What changed in this filing

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Item 1. Financial Statements

2020-07-24 compared with 2020-04-24 · 304 added, 154 removed, 567 unchanged (45% of the section changed)

4 unchanged sentences

(in thousands)

2020 December 31,

Current assets:

2 unchanged sentences

Accounts receivable, net of allowance for credit losses of $ 3,209 and $ 0 , respectively

165,941 125,457

Other current assets 91,818 50,450

5 unchanged sentences

Other assets, net 52,196 84,508

Total assets $ 2,484,669 $ 2,596,731

LIABILITIES AND SHAREHOLDERS' EQUITY

13 unchanged sentences

Common stock, no par, 240,000 shares authorized, 150,040 and 148,888 shares issued, respectively

1,318,531 1,318,961

Retained earnings 436,107 445,370

1 unchanged sentence

Total shareholders ’ equity

1,654,700 1,699,591

Total liabilities, redeemable noncontrolling interests and shareholders ’ equity

$ 2,484,669 $ 2,596,731

The accompanying notes are an integral part of these condensed consolidated financial statements.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Net revenues $ 199,147 $ 201,728 $ 380,168 $ 368,551

Cost of sales 169,571 161,794 348,582 312,363

Gross profit 29,576 39,934 31,586 56,188

Gain on disposition of assets, net 473 — 473 —

Goodwill impairment — — ( 6,689 ) —

3 unchanged sentences

Net interest expense ( 7,063 ) ( 2,205 ) ( 12,809 ) ( 4,303 )

Other income (expense), net

Loss on extinguishment of long-term debt — ( 18 ) — ( 18 )

Other expense, net ( 2,069 ) ( 1,311 ) ( 12,496 ) ( 145 )

Royalty income and other 119 190 2,318 2,535

5 unchanged sentences

Earnings (loss) per share of common stock:

Basic $ 0.04 $ 0.11 $ ( 0.06 ) $ 0.12

Diluted $ 0.04 $ 0.11 $ ( 0.06 ) $ 0.12

Weighted average common shares outstanding:

Basic 148,971 147,521 148,917 147,471

Diluted 149,691 148,101 148,917 147,931

The accompanying notes are an integral part of these condensed consolidated financial statements.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Net income (loss) $ 5,450 $ 16,823 $ ( 8,478 ) $ 18,141

Other comprehensive income (loss), net of tax:

Net unrealized loss on hedges arising during the period

Reclassifications to net (income) loss

Net unrealized gain (loss) on hedges arising during the period 1 ( 278 ) ( 95 ) ( 427 )

Reclassifications into earnings 25 1,975 452 3,821

Income taxes on hedges ( 6 ) ( 340 ) ( 72 ) ( 682 )

Net change in hedges, net of tax 20 1,357 285 2,712

Foreign currency translation gain (loss)

Foreign currency translation loss ( 1,896 ) ( 3,065 ) ( 35,483 ) ( 263 )

Other comprehensive income (loss), net of tax ( 1,876 ) ( 1,708 ) ( 35,198 ) 2,449

1 unchanged sentence

Less comprehensive loss attributable to redeemable noncontrolling interests:

Net loss — ( 31 ) ( 1,990 ) ( 31 )

Foreign currency translation loss ( 20 ) — ( 248 ) —

6 unchanged sentences

(in thousands)

Common Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Equity Redeemable

Noncontrolling

Shares Amount

Balance, March 31, 2020 149,962 $ 1,316,401 $ 430,726 $ ( 98,062 ) $ 1,649,065 $ 3,323

Net income — — 5,450 — 5,450 —

Foreign currency translation adjustments — — — ( 1,896 ) ( 1,896 ) ( 20 )

Unrealized gain on hedges, net of tax — — — 20 20 —

Accretion of redeemable noncontrolling interests — — ( 69 ) — ( 69 ) 69

Activity in company stock plans, net and other 78 217 — — 217 —

Share-based compensation — 1,913 — — 1,913 —

Balance, June 30, 2020 150,040 $ 1,318,531 $ 436,107 $ ( 99,938 ) $ 1,654,700 $ 3,372

Common Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Equity Redeemable

Noncontrolling

Shares Amount

Balance, March 31, 2019 148,785 $ 1,310,738 $ 388,912 $ ( 69,807 ) $ 1,629,843 $ —

Net income (loss) — — 16,854 — 16,854 ( 31 )

Foreign currency translation adjustments — — — ( 3,065 ) ( 3,065 ) —

Unrealized gain on hedges, net of tax — — — 1,357 1,357 —

Issuance of redeemable noncontrolling interests — — — — — 3,396

Accretion of redeemable noncontrolling interests — — ( 18 ) — ( 18 ) 18

Activity in company stock plans, net and other ( 26 ) ( 320 ) — — ( 320 ) —

Share-based compensation — 3,745 — — 3,745 —

Balance, June 30, 2019 148,759 $ 1,314,163 $ 405,748 $ ( 71,515 ) $ 1,648,396 $ 3,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

HELIX ENERGY SOLUTIONS GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

Common Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Equity Redeemable

Noncontrolling

Shares Amount

Balance, December 31, 2019 148,888 $ 1,318,961 $ 445,370 $ ( 64,740 ) $ 1,699,591 $ 3,455

Net loss — — ( 6,488 ) — ( 6,488 ) ( 1,990 )

Expected credit losses recognized in retained earnings upon adoption of ASU 2016-13 — — ( 620 ) — ( 620 ) —

4 unchanged sentences

Share-based compensation — 4,083 — — 4,083 —

Balance, March 31, 2020

Balance, June 30, 2020 150,040 $ 1,318,531 $ 436,107 $ ( 99,938 ) $ 1,654,700 $ 3,372

Common Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Equity Redeemable

Noncontrolling

Shares Amount

Balance, December 31, 2018 148,203 $ 1,308,709 $ 383,034 $ ( 73,964 ) $ 1,617,779 $ —

Net income (loss) — — 18,172 — 18,172 ( 31 )

Reclassification of deferred gain from sale and leaseback transaction to retained earnings — — 4,560 — 4,560 —

