What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-22 compared with 2020-07-24 · 255 added, 180 removed, 691 unchanged (39% of the section changed)

4 unchanged sentences

(in thousands)

September 30,

2020 December 31,

40 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

5 unchanged sentences

Selling, general and administrative expenses ( 16,053 ) ( 16,076 ) ( 48,256 ) ( 48,923 )

Income (loss) from operations 14,194 23,072 ( 6,833 ) 23,341

Income from operations 19,015 38,998 12,182 62,339

Equity in losses of investment ( 11 ) ( 13 ) ( 33 ) ( 82 )

Net interest expense ( 7,598 ) ( 1,901 ) ( 20,407 ) ( 6,204 )

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

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

Gain (loss) on extinguishment of long-term debt 9,239 — 9,239 ( 18 )

Other income (expense), net 8,824 ( 2,285 ) ( 3,672 ) ( 2,430 )

Royalty income and other 208 362 2,526 2,897

1 unchanged sentence

Income tax provision (benefit) 5,232 3,539 ( 16,132 ) 6,739

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

Net income 24,445 31,622 15,967 49,763

Net loss attributable to redeemable noncontrolling interests ( 54 ) ( 73 ) ( 2,044 ) ( 104 )

Net income (loss) attributable to common shareholders $ 5,450 $ 16,854 $ ( 6,488 ) $ 18,172

Earnings (loss) per share of common stock:

Net income attributable to common shareholders $ 24,499 $ 31,695 $ 18,011 $ 49,867

Earnings per share of common stock:

Basic $ 0.16 $ 0.21 $ 0.10 $ 0.33

6 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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

Other comprehensive income (loss), net of tax:

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

Net income $ 24,445 $ 31,622 $ 15,967 $ 49,763

Other comprehensive income, net of tax:

Net unrealized loss on hedges arising during the period — ( 274 ) ( 95 ) ( 701 )

Reclassifications into earnings — 1,046 452 4,867

1 unchanged sentence

Net change in hedges, net of tax — 616 285 3,328

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

Foreign currency translation gain (loss) 19,426 ( 4,301 ) ( 16,057 ) ( 4,564 )

Other comprehensive income (loss), net of tax 19,426 ( 3,685 ) ( 15,772 ) ( 1,236 )

Comprehensive income (loss) 3,574 15,115 ( 43,676 ) 20,590

Less comprehensive loss attributable to redeemable noncontrolling interests:

Comprehensive income 43,871 27,937 195 48,527

Less comprehensive income (loss) attributable to redeemable noncontrolling interests:

Net loss ( 54 ) ( 73 ) ( 2,044 ) ( 104 )

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

Comprehensive loss attributable to redeemable noncontrolling interests ( 20 ) ( 31 ) ( 2,238 ) ( 31 )

Comprehensive income (loss) attributable to common shareholders $ 3,594 $ 15,146 $ ( 41,438 ) $ 20,621

Foreign currency translation gain (loss) 133 ( 78 ) ( 115 ) ( 78 )

Comprehensive gain (loss) attributable to redeemable noncontrolling interests 79 ( 151 ) ( 2,159 ) ( 182 )

Comprehensive income attributable to common shareholders $ 43,792 $ 28,088 $ 2,354 $ 48,709

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

10 unchanged sentences

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 —

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

Net income (loss) — — 24,499 — 24,499 ( 54 )

Foreign currency translation adjustments — — — 19,426 19,426 133

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

Accretion of redeemable noncontrolling interests — — ( 128 ) — ( 128 ) 128

Equity component of convertible senior notes — 33,336 — — 33,336 —

Re-acquisition of equity component of convertible senior notes — ( 18,006 ) — — ( 18,006 ) —

Capped call transactions — ( 10,625 ) — — ( 10,625 ) —

Activity in company stock plans, net and other 96 193 — — 193 —

Share-based compensation — 2,091 — — 2,091 —

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

Balance, September 30, 2020 150,136 $ 1,325,520 $ 460,478 $ ( 80,512 ) $ 1,705,486 $ 3,579

Common Stock Retained

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Shares Amount

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

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

Net income (loss) — — 31,695 — 31,695 ( 73 )

