 2022 that we intend to settle in cash. We believe that our cash on hand, internally generated cash flows and availability under the ABL Facility will be sufficient to fund our operations and service our debt over at least the next 12 months.
An ongoing period of weak, or continued decreases in, industry activity may make it difficult to comply with the covenants and other restrictions in our debt agreements. Our failure to comply with the covenants and other restrictions could lead to an event of default. Decreases in our borrowing base may limit our ability to fully access the ABL Facility. At March 31, 2022, our available borrowing capacity under the ABL Facility was $41.2 million, net of unamortized debt discount and debt$2.3 million of letters of credit issued under that facility. We currently do not anticipate borrowing under the ABL Facility other than for the issuance costs, is as follows (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Term Loan (previously scheduled to mature June 2018) | $ | — | $ | 190,867 | |||
Nordea Q5000 Loan (matures April 2020) | 167,667 | 193,879 | |||||
Term Loan (matures June 2020) | 96,935 | — | |||||
MARAD Debt (matures February 2027) | 72,365 | 78,221 | |||||
2022 Notes (mature May 2022) (1) | 108,018 | 105,697 | |||||
2032 Notes (mature March 2032) (2) | 58,971 | 57,303 | |||||
Total debt | $ | 503,956 | $ | 625,967 |
Cash Flows
The following table provides summary data from our condensed consolidated statements of cash flows (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash provided by (used in): |
| |
|
| | |
Operating activities | | $ | (17,413) | | $ | 39,869 |
Investing activities | |
| (623) | |
| (1,329) |
Financing activities | |
| (5,408) | |
| (59,885) |
30
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash provided by (used in): | |||||||
Operating activities | $ | 31,323 | $ | 15,444 | |||
Investing activities | $ | (121,428 | ) | $ | (42,266 | ) | |
Financing activities | $ | 88,420 | $ | 17,217 |
Operating Activities
The decrease in our current lines of business and to service our debt. Historically, we have funded our capital program withoperating cash flows from operations, borrowings under credit facilities, and project financing, along with other debt and equity alternatives.
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Capital expenditures: | |||||||
Well Intervention | $ | (130,649 | ) | $ | (79,147 | ) | |
Robotics | (691 | ) | (504 | ) | |||
Production Facilities | — | (74 | ) | ||||
Other | (88 | ) | 372 | ||||
Distribution from equity investment | — | 1,200 | |||||
Proceeds from sale of equity investment (1) | — | 25,000 | |||||
Proceeds from sale of assets (2) | 10,000 | 10,887 | |||||
Net cash used in investing activities | $ | (121,428 | ) | $ | (42,266 | ) |
Investing Activities
Cash flows from financingused in investing activities consist primarily of proceeds from debt and equity financing activities and repayments of our long-term debt. Total cash flows from financing activities increased by $71.2 million for the nine-month periodthree-month periods ended September 30, 2017 as compared toMarch 31, 2022 and 2021 reflect the same period in 2016 primarily reflecting net proceeds of approximately $220 million we received from our underwritten public equity offering in January 2017 (Note 8) and the $100 million proceeds from our Term Loan borrowings in June 2017, offset in part by early repayment of the approximately $180 million term loan then outstanding under the credit agreement prior to its June 2017 amendment and restatement (Note 6) and net proceeds of approximately $95 million we received in the nine-month period ended September 30, 2016 from the sale of our common stock under at-the-market equity offering programs.
Financing Activities
Net cash outflows from financing activities for the three-month period ended March 31, 2022 primarily reflect the repayment of $3.9 million related to the MARAD Debt (Note 5). Net cash outflows from financing activities for the three-month period ended March 31, 2021 primarily reflect the repayment of $58.2 million related to our indebtedness, including the final maturity of $53.6 million of the Nordea Q5000 Loan.