1 unchanged sentence

Unrealized gain on hedges, net of tax — — — 2,712 2,712 —

Issuance of redeemable noncontrolling interests — — — — — 3,396

Accretion of redeemable noncontrolling interests — — ( 18 ) — ( 18 ) 18

Activity in company stock plans, net and other 556 ( 979 ) — — ( 979 ) —

Share-based compensation — 6,433 — — 6,433 —

Balance, March 31, 2019

Balance, June 30, 2019 148,759 $ 1,314,163 $ 405,748 $ ( 71,515 ) $ 1,648,396 $ 3,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

8 unchanged sentences

Equity in losses of investment 22 69

Gain on disposition of assets, net ( 473 ) —

Loss on extinguishment of long-term debt — 18

Unrealized gain on derivative contracts, net ( 601 ) ( 1,740 )

Unrealized foreign currency (gain) loss

Unrealized foreign currency loss 10,433 ( 568 )

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and accrued liabilities 35,219 665

Net cash used in operating activities

Other, net ( 16,891 ) ( 16,113 )

Net cash provided by operating activities 6,042 32,561

Cash flows from investing activities:

Capital expenditures ( 17,579 ) ( 27,458 )

STL acquisition, net — ( 4,081 )

Proceeds from sale of assets 498 2,525

1 unchanged sentence

Cash flows from financing activities:

Proceeds from term loan — 35,000

Repayment of term loans ( 1,750 ) ( 33,692 )

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We have made all adjustments, which, unless otherwise disclosed, are of normal recurring nature, that we believe are necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income and statements of cash flows, as applicable.

The operating results for the three- month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 .

The operating results for the three- and six-month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Our balance sheet as of December 31, 2019 included herein has been derived from the audited balance sheet as of December 31, 2019 included in our 2019 Form 10-K.

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The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity, as governments around the world imposed regulations in efforts to control the spread of COVID-19 such as shelter-in-place orders, quarantines, executive orders and similar restrictions.

As a result, the global economy has been marked by significant slowdown and uncertainty, which has led to a precipitous decline in oil prices in response to demand concerns, further exacerbated by the price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) during the first quarter 2020 and global storage considerations.

The decline in oil prices has resulted in a significantly weaker outlook for oil and gas producers, who have begun to cut their capital and operating budgets.

Our financial statements for the three- month period ended March 31, 2020 reflect the impact of these events and current market conditions, which include namely the recognition of goodwill impairment losses (Note 6) and tax benefits resulting from the U.S.

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (Note 8).

The continued spread of COVID-19 or deterioration in oil prices could result in further adverse impact on our results of operations, cash flows and financial position, including further asset impairments.

As a result, the global economy has been marked by significant slowdown and uncertainty, which led to a precipitous decline in oil prices in response to demand concerns and global storage considerations.

The decline in oil prices has resulted in a significantly weaker outlook for oil and gas producers, many of which are cutting their capital and operating budgets.

Our financial statements for the three- and six-month periods ended June 30, 2020 reflect the impact of these events and current market conditions, which include the recognition of goodwill impairment losses (Note 6) and tax benefits resulting from the U.S.

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (Note 8), reduced utilization on our vessels due to customers deferring work as well as costs related to our crew changes.

The continued spread of, or failure to contain, COVID-19 or continued oil price volatility could result in further adverse impact on our results of operations, cash flows and financial position, including further asset impairments.

New accounting standards adopted

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Our services cover the lifecycle of an offshore oil or gas field.

Our services also include subsea cable burial and seabed clearing services for the offshore renewable energy sector.

We provide services primarily in deepwater in the Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions.

Our life of field services are segregated into three reportable business segments:

Our services are segregated into three reportable business segments:

Well Intervention, Robotics and Production Facilities (Note 13).

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Our Robotics segment includes remotely operated vehicles (“ROVs”), trenchers and a ROVDrill, which are designed to complement well intervention services and offshore construction to both the oil and gas and the renewable energy markets.

Our Robotics segment also includes two robotics support vessels under long-term charter, the Grand Canyon II and the Grand Canyon III , as well as spot vessels as needed, including the Ross Candies , which is under a flexible charter agreement.

Our Production Facilities segment includes the Helix Producer I (the “ HP I ”), a ship-shaped dynamically positioned floating production vessel, the Helix Fast Response System (the “HFRS”), our ownership interest in Independence Hub, LLC (“Independence Hub”) (Note 4), and our ownership of oil and gas properties acquired from Marathon Oil Corporation (“Marathon Oil”) in January 2019.

All of our current production facilities activities are located in the Gulf of Mexico.

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Other current assets consist of the following (in thousands):

2020 December 31,

Contract assets (Note 10) $ 443 $ 740

Prepaids 11,001 12,635

Deferred costs (Note 10) 25,774 28,340

Income tax receivable 18,927 1,261

Other receivable (1)

Other 7,132 7,474

Total other current assets $ 91,818 $ 50,450

(1) Agreed-upon amounts to be paid by Marathon Oil Corporation (“Marathon Oil”) as the required plug and abandonment (“P&A”) work is completed (Note 14).

Other assets, net consist of the following (in thousands):

2020 December 31,

Prepaids $ 611 $ 777

Deferred recertification and dry dock costs, net 27,020 16,065

1 unchanged sentence

Charter deposit (1)

12,544 12,544

Other receivable (2)

1 unchanged sentence

Intangible assets with finite lives, net 3,645 3,847

Other 2,087 2,323

Total other assets, net $ 52,196 $ 84,508

(1) This amount is deposited with the owner of the Siem Helix 2 to offset certain payment obligations associated with the vessel at the end of the charter term.

Agreed-upon amounts to be paid by Marathon Oil as the required plug and abandonment (“P&A”) work on the remaining Droshky wells is completed (Notes 7 and 14).

(2) Agreed-upon amounts to be paid by Marathon Oil as the required P&A work is completed (Note 14).