1 unchanged sentence

Unrealized gain on hedges, net of tax — — — 616 616 —

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

Accretion of redeemable noncontrolling interests — — ( 25 ) — ( 25 ) 25

1 unchanged sentence

Share-based compensation — 2,428 — — 2,428 —

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

Balance, September 30, 2019 148,802 $ 1,316,805 $ 437,418 $ ( 75,200 ) $ 1,679,023 $ 3,257

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

11 unchanged sentences

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 )

Net income (loss) — — 18,011 — 18,011 ( 2,044 )

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

2 unchanged sentences

Accretion of redeemable noncontrolling interests — — ( 2,283 ) — ( 2,283 ) 2,283

Equity component of convertible senior notes — 33,336 — — 33,336 —

Re-acquisition of equity component of convertible senior notes — ( 18,006 ) — — ( 18,006 ) —

Capped call transactions — ( 10,625 ) — — ( 10,625 ) —

Activity in company stock plans, net and other 1,248 ( 4,320 ) — — ( 4,320 ) —

Share-based compensation — 6,174 — — 6,174 —

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

Balance, September 30, 2020 150,136 $ 1,325,520 $ 460,478 $ ( 80,512 ) $ 1,705,486 $ 3,579

Common Stock Retained

14 unchanged sentences

Share-based compensation — 8,861 — — 8,861 —

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

Balance, September 30, 2019 148,802 $ 1,316,805 $ 437,418 $ ( 75,200 ) $ 1,679,023 $ 3,257

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

3 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss) $ ( 8,478 ) $ 18,141

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net income $ 15,967 $ 49,763

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 99,552 84,420

6 unchanged sentences

Gain on disposition of assets, net ( 913 ) —

Loss on extinguishment of long-term debt — 18

(Gain) loss on extinguishment of long-term debt ( 9,239 ) 18

Unrealized gain on derivative contracts, net ( 601 ) ( 2,351 )

13 unchanged sentences

Cash flows from financing activities:

Proceeds from convertible senior notes 200,000 —

Repayment of convertible senior notes ( 183,150 ) —

Proceeds from term loan — 35,000

2 unchanged sentences

Repayment of MARAD Debt ( 7,200 ) ( 6,858 )

Capped call transactions ( 10,625 ) —

Debt issuance costs ( 7,075 ) ( 1,544 )

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 1,600 ) ( 191 )

Net decrease in cash and cash equivalents and restricted cash ( 42,067 ) ( 18,317 )

Net increase (decrease) in cash and cash equivalents and restricted cash ( 3,227 ) 6,881

Cash and cash equivalents and restricted cash:

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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- 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.

The operating results for the three- and nine-month periods ended September 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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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.

In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic.

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 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.

Beginning in the first quarter 2020, the COVID-19 pandemic 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 resulted in a decline in oil prices in response to demand concerns and global storage considerations.

Lower oil prices have resulted in a significantly weaker outlook for oil and gas producers, many of which have cut their capital and operating budgets for 2020 and beyond.

Our financial statements for the three- and nine-month periods ended September 30, 2020 reflect the impact of these events and current market conditions, which include reduced utilization on our vessels due to customers deferring work, increased operating costs related to the current environment, our 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, 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.

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New accounting standards issued but not yet effective

In August 2020, the FASB issued ASU No.

2020-06, “Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,” which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, this ASU removes from GAAP the liability and equity separation model for convertible instruments with conversion features that are not required to be bifurcated as a derivative under ASC Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

The embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

The adoption of this ASU is expected to increase the net book value of our long-term debt and reduce shareholders’ equity as we reclassify the conversion features associated with our various outstanding convertible senior notes (Note 7).

Subsequent to its adoption, the ASU is also expected to reduce our interest expense.

Additionally, the ASU no longer permits the treasury stock method and instead requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (“EPS”).

The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.

We are currently evaluating when to adopt the ASU and the impact it will have on our consolidated financial statements.

We do not expect any other new accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.

10 unchanged sentences

Our well intervention equipment includes intervention riser systems (“IRSs”) and subsea intervention lubricators (“SILs”), some of which we provide on a stand-alone basis.

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 through August 2020.

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.

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.

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

On May 29, 2019, we acquired a 70 % controlling interest in Subsea Technologies Group Limited (“STL”), a subsea engineering firm based in Aberdeen, Scotland, for $ 5.1 million.

The holders of the remaining 30 % noncontrolling interest have the right to put their shares to us in June 2024.

These redeemable noncontrolling interests were recognized as temporary equity at their estimated fair value of $ 3.4 million at the acquisition date.