Material Cash Requirements
Our material cash requirements include our obligations to repay our long-term debt, satisfy other contractual cash commitments and Commercial Commitments
Long-term debt and other contractual commitments
The following table summarizes the principal amount of our long-term debt and related debt service costs as well as other contractual cashcommitments, which include commitments for property and equipment and operating lease obligations, as of September 30, 2017March 31, 2022 and the scheduled yearsportions of those amounts that are short-term (due in whichless than one year) and long-term (due in one year or greater) based on their stated maturities (in thousands). Our property and equipment commitments include contractually committed amounts to purchase and service certain property and equipment (inclusive of commitments related to regulatory recertification and dry dock as discussed below) but do not include expected capital spending that is not contractually committed as of March 31, 2022. Our 2022 Notes, 2023 Notes and 2026 Notes have certain early redemption and conversion features that could affect the obligationstiming and amount of any cash requirements. Although upon conversion these notes are contractually due (in thousands):
| | | | | | | | | |
|
| Total |
| Short-Term |
| Long-Term | |||
MARAD debt | | $ | 44,930 | | $ | 8,133 | | $ | 36,797 |
2022 Notes | |
| 35,000 | |
| 35,000 | |
| — |
2023 Notes | |
| 30,000 | |
| — | |
| 30,000 |
2026 Notes | |
| 200,000 | |
| — | |
| 200,000 |
Interest related to debt | |
| 62,148 | |
| 17,362 | |
| 44,786 |
Property and equipment | |
| 9,125 | |
| 9,125 | |
| — |
Operating leases (1) | |
| 308,370 | |
| 99,767 | |
| 208,603 |
Total cash obligations | | $ | 689,573 | | $ | 169,387 | | $ | 520,186 |
Total (1) | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||
Term Loan | $ | 98,750 | $ | 6,250 | $ | 92,500 | $ | — | $ | — | |||||||||
Nordea Q5000 Loan | 169,643 | 35,714 | 133,929 | — | — | ||||||||||||||
MARAD Debt | 77,000 | 6,532 | 14,058 | 15,497 | 40,913 | ||||||||||||||
2022 Notes (2) | 125,000 | — | — | 125,000 | — | ||||||||||||||
2032 Notes (3) | 60,115 | 60,115 | — | — | — | ||||||||||||||
Interest related to debt (4) | 78,706 | 23,411 | 35,804 | 14,614 | 4,877 | ||||||||||||||
Property and equipment (5) | 262,626 | 113,149 | 149,477 | — | — | ||||||||||||||
Operating leases (6) | 694,257 | 140,345 | 250,424 | 207,824 | 95,664 | ||||||||||||||
Total cash obligations | $ | 1,566,097 | $ | 385,516 | $ | 676,192 | $ | 362,935 | $ | 141,454 |
(1) |
Operating leases include vessel charters and facility and equipment leases. At March 31, 2022. |
31
Other material cash requirements
Other material cash requirements include the following:
Decommissioning. We have decommissioning obligations associated with our oil and gas properties (Note 11). Those obligations approximate $31.0 million (undiscounted) as of March 31, 2022 and are all expected to be paid during the next 12 months. We are entitled to receive certain amounts from Marathon Oil Corporation as these decommissioning obligations are fulfilled.
Regulatory recertification and dry dock. Our vessels and intervention systems are subject to certain regulatory recertification requirements that must be satisfied in order for the vessels and intervention systems to operate. Recertification may require dry dock and other compliance costs on a periodic basis, usually every 30 months. These costs can vary and generally range between $3.0 million to $15.0 million per vessel and $0.5 million to $5.0 million per intervention system. The timing of these costs can vary.
We expect the sources of funds to satisfy our material cash requirements to primarily come from our ongoing operations and existing cash on hand, but may also come from availability under the ABL Facility and access to capital markets.
CRITICAL ACCOUNTING POLICIESESTIMATES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations, are based upon ouras reflected in the condensed consolidated financial statements. We prepare these financial statements and related footnotes, are prepared in conformity with accounting principles generally accepted in the United States.GAAP. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amountshave had or are reasonably likely to have a material impact on our financial condition or results of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.operations. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. These estimates involve a significant level of estimation uncertainty and may change over time as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. For additional information regarding our critical accounting policies and estimates, please readsee our “Critical Accounting Policies and Estimates” as disclosed in our 20162021 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2022, we were exposed to market risk in two areas: interest rates andrisks associated with foreign currency exchange rates.