Accrued liabilities consist of the following (in thousands):

2020 December 31,

Accrued payroll and related benefits $ 21,800 $ 31,417

1 unchanged sentence

Deferred revenue (Note 10) 10,530 11,568

Asset retirement obligations (Note 14) 29,562 —

Derivative liability (Note 19) — 1,002

Other 16,128 14,333

Total accrued liabilities $ 80,268 $ 62,389

Other non-current liabilities consist of the following (in thousands):

2020 December 31,

Deferred revenue (Note 10) $ 4,262 $ 8,286

Asset retirement obligations (Note 14) — 28,258

Other 2,024 2,100

Total other non-current liabilities $ 6,286 $ 38,644

2 unchanged sentences

Independence Hub owns the “Independence Hub” platform, which is in the process of being decommissioned and is expected to be substantially completed within the next 12 months.

We recognized a liability of $ 2.7 million at March 31, 2020 and $ 4.1 million at December 31, 2019 for our share of Independence Hub’s estimated obligations, net of remaining working capital.

The liability balances for our share of Independence Hub’s estimated obligations, net of remaining working capital, were $ 2.2 million at June 30, 2020 and $ 4.1 million at December 31, 2019.

Note 5 — Leases

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Operating lease cost $ 16,106 $ 18,056 $ 32,429 $ 36,189

3 unchanged sentences

Net lease cost $ 29,610 $ 25,709 $ 56,040 $ 50,722

Maturities of our operating lease liabilities as of March 31, 2020 are as follows (in thousands):

Facilities and Equipment

Maturities of our operating lease liabilities as of June 30, 2020 are as follows (in thousands):

Vessels Facilities and Equipment Total

Remainder of 2020 $ 29,916 $ 3,051 $ 32,967

2021 54,347 5,598 59,945

2022 52,106 5,093 57,199

2023 34,580 4,562 39,142

2024 2,470 4,296 6,766

Thereafter — 5,937 5,937

Total lease payments $ 173,419 $ 28,537 $ 201,956

5 unchanged sentences

Maturities of our operating lease liabilities as of December 31, 2019 are as follows (in thousands):

Facilities and Equipment

Vessels Facilities and Equipment Total

2020 $ 60,210 $ 6,610 $ 66,820

2021 54,564 5,888 60,452

2022 52,106 5,257 57,363

2023 34,580 4,622 39,202

2024 2,470 4,349 6,819

Thereafter — 6,251 6,251

Total lease payments $ 203,930 $ 32,977 $ 236,907

5 unchanged sentences

The following table presents the weighted average remaining lease term and discount rate:

March 31, 2020

2020 December 31,

Weighted average remaining lease term

Weighted average remaining lease term 3.5 years 4.0 years

Weighted average discount rate 7.53 % 7.54 %

The following table presents other information related to our operating leases (in thousands):

Three Months Ended

Six Months Ended

Cash paid for operating lease liabilities $ 32,731 $ 35,784

6 unchanged sentences

Other adjustments (2)

Balance at March 31, 2020

As a result of the decline in oil prices as well as energy and energy services valuations during the three- month period ended March 31, 2020 due to the ongoing COVID-19 pandemic and the OPEC+ price war, we identified that it was more likely than not that the fair value of goodwill associated with our STL acquisition (Note 2) was less than its carrying amount.

Balance at June 30, 2020 $ —

(1) As a result of the decline in oil prices as well as energy and energy services valuations during the first quarter 2020 due to the ongoing COVID-19 pandemic and the price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”), we identified that it was more likely than not that the fair value of goodwill associated with our STL acquisition was less than its carrying amount.

Based on the result of our goodwill impairment test as of March 31, 2020, we recorded a charge to write off the carrying amount of the goodwill.

2 unchanged sentences

Note 7 — Long-Term Debt

Scheduled maturities of our long-term debt outstanding as of March 31, 2020 are as follows (in thousands):

Scheduled maturities of our long-term debt outstanding as of June 30, 2020 are as follows (in thousands):

Notes 2023 Notes MARAD

Less than one year $ 3,500 $ — $ — $ 7,378 $ 71,428 $ 82,306

4 unchanged sentences

Over five years — — — 19,294 — 19,294

Gross debt 31,500 125,000 125,000 60,054 71,428 412,982

Unamortized debt discounts (2)

— ( 6,395 ) ( 12,829 ) — — ( 19,224 )

Unamortized debt issuance costs (3)

( 286 ) ( 971 ) ( 2,068 ) ( 3,293 ) ( 278 ) ( 6,896 )

Total debt 31,214 117,634 110,103 56,761 71,150 386,862

current maturities ( 3,500 ) — — ( 7,378 ) ( 71,150 ) ( 82,028 )

11 unchanged sentences

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 of up to $ 100 million with respect to an increase in the Revolving Credit Facility.

As of March 31, 2020 , we had no borrowings under the Revolving Credit Facility, and our available borrowing capacity under that facility, based on the leverage ratios, totaled $ 172.6 million , net of $ 2.4 million of letters of credit issued under that facility.

As of June 30, 2020, we had no borrowings under the Revolving Credit Facility, and our available borrowing capacity under that facility, based on the leverage ratios, totaled $ 172.4 million, net of $ 2.6 million of letters of credit issued under that facility.

Borrowings under the Credit Agreement bear interest, at our election, at either Bank of America’s base rate, the LIBOR or a comparable successor rate, or a combination thereof.

1 unchanged sentence

The Term Loan bearing interest at a LIBOR rate will bear interest per annum at the LIBOR or a comparable successor rate selected by us plus a margin of 3.25 %.

The interest rate on the Term Loan was 4.24 % as of March 31, 2020 .

The interest rate on the Term Loan was 3.43 % as of June 30, 2020.

Borrowings under the Revolving Credit Facility bearing interest at the base rate will bear interest at a per annum rate equal to Bank of America’s base rate plus a margin ranging from 1.50 % to 2.50 %.

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(“Q5000 Holdings”), a wholly owned Luxembourg subsidiary of Helix Vessel Finance S.à r.l., are not included in the calculations of our financial covenants except to the extent of any cash actually distributed by such subsidiary of Helix.

In January 2019, contemporaneously with our acquisition from Marathon Oil of several wells and related infrastructure associated with the Droshky Prospect located in offshore Gulf of Mexico Green Canyon Block 244, we amended the Credit Agreement to permit the issuance of certain security to third parties for required P&A obligations and to make certain capital expenditures in connection with acquired assets (Notes 2 and 14).