In March 2020, we recorded an impairment loss to write off the goodwill associated with the STL acquisition (Note 6).

STL is included in our Well Intervention segment (Note 13) and its revenue and earnings are immaterial to our consolidated results.

Note 3 — Details of Certain Accounts

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

September 30,

2020 December 31,

6 unchanged sentences

Total other current assets $ 104,117 $ 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).

(1) Agreed-upon amounts to be paid to us by Marathon Oil Corporation (“Marathon Oil”) as the required plug and abandonment (“P&A”) work associated with our Droshky oil and gas properties is completed (Note 14).

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

September 30,

2020 December 31,

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(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.

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

(2) Agreed-upon amounts to be paid to us by Marathon Oil as the required P&A work associated with our Droshky oil and gas properties is completed (Note 14).

Accrued liabilities consist of the following (in thousands):

September 30,

2020 December 31,

7 unchanged sentences

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

September 30,

2020 December 31,

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We have a 20 % ownership interest in Independence Hub that we account for using the equity method of accounting.

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.

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.

Independence Hub owns the “Independence Hub” platform, which is nearing completion of its decommissioning.

The remaining liability balances for our share of Independence Hub’s estimated obligations, net of remaining working capital, were $ 1.9 million at September 30, 2020 and $ 4.1 million at December 31, 2019.

Note 5 — Leases

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

4 unchanged sentences

Net lease cost $ 32,915 $ 26,868 $ 88,955 $ 77,590

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

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

Vessels Facilities and Equipment Total

26 unchanged sentences

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

September 30,

2020 December 31,

2 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Cash paid for operating lease liabilities $ 49,350 $ 54,538

ROU assets obtained in exchange for new operating lease obligations 36 921

Note 6 — Goodwill

Note 6 — Business Combinations and Goodwill

In May 2019, we acquired a 70 % controlling interest in Subsea Technologies Group Limited (“STL”), a subsea engineering firm based in Aberdeen, Scotland, for $ 5.1 million.

The holders of the remaining 30 % noncontrolling interest currently have the right to put their shares to us in June 2024.

These redeemable noncontrolling interests have been recognized as temporary equity.

STL is included in our Well Intervention segment (Note 13) and its revenue and earnings are immaterial to our consolidated results.

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+”) during the first quarter 2020, 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.

The fair value of the reporting unit used to determine the impairment was estimated using a discounted cash flow approach.

The changes in the carrying amount of goodwill are as follows (in thousands):

3 unchanged sentences

Other adjustments (1)

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.

The fair value of the reporting unit used to determine the impairment was estimated using a discounted cash flow approach.

Balance at September 30, 2020 $ —

(1) Relates to foreign currency adjustments.

Note 7 — Long-Term Debt

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

Notes 2023 Notes MARAD

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

Less than one year $ 3,500 $ — $ — $ — $ 7,560 $ 62,500 $ 73,560

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(1) Term Loan pursuant to the Credit Agreement (as defined below) matures in December 2021.

(2) Convertible Senior Notes due 2022 and 2023 will increase to their face amounts through accretion of their debt discounts to interest expense through May 2022 and September 2023, respectively.

(2) Convertible Senior Notes due 2022, 2023 and 2026 will increase to their face amounts through accretion of their debt discounts to interest expense through May 2022, September 2023 and February 2026, respectively.

(3) Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement.

1 unchanged sentence

Credit Agreement

On June 30, 2017, we entered into an Amended and Restated Credit Agreement (and the amendments made thereafter, collectively the “Credit Agreement”) with a group of lenders led by Bank of America, N.A.

We have a credit agreement (and the amendments made thereafter, collectively the “Credit Agreement”) with a group of lenders led by Bank of America, N.A.

(“Bank of America”).

On June 28, 2019, we amended our existing term loan (the “Term Loan”) and revolving credit facility (the “Revolving Credit Facility”) under the Credit Agreement.

The Credit Agreement is comprised of a $ 35 million Term Loan and a Revolving Credit Facility of $ 175 million and matures on December 31, 2021.

The Credit Agreement is comprised of a Term Loan with a remaining balance of $ 30.6 million as of September 30, 2020 and a Revolving Credit Facility with a maximum availability of $ 175 million that matures on December 31, 2021.