Foreign Currency Exchange Rate Risk.
Because we operate in various regions around the world, we conduct a portion of our business in currencies other than the U.S. dollar. As such, our earnings areAssets and liabilities of our subsidiaries that do not have the nine-monthU.S. dollar as their functional currency are translated using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected in “Accumulated other comprehensive loss” in the shareholders’ equity section of our condensed consolidated balance sheets. For the three-month period ended September 30, 2017,March 31, 2022, we recognizedrecorded foreign currency translation losses of $2.2$13.1 million related to accumulated other comprehensive loss. Deferred taxes have not been provided on foreign currency translation adjustments as our non-U.S. undistributed earnings are permanently reinvested.
32
When currencies other than the functional currency are to be paid or received, the resulting transaction gain or loss associated with changes in the applicable foreign currency exchange rate is recognized in the condensed consolidated statements of operations as a component of “Other income (expense), net.” Foreign currency gains or losses from the remeasurement of monetary assets and liabilities as well as unsettled foreign currency transactions, inincluding intercompany transactions that are not of a long-term investment nature, are also recognized as a component of “Other income (expense), net” in our condensed consolidated statement of operations.
Item 4.
Controls and Procedures(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2017.March 31, 2022. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2017March 31, 2022 to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.
(b)
Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter endedPart II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Note 12 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| | | | | | | | | |
| | | | | | | (c) | | |
| | | | | | | Total number | | (d) |
| | | | | | | of shares | | Maximum |
| | (a) | | (b) | | purchased as | | number of shares | |
| | Total number | | Average | | part of publicly | | that may yet be | |
| | of shares | | price paid | | announced | | purchased under | |
Period |
| purchased (1) |
| per share |
| program |
| the program (2) | |
January 1 to January 31, 2022 |
| 488,718 | | $ | 3.12 |
| — |
| 9,183,183 |
February 1 to February 28, 2022 |
| — | |
| — |
| — |
| 9,183,183 |
March 1 to March 31, 2022 |
| — | |
| — |
| — |
| 9,183,183 |
|
| 488,718 | | $ | 3.12 |
| — | | |
(1) | Includes shares forfeited in satisfaction of tax obligations upon vesting of share-based awards under our existing long-term incentive plans. |
(2) | Under the terms of our stock repurchase program, |
33
Item 6. Exhibits
| | | | |
Exhibit Number | Description | Filed or Furnished Herewith or Incorporated by Reference from the Following Documents (Registration or File Number) | ||
3.1 | | | Exhibit 3.1 to the Current Report on Form 8-K filed on March 1, 2006 (000-22739) | |
3.2 | | | Exhibit 3.1 to the Current Report on Form 8-K filed on September 28, 2006 (001-32936) | |
31.1 | | | Filed herewith | |
31.2 | | | Filed herewith | |
32.1 | | | Furnished herewith | |
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 | | Inline XBRL Taxonomy Extension Schema Document. | | Filed herewith |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | Filed herewith |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | Filed herewith |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | Filed herewith |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | Filed herewith |
104 | | Cover Page Interactive Data File (formatted as inline XBRL | | Filed herewith |
34
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.
| | | | |
| | |||
HELIX ENERGY SOLUTIONS GROUP, INC. | ||||
| | | (Registrant) | |
| | | ||
Date: April 27, 2022 | | By: | /s/ Owen Kratz | |
| | | Owen Kratz | |
| | | President and Chief Executive Officer | |
| | | (Principal Executive Officer) | |
| | | | |
Date: April 27, 2022 | | By: | /s/ Erik Staffeldt | |
| | | Erik Staffeldt | |
| | | Executive Vice President and | |
| | | Chief Financial Officer | |
| | | (Principal Financial Officer) |
35