Convertible Senior Notes Due 2022 (“2022 Notes”)

On November 1, 2016, we completed a public offering and sale of the 2022 Notes in the aggregate principal amount of $ 125 million .

The 2022 Notes bear interest at a 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.

6 unchanged sentences

The indenture governing the 2022 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 all the notes, and the interest accrued on such notes, if any, to be immediately due and payable.

In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a significant subsidiary, the principal amount of the 2022 Notes together with any accrued and unpaid interest thereon will become immediately due and payable.

The 2022 Notes were initially accounted for by separating the net proceeds between long-term debt and shareholders’ equity.

In connection with the issuance of the 2022 Notes, we recorded a debt discount of $ 16.9 million ( $ 11.0 million net of tax) as a result of separating the equity component.

In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a subsidiary, the principal amount of the 2022 Notes together with any accrued and unpaid interest thereon will become immediately due and payable.

The 2022 Notes are separated between the equity component of $ 11.0 million recognized in shareholders’ equity and the debt component which is presented as long-term debt, net of unamortized debt discount and debt issuance costs.

The effective interest rate for the 2022 Notes is 7.3 % after considering the effect of the accretion of the related debt discount over the term of the 2022 Notes.

Interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 2.1 million for each of the three- month periods ended March 31, 2020 and 2019 .

The remaining unamortized debt discount of the 2022 Notes was $ 7.2 million at March 31, 2020 and $ 8.0 million at December 31, 2019 .

For the three- and six-month periods ended June 30, 2020, interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 2.1 million and $ 4.3 million, respectively.

For the three- and six-month periods ended June 30, 2019, interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 2.1 million and $ 4.2 million, respectively.

The remaining unamortized debt discount of the 2022 Notes was $ 6.4 million at June 30, 2020 and $ 8.0 million at December 31, 2019.

Convertible Senior Notes Due 2023 (“2023 Notes”)

On March 20, 2018, we completed a public offering and sale of the 2023 Notes in the aggregate principal amount of $ 125 million .

The 2023 Notes bear interest at a rate of 4.125 % per annum and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2018.

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In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a significant subsidiary, the principal amount of the 2023 Notes together with any accrued and unpaid interest thereon will become immediately due and payable.

The 2023 Notes were initially accounted for by separating the net proceeds between long-term debt and shareholders’ equity.

In connection with the issuance of the 2023 Notes, we recorded a debt discount of $ 20.1 million ( $ 15.9 million net of tax) as a result of separating the equity component.

The 2023 Notes are separated between the equity component of $ 15.9 million recognized in shareholders’ equity and the debt component which is presented as long-term debt, net of unamortized debt discount and debt issuance costs.

The effective interest rate for the 2023 Notes is 7.8 % after considering the effect of the accretion of the related debt discount over the term of the 2023 Notes.

Interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 2.1 million for each of the three- month periods ended March 31, 2020 and 2019 .

The remaining unamortized debt discount of the 2023 Notes was $ 13.7 million at March 31, 2020 and $ 14.5 million at December 31, 2019 .

For the three- and six-month periods ended June 30, 2020, interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 2.2 million and $ 4.3 million, respectively.

For the three- and six-month periods ended June 30, 2019, interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 2.1 million and $ 4.2 million, respectively.

The remaining unamortized debt discount of the 2023 Notes was $ 12.8 million at June 30, 2020 and $ 14.5 million at December 31, 2019.

government-guaranteed financing (the “MARAD Debt”), pursuant to Title XI of the Merchant Marine Act of 1936 administered by the Maritime Administration, was used to finance the construction of the Q4000 .

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In accordance with the Credit Agreement, the 2022 Notes, the 2023 Notes, the MARAD Debt agreements and the Nordea Credit Agreement, we are required to comply with certain covenants, including with respect to the Credit Agreement, certain financial ratios such as a consolidated interest coverage ratio, a consolidated total leverage ratio and a consolidated secured leverage ratio, as well as the maintenance of minimum cash balance, net worth, working capital and debt-to-equity requirements.

As of March 31, 2020 , we were in compliance with these covenants.

As of June 30, 2020, we were in compliance with these covenants.

The following table details the components of our net interest expense (in thousands):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Interest expense $ 7,179 $ 8,045 $ 14,573 $ 15,941

9 unchanged sentences

The CARES Act permits the carryback of certain net operating losses, which previously had been required to be carried forward, at the tax rates applicable in the relevant carryback year.

As a result of these changes, we recognized an estimated $ 5.8 million net tax benefit in the three- month period ended March 31, 2020 , consisting of a $ 15.9 million current tax benefit and a $ 10.1 million deferred tax expense.

As a result of these changes, we recognized an estimated $ 5.2 million net tax benefit in the six-month period ended June 30, 2020, consisting of a $ 15.8 million current tax benefit and a $ 10.6 million deferred tax expense.

This $ 5.2 million net tax benefit resulted from our deferred tax assets related to our net operating losses in the U.S.

being utilized at the previous higher income tax rate applicable to the carryback periods.

We adopted the discrete effective tax rate method for recording income taxes for the three- month period ended March 31, 2020 .

We adopted the discrete effective tax rate method for recording income taxes for the three- and six-month periods ended June 30, 2020.

The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate.

2 unchanged sentences

We will re-evaluate our use of this method each quarter until such time as a return to the annualized effective tax rate method is deemed appropriate.

The effective tax rates for the three- month periods ended March 31, 2020 and 2019 were 60.2 % benefit and 19.7 % expense, respectively.

The variance in the effective tax rate was primarily attributable to our carrying back certain net operating losses to prior periods with higher income tax rates as well as the result of the consolidation of certain U.S.

branch operations with the Helix U.S.

consolidated tax group.

Income taxes are provided based on the U.S.

statutory rate and at the local statutory rate for each foreign jurisdiction adjusted for items that are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes.