The Revolving Credit Facility permits us to obtain letters of credit up to a sublimit 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 of up to $ 100 million with respect to an increase in the Revolving Credit 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.

As of September 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 $ 144.7 million, net of $ 3.4 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.

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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 3.43 % as of June 30, 2020.

The interest rate on the Term Loan was 3.40 % as of September 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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We also pay a fixed commitment fee of 0.50 % per annum on the unused portion of the Revolving Credit Facility.

The Term Loan principal is required to be repaid in quarterly installments of 2.5 % of the aggregate principal amount of the Term Loan, with a balloon payment at maturity.

Installment amounts are subject to adjustment for any prepayments on the Term Loan.

The Term Loan principal is required to be repaid in quarterly installments of 2.5 % of its aggregate principal amount, with a balloon payment at maturity.

Installments are subject to adjustment for any prepayments.

We may prepay indebtedness outstanding under the Term Loan without premium or penalty, but may not reborrow any amounts prepaid.

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In addition, these obligations are secured by pledges of up to 66 % of the shares of certain foreign subsidiaries (restricted subsidiaries).

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 Credit Agreement and the other documents entered into in connection with the Credit Agreement include terms and conditions, including covenants, that we consider customary for this type of transaction.

The covenants include certain restrictions on our and certain of our subsidiaries’ ability to grant liens, incur indebtedness, make investments, merge or consolidate, sell or transfer assets, pay dividends and make capital expenditures.

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The Unrestricted Subsidiaries are not pledged as collateral under the Credit Agreement, and the debt and EBITDA of the Unrestricted Subsidiaries, with the exception of Helix Q5000 Holdings, S.à r.l.

(“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.

Convertible Senior Notes Due 2022 (“2022 Notes”)

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

On August 14, 2020, we repurchased $ 90 million in aggregate principal amount of the 2022 Notes for $ 89.1 million.

We applied $ 81.7 million of the repurchase price to the acquisition of the debt component of the 2022 Notes and recognized a gain of $ 3.3 million.

The remaining unamortized debt discount of the 2022 Notes was $ 1.6 million at September 30, 2020 and $ 8.0 million at December 31, 2019.

We applied the remaining $ 7.4 million of the repurchase price to the re-acquisition of the equity component.

The remaining equity component of the 2022 Notes was $ 9.5 million ($ 5.3 million net of tax) at September 30, 2020 and $ 16.9 million ($ 11.0 million net of tax) at December 31, 2019.

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.

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.

For the three- and nine-month periods ended September 30, 2020, interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 1.3 million and $ 5.6 million, respectively.

For the three- and nine-month periods ended September 30, 2019, interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 2.1 million and $ 6.2 million, respectively.

Convertible Senior Notes Due 2023 (“2023 Notes”)

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

On August 14, 2020, we repurchased $ 95 million in aggregate principal amount of the 2023 Notes for $ 94.1 million.

We applied $ 78.2 million of the repurchase price to the re-acquisition of the debt component of the 2023 Notes and recognized a gain of $ 5.9 million.

The remaining unamortized debt discount of the 2023 Notes was $ 2.9 million at September 30, 2020 and $ 14.5 million at December 31, 2019.

We applied the remaining $ 15.9 million of the repurchase price to the re-acquisition of the equity component.

The remaining equity component of the 2023 Notes was $ 4.2 million ($ 3.6 million net of tax) at September 30, 2020 and $ 20.1 million ($ 15.9 million net of tax) at December 31, 2019.

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.

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.

For the three- and nine-month periods ended September 30, 2020, interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 1.3 million and $ 5.6 million, respectively.

For the three- and nine-month periods ended September 30, 2019, interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 2.1 million and $ 6.3 million, respectively.

Convertible Senior Notes Due 2026 (“2026 Notes”)

On August 14, 2020, we issued $ 200 million in aggregate principal amount of the 2026 Notes.

The net proceeds from the issuance of the 2026 Notes were approximately $ 192.5 million, after deducting the underwriting discounts and commissions and estimated offering expenses.

As discussed further in Note 9, we used approximately $ 10.5 million of the net proceeds to enter into privately negotiated capped call transactions in connection with the issuance of the 2026 Notes.

We used approximately $ 183.2 million, consisting of the remainder of the net proceeds, together with cash on hand, to repurchase $ 90 million in aggregate principal amount of the 2022 Notes and $ 95 million in aggregate principal amount of the 2023 Notes (see “Convertible Senior Notes Due 2022” and “Convertible Senior Notes Due 2023” above) in privately negotiated transactions.

The 2026 Notes bear interest at a rate of 6.75 % per annum and are payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021.

The 2026 Notes mature on February 15, 2026 unless earlier converted, redeemed or repurchased.

During certain periods and subject to certain conditions, the 2026 Notes are convertible by the holders into shares of our common stock at an initial conversion rate of 143.3795 shares of our common stock per $1,000 principal amount (which represents an initial conversion price of approximately $ 6.97 per share of common stock), subject to adjustment in certain circumstances.

We have the right and the intention to settle the principal amount of any such future conversions in cash.

Prior to August 15, 2023, the 2026 Notes are not redeemable.

On or after August 15, 2023, if certain conditions are met, we may redeem all or any portion of the 2026 Notes at a redemption price payable in cash equal to 100 % of the principal amount to be redeemed plus accrued and unpaid interest and a “make-whole premium” (as defined in the indenture governing the 2026 Notes).

Holders of the 2026 Notes may require us to repurchase the notes following a “fundamental change” (as defined in the indenture governing the 2026 Notes).

The indenture governing the 2026 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 2026 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 2026 Notes together with any accrued and unpaid interest thereon will become immediately due and payable.

The 2026 Notes are separated between the equity component of $ 43.8 million ($ 34.6 million net of tax) recognized in shareholders’ equity and the debt component which is presented as long-term debt, net of the unamortized debt discount and debt issuance costs.

The effective interest rate for the 2026 Notes is 12.4 % after considering the effect of the accretion of the related debt discount over the term of the 2026 Notes.

For each of the three- and nine-month periods ended September 30, 2020, interest expense (including amortization of the debt discount) related to the 2026 Notes was $ 2.4 million.

The remaining unamortized debt discount of the 2026 Notes was $ 43.1 million at September 30, 2020.

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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The Nordea Q5000 Loan was funded in the amount of $ 250 million in April 2015 at the time the Q5000 was delivered to us.

Helix Vessel Finance S.à r.l., a direct wholly owned Luxembourg subsidiary of Helix, guaranteed the Nordea Q5000 Loan.

Helix Vessel Finance S.à r.l., Q5000 Holdings's parent, which is a direct wholly owned Luxembourg subsidiary of Helix, guaranteed the Nordea Q5000 Loan.

The loan is secured by the Q5000 and its charter earnings as well as by a pledge of the shares of Q5000 Holdings.

This indebtedness is non-recourse to Helix.

We amended the Nordea Q5000 Loan on March 11, 2020.

We amended the Nordea Credit Agreement on March 11, 2020.

Prior to the amendment, the Nordea Q5000 Loan incurred interest at a LIBOR rate plus a margin of 2.5 % and was repayable in scheduled quarterly principal installments of $ 8.9 million with a balloon payment of $ 80.4 million on April 30, 2020.

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In addition, the Nordea Credit Agreement obligates Q5000 Holdings to meet certain minimum financial requirements, including liquidity, consolidated debt service coverage and collateral maintenance.

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

In accordance with the Credit Agreement, the 2022 Notes, the 2023 Notes, the 2026 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 September 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

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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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 $ 5.2 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.

As a result of these changes, we recognized a $ 7.6 million net tax benefit in the nine-month period ended September 30, 2020, consisting of a $ 18.9 million current tax benefit and a $ 11.3 million deferred tax expense.

This $ 7.6 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- 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.

The discrete method treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis.

We believe that the use of the discrete method is more appropriate than the annual effective tax rate method because of the current high degree of uncertainty in estimating annual pretax earnings created by uncertainty in future market conditions caused by the ongoing COVID-19 pandemic as well as uncertainty in the oil and gas market.

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.

During the nine-month period ended September 30, 2020, we migrated two of our foreign subsidiaries into our U.S.

consolidated tax group.

Subsequent to the migration, these subsidiaries are disregarded and no longer subject to certain branch profits taxes.

Consequently, we recognized net deferred tax benefits of $ 8.3 million due to the reduction in the overall tax rate associated with these subsidiaries.

Our estimated annual effective tax rate, adjusted for discrete tax items, is applied to our near break-even pre-tax loss for the nine-month period ended September 30, 2020 as we have determined that a return to the annualized effective tax rate method is appropriate.