The primary differences between the U.S.

statutory rate and our effective rate are as follows:

statutory rate and the local statutory rate for each foreign jurisdiction adjusted for items that are required for federal and foreign income tax reporting purposes.

The effective tax rate for the three-month period ended June 30, 2020 was negative primarily due to the earnings mix between our higher and lower tax rate jurisdictions.

The effective tax rate for the six-month loss period ended June 30, 2020 was higher than the U.S.

statutory rate primarily due to our carrying back certain net operating losses to prior periods with higher income tax rates as well as the restructuring of certain foreign subsidiaries.

The effective tax rates for the three- and six-month periods ended June 30, 2019 were lower than the U.S.

statutory rate primarily due to a significant portion of our earnings being generated in certain jurisdictions with lower tax rates.

The primary differences between the income tax provision (benefit) at the U.S.

statutory rate and our actual income tax provision (benefit) are as follows:

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Taxes at U.S.

statutory rate $ 1,087 21.0 % $ 4,137 21.0 % $ ( 6,267 ) 21.0 % $ 4,482 21.0 %

Foreign provision

Foreign tax provision ( 2,166 ) ( 41.8 ) ( 1,664 ) ( 8.4 ) ( 1,116 ) 3.7 ( 1,914 ) ( 9.0 )

CARES Act 580 11.2 — — ( 5,234 ) 17.6 — —

Subsidiary restructuring — — — — ( 8,333 ) 27.9 — —

Effective rate

Other 228 4.4 403 2.0 ( 414 ) 1.4 632 3.0

Income tax provision (benefit) $ ( 271 ) ( 5.2 ) % $ 2,876 14.6 % $ ( 21,364 ) 71.6 % $ 3,200 15.0 %

Note 9 — Shareholders’ Equity

The components of accumulated other comprehensive loss (“accumulated OCI”) are as follows (in thousands):

2020 December 31,

Cumulative foreign currency translation adjustment $ ( 99,938 ) $ ( 64,455 )

7 unchanged sentences

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 Intervention

Production Facilities

Intercompany Eliminations (1)

Well Intervention Robotics Production Facilities Intercompany Eliminations (1)

Total Revenue

Three months ended March 31, 2020

Three months ended June 30, 2020

Short-term $ 55,368 $ 36,084 $ — $ — $ 91,452

Long-term 90,473 14,752 13,593 ( 11,123 ) 107,695

Three months ended March 31, 2019

Total $ 145,841 $ 50,836 $ 13,593 $ ( 11,123 ) $ 199,147

Three months ended June 30, 2019

Short-term $ 62,788 $ 28,701 $ — $ — $ 91,489

Long-term 96,286 16,745 15,621 ( 18,413 ) 110,239

Total $ 159,074 $ 45,446 $ 15,621 $ ( 18,413 ) $ 201,728

Six months ended June 30, 2020

Short-term $ 137,692 $ 58,525 $ — $ — $ 196,217

Long-term 148,801 27,569 29,134 ( 21,553 ) 183,951

Total $ 286,493 $ 86,094 $ 29,134 $ ( 21,553 ) $ 380,168

Six months ended June 30, 2019

Short-term $ 92,593 $ 53,631 $ — $ — $ 146,224

Long-term 188,712 30,856 30,874 ( 28,115 ) 222,327

Total $ 281,305 $ 84,487 $ 30,874 $ ( 28,115 ) $ 368,551

(1) Intercompany revenues among our business segments are under agreements that are considered long-term.

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.

Contract Balances

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Contract assets are reflected in “Other current assets” in the accompanying condensed consolidated balance sheets (Note 3).

Contract assets were $ 5.9 million at March 31, 2020 and $ 0.7 million at December 31, 2019 .

We had no impairment losses on our contract assets for the three- month periods ended March 31, 2020 and 2019 .

Contract assets were $ 0.4 million at June 30, 2020 and $ 0.7 million at December 31, 2019.

We had no impairment losses on our contract assets for the three- and six-month periods ended June 30, 2020 and 2019.

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.

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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 $ 17.2 million at March 31, 2020 and $ 19.9 million at December 31, 2019 .

Revenue recognized for the three- month periods ended March 31, 2020 and 2019 included $ 3.4 million and $ 2.5 million , respectively, that were included in the contract liability balance at the beginning of each period.

Contract liabilities totaled $ 14.8 million at June 30, 2020 and $ 19.9 million at December 31, 2019.

Revenue recognized for the three- and six-month periods ended June 30, 2020 included $ 3.5 million and $ 6.4 million, respectively, that were included in the contract liability balance at the beginning of each period.

Revenue recognized for the three- and six-month periods ended June 30, 2019 included $ 2.6 million and $ 5.2 million, respectively, that were included in the contract liability balance at the beginning 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, 2020 , $ 677.7 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $ 392.2 million in 2020, $ 219.5 million in 2021 and $ 66.0 million in 2022 and thereafter.

As of June 30, 2020, $ 574.2 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $ 262.8 million in 2020, $ 221.5 million in 2021 and $ 89.9 million in 2022 and thereafter.

These amounts include fixed consideration and estimated variable consideration for both wholly and partially unsatisfied performance obligations, including mobilization and demobilization fees.

These amounts are derived from the specific terms of our contracts, and the expected timing for revenue recognition is based on the estimated start date and duration of each contract according to the information known at March 31, 2020 .

For the three- month periods ended March 31, 2020 and 2019 , revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.

For the three- and six-month periods ended June 30, 2020 and 2019, revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.

Contract Fulfillment Costs

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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 $ 37.1 million at March 31, 2020 and $ 42.9 million at December 31, 2019 .

For the three- month periods ended March 31, 2020 and 2019 , we recorded $ 9.2 million and $ 7.7 million , respectively, related to amortization of deferred contract costs existing at the beginning of each period.

Our deferred contract costs totaled $ 32.1 million at June 30, 2020 and $ 42.9 million at December 31, 2019.

For the three- and six-month periods ended June 30, 2020, we recorded $ 8.8 million and $ 18.0 million, respectively, related to amortization of deferred contract costs existing at the beginning of each period.

For the three- and six-month periods ended June 30, 2019, we recorded $ 8.2 million and $ 15.9 million, respectively, related to amortization of deferred contract costs existing at the beginning of each period.

There were no associated impairment losses for any period presented.

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Three Months Ended

March 31, 2020

Three Months Ended

March 31, 2019

June 30, 2020 Three Months Ended

June 30, 2019

Income Shares Income Shares

Net income attributable to common shareholders $ 5,450 $ 16,854

Undistributed earnings allocated to participating securities ( 37 ) ( 141 )

Accretion of redeemable noncontrolling interests ( 69 ) ( 18 )

Net income available to common shareholders, basic $ 5,344 148,971 $ 16,695 147,521

Effect of dilutive securities:

Share-based awards other than participating securities — 720 — 580

Net income available to common shareholders, diluted $ 5,344 149,691 $ 16,695 148,101

Six Months Ended

June 30, 2020 Six Months Ended

June 30, 2019

Income Shares Income Shares

Net income (loss) attributable to common shareholders $ ( 6,488 ) $ 18,172

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Net income (loss) available to common shareholders, diluted $ ( 8,643 ) 148,917 $ 17,995 147,931

We had a net loss for the three- month period ended March 31, 2020 .

We had a net loss for the six-month period ended June 30, 2020.

Accordingly, our diluted EPS calculation for this period excluded any assumed exercise or conversion of common stock equivalents.

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Shares that otherwise would have been included in the diluted per share calculations assuming we had earnings are as follows (in thousands):

Three Months Ended

March 31, 2020

Six Months Ended

June 30, 2020

Diluted shares (as reported) 148,917

Share-based awards 980

Total 149,897

In addition, the following potentially dilutive shares related to the 2022 Notes and the 2023 Notes were excluded from the diluted EPS calculation as they were anti-dilutive (in thousands):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

2022 Notes 8,997 8,997 8,997 8,997

2023 Notes 13,202 13,202 13,202 13,202

Note 12 — Employee Benefit Plans

Long-Term Incentive Plan

We currently have one active long-term incentive plan:

the 2005 Long-Term Incentive Plan, as amended and restated (the “2005 Incentive Plan”).

As of March 31, 2020 , there were 7.0 million shares of our common stock available for issuance under the 2005 Incentive Plan.

During the three -month period ended March 31, 2020 , the following grants of share-based awards were made under the 2005 Incentive Plan:

Date of Grant

Per Share/Unit

Vesting Period

As of June 30, 2020, there were 7.0 million shares of our common stock available for issuance under our 2005 Long-Term Incentive Plan, as amended and restated (the “2005 Incentive Plan”).

During the six-month period ended June 30, 2020, the following grants of share-based awards were made under the 2005 Incentive Plan:

Date of Grant Shares/

Units Grant Date

Per Share/Unit Vesting Period

January 2, 2020 (1)

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5,679 9.63 100% on January 1, 2022

April 1, 2020 (3)

43,351 1.64 100% on January 1, 2022

(1) Reflects grants of restricted stock to our executive officers and select management employees.

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Forfeitures are recognized as they occur.

For the three- month periods ended March 31, 2020 and 2019 , $ 1.1 million and $ 1.3 million , respectively, were recognized as share-based compensation related to restricted stock.

For the three- and six-month periods ended June 30, 2020, $ 1.0 million and $ 2.1 million, respectively, were recognized as share-based compensation related to restricted stock.

For the three- and six-month periods ended June 30, 2019, $ 2.4 million and $ 3.7 million, respectively, were recognized as share-based compensation related to restricted stock.

The estimated fair value of PSUs is determined using a Monte Carlo simulation model.

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Compensation cost for PSUs that are accounted for as equity awards is measured based on the estimated grant date fair value and recognized over the vesting period on a straight-line basis as an increase to equity.

For the three- month periods ended March 31, 2020 and 2019 , $ 1.1 million and $ 1.3 million , respectively, were recognized as share-based compensation related to PSUs.

For the three- and six-month periods ended June 30, 2020, $ 0.9 million and $ 2.0 million, respectively, were recognized as share-based compensation related to PSUs.

For the three- and six-month periods ended June 30, 2019, $ 1.4 million and $ 2.7 million, respectively, were recognized as share-based compensation related to PSUs.

In January 2020, based on the performance of our common stock over a three-year period, 589,335 equity PSU awards granted in 2017 vested at 200 % and resulted in the delivery of 1,178,670 shares of our common stock with a total market value of $ 11.4 million.

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The value of these cash awards is recognized on a straight-line basis over a vesting period of three years .

For the three- month periods ended March 31, 2020 and 2019 , $ 1.2 million and $ 0.8 million , respectively, were recognized as compensation cost.

For the three- and six-month periods ended June 30, 2020, $ 1.1 million and $ 2.3 million, respectively, were recognized as compensation cost.

For the three- and six-month periods ended June 30, 2019, $ 0.8 million and $ 1.6 million, respectively, were recognized as compensation cost.

Defined Contribution Plan

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We have an employee stock purchase plan (the “ESPP”).

As of March 31, 2020 , 1.9 million shares were available for issuance under the ESPP.

As of June 30, 2020, 1.8 million shares were available for issuance under the ESPP.

The ESPP currently has a purchase limit of 260 shares per employee per purchase period.

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Our Well Intervention reportable segment includes our vessels and/or equipment used to perform well intervention services primarily in the Gulf of Mexico, Brazil, the North Sea and West Africa.

Our well intervention vessels include the Q4000 , the Q5000 , the Q7000 , the Seawell , the Well Enhancer , and the chartered Siem Helix 1 and Siem Helix 2 vessels.

Our well intervention vessels include the Q4000 , the Q5000 , the Q7000 , the Seawell , the Well Enhancer , and the Siem Helix 1 and Siem Helix 2 chartered vessels.

Our well intervention equipment includes IRSs and SILs, some of which we provide on a stand-alone basis.

Our Robotics segment includes ROVs, trenchers and a ROVDrill, which are designed to complement well intervention services and offshore construction to both the oil and gas and the renewable energy markets.