Income taxes are provided based on the U.S.

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.

The effective tax rates for the three-month periods ended September 30, 2020 and 2019 were 17.6 % and 10.1 %, respectively.

The variance was primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as our carrying back certain net operating losses to prior periods with higher income tax rates.

The effective tax rate for the nine-month period ended September 30, 2020 was significantly higher than the U.S.

statutory rate primarily due to our recognition of discrete benefits during the period related to the restructuring of certain foreign subsidiaries and our carrying back certain net operating losses to prior periods with higher income tax rates under tax law changes associated with the CARES Act whereas we had only nominal pre-tax losses.

The effective tax rate for the nine-month period ended September 30, 2019 was 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:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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

September 30,

2020 December 31,

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(1) Relates to foreign currency hedges for the Grand Canyon III charter as well as interest rate hedge contracts for the Nordea Q5000 Loan (Note 19).

In connection with the 2026 Notes offering (Note 7), we entered into capped call transactions with three separate option counterparties (the “2026 Capped Calls”).

The 2026 Capped Calls are separate transactions from the 2026 Notes and do not change the holders' rights under the 2026 Notes.

Holders of the 2026 Notes do not have any rights with respect to the 2026 Capped Calls.

The 2026 Capped Calls are for an aggregate of 28,675,900 shares of our common stock, 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 2026 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 potential dilution to Helix common shares caused by any conversion of the 2026 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 2026 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 as a reduction to common stock in the shareholders’ equity section of our condensed consolidated balance sheet.

Note 10 — Revenue from Contracts with Customers

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Total Revenue

Three months ended June 30, 2020

Three months ended September 30, 2020

Short-term $ 46,907 $ 28,782 $ — $ — $ 75,689

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Total $ 140,803 $ 49,802 $ 14,167 $ ( 11,282 ) $ 193,490

Three months ended June 30, 2019

Three months ended September 30, 2019

Short-term $ 53,018 $ 26,809 $ — $ — $ 79,827

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Total $ 170,206 $ 51,909 $ 13,777 $ ( 23,283 ) $ 212,609

Six months ended June 30, 2020

Nine months ended September 30, 2020

Short-term $ 184,599 $ 87,307 $ — $ — $ 271,906

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Total $ 427,296 $ 135,896 $ 43,301 $ ( 32,835 ) $ 573,658

Six months ended June 30, 2019

Nine months ended September 30, 2019

Short-term $ 145,611 $ 80,440 $ — $ — $ 226,051

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Total $ 451,511 $ 136,396 $ 44,651 $ ( 51,398 ) $ 581,160

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

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

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 $ 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 assets were $ 1.9 million at September 30, 2020 and $ 0.7 million at December 31, 2019.

We had no impairment losses on our contract assets for the three- and nine-month periods ended September 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 $ 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.

Contract liabilities totaled $ 12.8 million at September 30, 2020 and $ 19.9 million at December 31, 2019.

Revenue recognized for the three- and nine-month periods ended September 30, 2020 included $ 3.4 million and $ 8.8 million, respectively, that were included in the contract liability balance at the beginning of each period.

Revenue recognized for the three- and nine-month periods ended September 30, 2019 included $ 4.0 million and $ 7.4 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 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.

As of September 30, 2020, $ 480.6 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $ 129.6 million in 2020, $ 247.0 million in 2021 and $ 104.0 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 June 30, 2020.

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.

For the three- and nine-month periods ended September 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 $ 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.

Our deferred contract costs totaled $ 26.1 million at September 30, 2020 and $ 42.9 million at December 31, 2019.

For the three- and nine-month periods ended September 30, 2020, we recorded $ 9.2 million and $ 27.2 million, respectively, related to amortization of deferred contract costs existing at the beginning of each period.

For the three- and nine-month periods ended September 30, 2019, we recorded $ 7.7 million and $ 23.6 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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Shares of restricted stock are considered participating securities because 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 two-class method in periods in which we have earnings.

We are required to compute basic and diluted EPS under the two-class method in periods in which we have earnings.

Under the two-class method, the undistributed earnings for each period are allocated based on the participation rights of both common shareholders and the holders of any participating securities as if earnings for the respective periods had been distributed.

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Three Months Ended

June 30, 2020 Three Months Ended

June 30, 2019

September 30, 2020 Three Months Ended

September 30, 2019

Income Shares Income Shares

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Share-based awards other than participating securities — 919 — 779

Undistributed earnings reallocated to participating securities 2 — 1 —

Net income available to common shareholders, diluted $ 24,193 149,951 $ 31,410 148,354

Six Months Ended

June 30, 2020 Six Months Ended

June 30, 2019

Nine Months Ended

September 30, 2020 Nine Months Ended

September 30, 2019

Income Shares Income Shares

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

Net income attributable to common shareholders $ 18,011 $ 49,867

Undistributed earnings allocated to participating securities ( 117 ) ( 435 )

Accretion of redeemable noncontrolling interests ( 2,283 ) ( 43 )

Net income (loss) available to common shareholders, basic $ ( 8,643 ) 148,917 $ 17,995 147,471

Net income available to common shareholders, basic $ 15,611 148,956 $ 49,389 147,506

Effect of dilutive securities:

Share-based awards other than participating securities — 868 — 580

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

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.

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):

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):

Undistributed earnings reallocated to participating securities 1 — 2 —

Net income available to common shareholders, diluted $ 15,612 149,824 $ 49,391 148,086

The following potentially dilutive shares related to the 2022 Notes, the 2023 Notes and the 2026 Notes were excluded from the diluted EPS calculation as they were anti-dilutive (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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2023 Notes 8,076 13,202 11,481 13,202

2026 Notes 14,650 — 4,919 —

Note 12 — Employee Benefit Plans

Long-Term Incentive Plan

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:

As of September 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 nine-month period ended September 30, 2020, the following grants of share-based awards were made under the 2005 Incentive Plan:

Date of Grant Shares/

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43,351 1.64 100% on January 1, 2022

July 1, 2020 (3)

19,407 3.47 100% 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- 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.

For the three- and nine-month periods ended September 30, 2020, $ 1.1 million and $ 3.2 million, respectively, were recognized as share-based compensation related to restricted stock.

For the three- and nine-month periods ended September 30, 2019, $ 1.2 million and $ 4.9 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.

PSUs granted prior to 2017 were settled in cash and accounted for as liability awards.

PSUs granted beginning in 2017 are to be settled solely in shares of our common stock and therefore are accounted for as equity awards.

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- 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.

Our existing PSUs are to be settled solely in shares of our common stock and are accounted for as equity awards.

Compensation cost for PSUs 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 shareholders’ equity.

For the three- and nine-month periods ended September 30, 2020, $ 1.0 million and $ 3.0 million, respectively, were recognized as share-based compensation related to PSUs.

For the three- and nine-month periods ended September 30, 2019, $ 1.2 million and $ 3.9 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- 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.

For the three- and nine-month periods ended September 30, 2020, $ 1.1 million and $ 3.4 million, respectively, were recognized as compensation cost.

For the three- and nine-month periods ended September 30, 2019, $ 0.8 million and $ 2.4 million, respectively, were recognized as compensation cost.

Defined Contribution Plan

We sponsor a defined contribution 401(k) retirement plan.

Our discretionary contributions, which were reactivated in April 2019, are in the form of cash and currently consist of a 50 % match of each participant’s contribution up to 5 % of the participant’s salary.

Our discretionary contributions are in the form of cash and currently consist of a 50 % match of each participant’s contribution up to 5 % of the participant’s salary.

Employee Stock Purchase Plan

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

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

As of September 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 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 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.

and Brazil well intervention operating segments are aggregated into the Well Intervention segment for financial reporting purposes.

Our Well Intervention 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 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 through August 2020.

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.

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

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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

Intercompany segment amounts are derived primarily from equipment and services provided to other business segments at rates consistent with those charged to third parties.

Intercompany segment amounts are derived primarily from equipment and services provided to other business segments.

Intercompany segment revenues are as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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Total $ 11,282 $ 23,283 $ 32,835 $ 51,398

(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.

(1) The three- and nine-month periods ended September 30, 2019 included $ 10.6 million and $ 15.9 million, respectively, associated with P&A work on our Droshky oil and gas properties in our Production Facilities segment (Note 14).

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):

September 30,

2020 December 31,

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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 acquired from Marathon Oil in January 2019, 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.

In connection with the acquisition of our Droshky oil and gas properties which we acquired from Marathon Oil in January 2019, we assumed the AROs for the required P&A of those assets in exchange for agreed-upon amounts to be paid by Marathon Oil as the P&A work is completed.

The estimated P&A 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.

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AROs at January 1, 2020 $ 28,258

Other revisions in estimated cash flows —

Accretion expense 2,021

AROs at June 30, 2020 $ 29,562

AROs at September 30, 2020 $ 30,279

Note 15 — Commitments and Contingencies and Other Matters

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.

We have long-term charter agreements with Siem Offshore AS (“Siem”) for the Siem Helix 1 and Siem Helix 2 vessels, which are currently 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 , which expires in June 2023 for the Siem Helix 1 and in February 2024 for the Siem Helix 2 with options to extend.

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

The Siem Helix 1 charter expires June 2023 and the Siem Helix 2 charter expires February 2024.

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 .

The Grand Canyon II charter expires April 2021 and the Grand Canyon III charter expires May 2023.

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.

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

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 and cash flows.

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.

We are involved in various legal proceedings, some involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act.

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

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):

Six Months Ended

Nine Months Ended

September 30,

Interest paid, net of interest capitalized $ 14,255 $ 2,404

Income taxes paid 6,436 7,535

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 $ 1.6 million at June 30, 2020 and $ 10.2 million at December 31, 2019.

Our capital additions include the acquisition of property and equipment for which payment has not been made.

These non-cash capital additions totaled $ 1.2 million at September 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 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.

Balance at September 30, 2020 $ 3,172

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

Note 18 — Fair Value Measurements

16 unchanged sentences

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

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

As of September 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):

5 unchanged sentences

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Value (2) (3)

6 unchanged sentences

2023 Notes (mature September 2023) 30,000 27,300 125,000 162,188

2026 Notes (mature February 2026) 200,000 160,626 — —

Total debt $ 414,535 $ 376,259 $ 436,146 $ 487,413

1 unchanged sentence

See Note 7 for additional disclosures on our long-term debt.

(2) The estimated fair value of the 2022 Notes and the 2023 Notes was determined using Level 1 fair value inputs under the market approach.

(2) The estimated fair value of the 2022 Notes, the 2023 Notes and the 2026 Notes was determined using Level 1 fair value inputs under the market approach.

The fair value of the Term Loan, the Nordea Q5000 Loan and the MARAD Debt was estimated using Level 2 fair value inputs under the market approach, which was determined using a third-party evaluation of the remaining average life and outstanding principal balance of the indebtedness as compared to other obligations in the marketplace with similar terms.

(3) The principal amount and estimated fair value of the 2022 Notes and the 2023 Notes are for the entire instrument inclusive of the conversion feature reported in shareholders’ equity.

(4) The maturity date of the Nordea Q5000 was extended from April 2020 to January 2021 as a result of an amendment to the Nordea Credit Agreement in March 2020 (Note 7).

(3) The principal amount and estimated fair value of the 2022 Notes, the 2023 Notes and the 2026 Notes are for the entire instrument inclusive of the conversion feature reported in shareholders’ equity.

(4) The maturity date of the Nordea Q5000 Loan was extended from April 2020 to January 2021 as a result of an amendment to the Nordea Credit Agreement in March 2020 (Note 7).

Note 19 — Derivative Instruments and Hedging Activities

2 unchanged sentences

To reduce the impact of these risks on earnings and increase the predictability of our cash flows, from time to time we enter into derivative contracts, including interest rate swaps and foreign currency exchange contracts.

All derivative instruments are reflected in the accompanying condensed consolidated balance sheets at fair value.

Interest rate and foreign currency derivative instruments are reflected in the accompanying condensed consolidated balance sheets at fair value.

The 2026 Capped Calls are recorded in shareholders’ equity and are not accounted for as derivatives.

We engage solely in cash flow hedges.

19 unchanged sentences

Quantitative Disclosures Relating to Derivative Instruments

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

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

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

December 31, 2019

Balance Sheet

4 unchanged sentences

Foreign exchange contracts Accrued liabilities $ 401

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

We had no derivative instruments that were not designated as hedging instruments as of September 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):

December 31, 2019

Balance Sheet

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

$ — $ ( 274 ) $ ( 95 ) $ ( 701 )

Location of Gain (Loss) Reclassified from

Location of Gain (Loss)

Reclassified from

Accumulated OCI into Earnings Gain (Loss) Reclassified from

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

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