Our Robotics segment also includes two robotics support vessels under long-term charter, the Grand Canyon II and the Grand Canyon III , as well as spot vessels, including the Ross Candies, which is under a flexible charter agreement.

Our Production Facilities segment includes the HP I , the HFRS, our ownership interest in Independence Hub (Note 4) and our ownership of oil and gas properties (Note 14).

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Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Net revenues —

Well Intervention $ 145,841 $ 159,074 $ 286,493 $ 281,305

Robotics 50,836 45,446 86,094 84,487

Production Facilities 13,593 15,621 29,134 30,874

Intercompany eliminations ( 11,123 ) ( 18,413 ) ( 21,553 ) ( 28,115 )

Total $ 199,147 $ 201,728 $ 380,168 $ 368,551

Income (loss) from operations —

Well Intervention $ 11,758 $ 26,672 $ 6,066 $ 36,313

Robotics 7,781 2,949 4,957 ( 955 )

Production Facilities 3,365 4,452 7,008 8,857

Segment operating income (loss)

Segment operating income 22,904 34,073 18,031 44,215

Goodwill impairment (1)

— — ( 6,689 ) —

Corporate, eliminations and other ( 8,710 ) ( 11,001 ) ( 18,175 ) ( 20,874 )

Total $ 14,194 $ 23,072 $ ( 6,833 ) $ 23,341

(1) Relates to goodwill associated with our STL acquisition (Note 6).

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Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Well Intervention (1)

$ 3,910 $ 9,812 $ 7,214 $ 13,037

Robotics 7,213 8,601 14,339 15,078

Total $ 11,123 $ 18,413 $ 21,553 $ 28,115

(1) Both amounts in 2019 included $ 5.3 million associated with P&A work on one of the oil and gas properties in our Production Facilities segment (Note 14), which amounts are paid by Marathon Oil as the corresponding P&A work is completed.

Segment assets are comprised of all assets attributable to each reportable segment.

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The following table reflects total assets by reportable segment (in thousands):

2020 December 31,

Well Intervention $ 2,128,563 $ 2,180,180

Robotics 136,868 151,478

Production Facilities 135,474 142,624

Corporate and other 83,764 122,449

Total $ 2,484,669 $ 2,596,731

Note 14 — Asset Retirement Obligations

Asset retirement obligations (“AROs”) are recorded at fair value and consist of estimated costs for subsea infrastructure P&A activities associated with our oil and gas properties, which costs are discounted to present value using a credit-adjusted risk-free discount rate.

Asset retirement obligations (“AROs”) are recorded at fair value and consist of estimated costs for subsea infrastructure P&A activities associated with our oil and gas properties acquired from Marathon Oil in January 2019, which costs are discounted to present value using a credit-adjusted risk-free discount rate.

After its initial recognition, an ARO liability is increased for the passage of time as accretion expense, which is a component of our depreciation and amortization expense.

An ARO liability may also change based on revisions in estimated costs and/or timing to settle the obligations.

The following table describes the changes in our AROs (both current and long-term) (in thousands):

The following table describes the changes in our AROs (in thousands):

AROs at January 1, 2020 $ 28,258

Accretion expense 1,304

AROs at March 31, 2020

AROs at June 30, 2020 $ 29,562

Note 15 — Commitments and Contingencies and Other Matters

Commitments Related to Our Fleet

We have long-term charter agreements with Siem Offshore AS (“Siem”) for the Siem Helix 1 and Siem Helix 2 vessels used in connection with our contracts with Petróleo Brasileiro S.A.

(“Petrobras”) to perform well intervention work offshore Brazil.

The initial term of the charter agreements with Siem is for seven years with options to extend.

The initial term of the charter agreements with Siem is for seven years , which expires in June 2023 for the Siem Helix 1 and in February 2024 for the Siem Helix 2 with options to extend.

We have long-term charter agreements for the Grand Canyon II and Grand Canyon III vessels for use in our robotics operations.

The charter agreements expire in April 2021 for the Grand Canyon II and in May 2023 for the Grand Canyon III .

We took delivery of the Q7000 in November 2019 and the vessel commenced operations in Nigeria in January 2020.

We took delivery of the Q7000 in November 2019 and the vessel commenced operations in January 2020.

With the delivery of the Q7000 , all significant capital commitments have been completed.

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We classify cash as restricted when there are legal or contractual restrictions for its withdrawal.

As of March 31, 2020 , we had restricted cash of $ 52.4 million , which serves as collateral for one project-related letter of credit and is expected to be restricted for less than one year.

As of June 30, 2020, we had restricted cash of $ 42.1 million, which serves as collateral for one project-related letter of credit.

The letter of credit was cancelled in July 2020 and the restrictions on the cash were subsequently released.

The following table provides supplemental cash flow information (in thousands):

Three Months Ended

Six Months Ended

Interest paid, net of interest capitalized $ 8,413 $ 1,478

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Our non-cash investing activities include the acquisition of property and equipment for which payment has not been made.

These non-cash capital additions totaled $ 5.2 million at March 31, 2020 and $ 10.2 million at December 31, 2019 .

These non-cash capital additions totaled $ 1.6 million at June 30, 2020 and $ 10.2 million at December 31, 2019.

Note 17 — Allowance for Credit Losses

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Provision for current expected credit losses (1)

Balance at March 31, 2020

Balance at June 30, 2020 $ 3,209

(1) This amount consists of a $ 1.7 million credit loss reserve related to a receivable in our Robotics business segment and general current expected credit loss adjustments.

Note 18 — Fair Value Measurements

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Assets and liabilities measured at fair value are based on one or more of three valuation approaches as follows:

Market Approach — Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Cost Approach — Amount that would be required to replace the service capacity of an asset (replacement cost).

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).

(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, long-term debt and derivative instruments.

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These modeling techniques require us to make estimations of future prices, price correlation, volatility and liquidity based on market data.

The following tables provide additional information relating to those financial instruments measured at fair value on a recurring basis (in thousands):

Fair Value at March 31, 2020

Interest rate swaps

Total liability

Fair Value at December 31, 2019

Interest rate swaps

Foreign exchange contracts — hedging instruments

Foreign exchange contracts — non-hedging instruments

As of June 30, 2020, there were no financial instruments measured at fair value on a recurring basis.

The following table provides additional information relating to financial instruments measured at fair value on a recurring basis as of December 31, 2019 (in thousands):

Level 1 Level 2 Level 3 Total Valuation

Interest rate swaps $ — $ 44 $ — $ 44 (c)

Foreign exchange contracts — hedging instruments — 401 — 401 (c)

Foreign exchange contracts — non-hedging instruments — 601 — 601 (c)

Total net liability $ — $ 958 $ — $ 958

The principal amount and estimated fair value of our long-term debt are as follows (in thousands):

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Value (2) (3)

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Nordea Q5000 Loan (matures January 2021) (4)

71,428 71,830 89,286 89,398

MARAD Debt (matures February 2027) 60,054 65,444 63,610 68,643

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2023 Notes (mature September 2023) 125,000 99,375 125,000 162,188

Total debt $ 412,982 $ 372,750 $ 436,146 $ 487,413

(1) Principal amount includes current maturities and excludes the related unamortized debt discount and debt issuance costs.

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From time to time, we enter into interest rate swaps to stabilize cash flows related to our long-term variable interest rate debt.

In June 2015, we entered into interest rate swap contracts to fix the interest rate on $ 187.5 million of the Nordea Q5000 Loan (Note 7).

These swap contracts, which are settled monthly, began in June 2015 and extend through April 2020.

Our interest rate swap contracts qualify for cash flow hedge accounting treatment.

Changes in the fair value of interest rate swaps are reported in accumulated OCI (net of tax).

These changes are subsequently reclassified into earnings when the anticipated interest is recognized as interest expense.

In June 2015, we entered into interest rate swap contracts to fix the interest rate on $ 187.5 million of the Nordea Q5000 Loan.

These swap contracts expired in April 2020.

Our interest rate swap contracts qualified for cash flow hedge accounting treatment.

Changes in the fair value of interest rate swaps were reported in accumulated OCI (net of tax).

These changes were subsequently reclassified into earnings when the anticipated interest was recognized as interest expense.

Foreign Currency Exchange Rate Risk

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In February 2013, we entered into foreign currency exchange contracts to hedge our foreign currency exposure associated with the Grand Canyon II and Grand Canyon III charter payments denominated in Norwegian kroner through July 2019 and February 2020, respectively.

Changes in the fair value of foreign currency exchange contracts that qualify for hedge accounting treatment are reported in accumulated OCI (net of tax).

These changes are subsequently reclassified into earnings when the forecasted payments are made.

Changes in the fair value of foreign currency exchange contracts that do not qualify as cash flow hedges are recognized immediately in earnings within “Other expense, net” in the accompanying condensed consolidated statements of operations.

Changes in the fair value of foreign currency exchange contracts that qualify for hedge accounting treatment were reported in accumulated OCI (net of tax).

These changes were subsequently reclassified into earnings when the forecasted payments were made.

Changes in the fair value of foreign currency exchange contracts that did not qualify as cash flow hedges were recognized immediately in earnings within “Other expense, net” in the accompanying condensed consolidated statements of operations.

Quantitative Disclosures Relating to Derivative Instruments

The following table presents the balance sheet location and fair value of our derivative instruments that were designated as hedging instruments (in thousands):

March 31, 2020

December 31, 2019

Balance Sheet

We had no derivative instruments that were designated as hedging instruments as of June 30, 2020.

The following table presents the balance sheet location and fair value of our hedging instruments as of December 31, 2019 (in thousands):

Balance Sheet

Location Fair

Asset Derivative Instruments:

Interest rate swaps

Other current assets

Interest rate swaps Other current assets $ 44

Liability Derivative Instruments:

Interest rate swaps

Accrued liabilities

Foreign exchange contracts

Accrued liabilities

The following table presents the balance sheet location and fair value of our derivative instruments that were not designated as hedging instruments (in thousands):

March 31, 2020

December 31, 2019

Balance Sheet

Foreign exchange contracts Accrued liabilities $ 401

We had no derivative instruments that were not designated as hedging instruments as of June 30, 2020.

The following table presents the balance sheet location and fair value of our non-hedging instruments as of December 31, 2019 (in thousands):

Balance Sheet

Location Fair

Liability Derivative Instruments:

Foreign exchange contracts

Accrued liabilities

Foreign exchange contracts Accrued liabilities $ 601

The following tables present the impact that derivative instruments designated as hedging instruments had on our accumulated OCI (net of tax) and our condensed consolidated statements of operations (in thousands):

Unrealized Loss

Recognized in OCI

Unrealized Gain (Loss) Recognized in OCI

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Foreign exchange contracts $ — $ ( 24 ) $ ( 54 ) $ ( 58 )

Interest rate swaps 1 ( 254 ) ( 41 ) ( 369 )

$ 1 $ ( 278 ) $ ( 95 ) $ ( 427 )

Location of Gain (Loss) Reclassified from

Accumulated OCI into Earnings

Gain (Loss) Reclassified from

Accumulated OCI into Earnings Gain (Loss) Reclassified from

Accumulated OCI into Earnings

Three Months Ended

Foreign exchange contracts

Cost of sales

Interest rate swaps

Net interest expense

June 30, Six Months Ended

2020 2019 2020 2019

Foreign exchange contracts Cost of sales $ — $ ( 2,185 ) $ ( 455 ) $ ( 4,263 )

Interest rate swaps Net interest expense ( 25 ) 210 3 442

$ ( 25 ) $ ( 1,975 ) $ ( 452 ) $ ( 3,821 )

The following table presents the impact that derivative instruments not designated as hedging instruments had on our condensed consolidated statements of operations (in thousands):

Location of Loss

Recognized in Earnings

Loss Recognized in Earnings

Recognized in Earnings Loss Recognized in Earnings

Three Months Ended

Foreign exchange contracts

Other expense, net

June 30, Six Months Ended

2020 2019 2020 2019

Foreign exchange contracts Other expense, net $ — $ ( 2 ) $ ( 81 ) $ ( 42 )

$ — $ ( 2 ) $ ( 81 ) $ ( 42 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements