HELIX ENERGY SOLUTIONS GROUP INC 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders Helix Energy Solutions Group, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Helix Energy Solutions Group, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of FASB ASU 2016-02 Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 46 Table of Contents Evaluation of property and equipment impairment triggering events As discussed in Note 2 to the consolidated financial statements, the Company evaluates property and equipment for impairment at least quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable, or triggering events. The Company performs this evaluation considering the future economic benefits of the asset or asset groups, historical and estimated future profitability measures, and other factors that may be present, such as extended periods of idle time or the inability to contract the Company’s equipment at economical rates. The carrying value of property and equipment as of December 31, 2020 was $1,783 million. We identified the evaluation of property and equipment impairment triggering events as a critical audit matter. Sustained decreases in commodity prices and uncertainty regarding spending trends by customers in the industry may lead to periods of low utilization and low day rates for those assets or asset groups not under a long-term contract, and the evaluation of the impact of these factors required a higher degree of subjective auditor judgment. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the evaluation of property and equipment for impairment. This included controls related to the Company’s process to identify and evaluate triggering events that indicate that the carrying value of an asset or asset group may not be recoverable, including the consideration of forecasted to actual results and market conditions in determination of a triggering event. We evaluated the Company’s identification of triggering events, including consideration of future expected revenues from executed contracts. We compared data used by the Company against analyst and industry reports. We compared the Company’s historical forecasts to actual results by asset group to assess the Company’s ability to accurately forecast. /s/ KPMG LLP We have served as the Company’s auditor since 2016. Houston, Texas February 25, 2021 47 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders Helix Energy Solutions Group, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Helix Energy Solutions Group, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Houston, Texas February 25, 2021 48 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 291,320 $ 208,431 Restricted cash — 54,130 Accounts receivable, net of allowance for credit losses of $ 3,469 and $ 0 , respectively 132,233 125,457 Other current assets 102,092 50,450 Total current assets 525,645 438,468 Property and equipment 2,948,907 2,922,274 Less accumulated depreciation ( 1,165,943 ) ( 1,049,637 ) Property and equipment, net 1,782,964 1,872,637 Operating lease right-of-use assets 149,656 201,118 Other assets, net 40,013 84,508 Total assets $ 2,498,278 $ 2,596,731 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 50,022 $ 69,055 Accrued liabilities 87,035 62,389 Current maturities of long-term debt 90,651 99,731 Current operating lease liabilities 51,599 53,785 Total current liabilities 279,307 284,960 Long-term debt 258,912 306,122 Operating lease liabilities 101,009 151,827 Deferred tax liabilities 110,821 112,132 Other non-current liabilities 3,878 38,644 Total liabilities 753,927 893,685 Redeemable noncontrolling interests 3,855 3,455 Shareholders’ equity: Common stock, no par, 240,000 shares authorized, 150,341 and 148,888 shares issued, respectively 1,327,592 1,318,961 Retained earnings 464,524 445,370 Accumulated other comprehensive loss ( 51,620 ) ( 64,740 ) Total shareholders’ equity 1,740,496 1,699,591 Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 2,498,278 $ 2,596,731 The accompanying notes are an integral part of these consolidated financial statements. 49 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2020 2019 2018 Net revenues $ 733,555 $ 751,909 $ 739,818 Cost of sales 653,646 614,071 618,134 Gross profit 79,909 137,838 121,684 Gain on disposition of assets, net 889 — 146 Goodwill impairment ( 6,689 ) — — Selling, general and administrative expenses ( 61,084 ) ( 69,841 ) ( 70,287 ) Income from operations 13,025 67,997 51,543 Equity in earnings (losses) of investment 216 1,439 ( 3,918 ) Net interest expense ( 28,531 ) ( 8,333 ) ( 13,751 ) Gain (loss) on extinguishment of long-term debt 9,239 ( 18 ) ( 1,183 ) Other income (expense), net 4,724 1,165 ( 6,324 ) Royalty income and other 2,710 3,306 4,631 Income before income taxes 1,383 65,556 30,998 Income tax provision (benefit) ( 18,701 ) 7,859 2,400 Net income 20,084 57,697 28,598 Net loss attributable to redeemable noncontrolling interests ( 2,090 ) ( 222 ) — Net income attributable to common shareholders $ 22,174 $ 57,919 $ 28,598 Earnings per share of common stock: Basic $ 0.13 $ 0.39 $ 0.19 Diluted $ 0.13 $ 0.38 $ 0.19 Weighted average common shares outstanding: Basic 148,993 147,536 146,702 Diluted 149,897 149,577 146,830 The accompanying notes are an integral part of these consolidated financial statements. 50 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2020 2019 2018 Net income $ 20,084 $ 57,697 $ 28,598 Other comprehensive income (loss), net of tax: Net unrealized loss on hedges arising during the period ( 95 ) ( 680 ) ( 847 ) Reclassifications into earnings 452 5,470 7,201 Income taxes on hedges ( 72 ) ( 966 ) ( 1,338 ) Net change in hedges, net of tax 285 3,824 5,016 Unrealized loss on note receivable arising during the period — — ( 629 ) Income taxes on note receivable — — 132 Unrealized loss on note receivable, net of tax — — ( 497 ) Foreign currency translation gain (loss) 12,835 5,400 ( 7,166 ) Other comprehensive income (loss), net of tax 13,120 9,224 ( 2,647 ) Comprehensive income 33,204 66,921 25,951 Less comprehensive loss attributable to redeemable noncontrolling interests: Net loss ( 2,090 ) ( 222 ) — Foreign currency translation gain 90 138 — Comprehensive loss attributable to redeemable noncontrolling interests ( 2,000 ) ( 84 ) — Comprehensive income attributable to common shareholders $ 35,204 $ 67,005 $ 25,951 The accompanying notes are an integral part of these consolidated financial statements. 51 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Redeemable Noncontrolling Interests Shares Amount Balance, December 31, 2017 147,740 $ 1,284,274 $ 352,906 $ ( 69,787 ) $ 1,567,393 $ — Net income — — 28,598 — 28,598 — Reclassification of stranded tax effect to retained earnings — — 1,530 ( 1,530 ) — — Foreign currency translation adjustments — — — ( 7,166 ) ( 7,166 ) — Unrealized gain on hedges, net of tax — — — 5,016 5,016 — Unrealized loss on note receivable, net of tax — — — ( 497 ) ( 497 ) — Equity component of debt discount on convertible senior notes — 15,411 — — 15,411 — Activity in company stock plans, net and other 463 ( 746 ) — — ( 746 ) — Share-based compensation — 9,770 — — 9,770 — Balance, December 31, 2018 148,203 $ 1,308,709 $ 383,034 $ ( 73,964 ) $ 1,617,779 $ — Net income — — 57,919 — 57,919 ( 222 ) Reclassification of deferred gain from sale leaseback transaction to retained earnings — — 4,560 — 4,560 — Foreign currency translation adjustments — — — 5,400 5,400 138 Unrealized gain on hedges, net of tax — — — 3,824 3,824 — Issuance of redeemable noncontrolling interests — — — — — 3,396 Accretion of redeemable noncontrolling interests — — ( 143 ) — ( 143 ) 143 Activity in company stock plans, net and other 685 ( 1,032 ) — — ( 1,032 ) — Share-based compensation — 11,284 — — 11,284 — Balance, December 31, 2019 148,888 $ 1,318,961 $ 445,370 $ ( 64,740 ) $ 1,699,591 $ 3,455 Net income — — 22,174 — 22,174 ( 2,090 ) Credit losses recognized in retained earnings upon adoption of ASU No. 2016-13 — — ( 620 ) — ( 620 ) — Foreign currency translation adjustments — — — 12,835 12,835 90 Unrealized gain on hedges, net of tax — — — 285 285 — Accretion of redeemable noncontrolling interests — — ( 2,400 ) — ( 2,400 ) 2,400 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 1,453 ( 4,345 ) — — ( 4,345 ) — Share-based compensation — 8,271 — — 8,271 — Balance, December 31, 2020 150,341 $ 1,327,592 $ 464,524 $ ( 51,620 ) $ 1,740,496 $ 3,855 The accompanying notes are an integral part of these consolidated financial statements. 52 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income $ 20,084 $ 57,697 $ 28,598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 133,709 112,720 110,522 Goodwill impairment 6,689 — — Amortization of debt discounts 6,964 6,261 5,735 Amortization of debt issuance costs 3,177 3,600 3,592 Share-based compensation 8,568 11,469 9,925 Deferred income taxes ( 3,883 ) 3,485 ( 2,430 ) Equity in (earnings) losses of investment ( 216 ) ( 1,439 ) 3,918 Gain on disposition of assets, net ( 889 ) — ( 146 ) (Gain) loss on extinguishment of long-term debt ( 9,239 ) 18 1,183 Unrealized gain on derivative contracts, net ( 601 ) ( 3,383 ) ( 2,324 ) Unrealized foreign currency (gain) loss ( 2,665 ) ( 628 ) 1,466 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 8,419 ) ( 3,050 ) 20,920 Income tax receivable, net of income tax payable ( 22,124 ) ( 4,456 ) 964 Other current assets ( 28,664 ) 25,383 ( 9,904 ) Accounts payable and accrued liabilities 10,830 ( 31,265 ) ( 1,818 ) Other, net ( 14,521 ) ( 6,743 ) 26,543 Net cash provided by operating activities 98,800 169,669 196,744 Cash flows from investing activities: Capital expenditures ( 20,244 ) ( 140,854 ) ( 137,083 ) STL acquisition, net — ( 4,081 ) — Proceeds from sale of assets 963 2,550 25 Other — — 1,044 Net cash used in investing activities ( 19,281 ) ( 142,385 ) ( 136,014 ) Cash flows from financing activities: Proceeds from convertible senior notes 200,000 — 125,000 Repayment of convertible senior notes ( 183,150 ) — ( 60,365 ) Proceeds from term loan — 35,000 — Repayment of term loans ( 3,500 ) ( 35,442 ) ( 63,807 ) Repayment of Nordea Q5000 Loan ( 35,714 ) ( 35,714 ) ( 35,714 ) Repayment of MARAD Debt ( 7,200 ) ( 6,858 ) ( 6,532 ) Capped call transactions ( 10,625 ) — — Debt issuance costs ( 7,747 ) ( 1,586 ) ( 3,867 ) Payments related to tax withholding for share-based compensation ( 5,264 ) ( 1,680 ) ( 1,407 ) Proceeds from issuance of ESPP shares 622 462 506 Net cash used in financing activities ( 52,578 ) ( 45,818 ) ( 46,186 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash 1,818 1,636 ( 1,677 ) Net increase (decrease) in cash and cash equivalents and restricted cash 28,759 ( 16,898 ) 12,867 Cash and cash equivalents and restricted cash: Balance, beginning of year 262,561 279,459 266,592 Balance, end of year $ 291,320 $ 262,561 $ 279,459 The accompanying notes are an integral part of these consolidated financial statements. 53 Table of Contents HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Organization Unless the context indicates otherwise, the terms “we,” “us” and “our” in this Annual Report refer collectively to Helix Energy Solutions Group, Inc. and its subsidiaries (“Helix” or the “Company”). We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. We provide services primarily in deepwater in the Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions. Our Operations Our services are segregated into three reportable business segments: Well Intervention, Robotics and Production Facilities (Note 15). Our Well Intervention segment includes our vessels and/or equipment used to access offshore wells for the purpose of performing well enhancement or decommissioning operations 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 two chartered monohull vessels, the Siem Helix 1 and the Siem Helix 2 . Our well intervention equipment includes intervention riser systems (“IRSs”), subsea intervention lubricators (“SILs”) and the Riserless Open-water Abandonment Module (“ROAM”), 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 globally. 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”), and our ownership of oil and gas properties. All of our current Production Facilities activities are located in the Gulf of Mexico. Note 2 — Summary of Significant Accounting Policies Principles of Consolidation Our consolidated financial statements include the accounts of our majority-owned subsidiaries. The equity method is used to account for investments in affiliates in which we do not have majority ownership but have the ability to exert significant influence. All material intercompany accounts and transactions have been eliminated. Basis of Presentation Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) in U.S. dollars. Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current presentation format. We have made all adjustments that we believe are necessary for a fair presentation of our consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. 54 Table of Contents Cash and Cash Equivalents Cash and cash equivalents are highly liquid financial instruments with original maturities of three months or less. They are carried at cost plus accrued interest, which approximates fair value. Restricted Cash We classify cash as restricted when there are legal or contractual restrictions for its withdrawal. We had no restricted cash as of December 31, 2020. As of December 31, 2019, we had restricted cash of $ 54.1 million, which served as collateral for a letter of credit and was restricted for less than one year. In January 2021, we reclassified $ 73.4 million to restricted cash, which serves as collateral for a letter of credit for a temporary importation permit for work offshore Nigeria that is expected to be less than one year. Accounts Receivable and Allowance for Credit Losses Accounts receivable are recognized when our right to consideration becomes unconditional. Accounts receivable are stated at the historical carrying amount, net of write-offs and allowance for credit losses. We estimate current expected credit losses on our accounts receivable at each reporting date. We estimate current expected credit losses based on our credit loss history, adjusted for current factors including global economic and business conditions, offshore energy industry and market conditions, customer mix, contract payment terms and past due accounts receivable. Uncollectible receivables are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when we have determined that the balance will not be collected (Note 19). Property and Equipment Property and equipment is recorded at historical cost, net of accumulated depreciation. Property and equipment is depreciated on a straight-line basis over its estimated useful life. The cost of improvements is capitalized whereas the cost of repairs and maintenance is expensed as incurred. Assets used in operations are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable because such carrying amount may exceed the asset’s or asset group’s expected undiscounted cash flows. If the carrying amount of the asset or asset group is not recoverable and is greater than its fair value, an impairment charge is recorded. The amount of the impairment recorded is calculated as the difference between the carrying amount of the asset or asset group and its estimated fair value. Individual assets are evaluated for impairment at the lowest level where there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The expected future cash flows used for impairment reviews and related fair value calculations are based on assessments of operating revenues and costs, project margins and capital project spending, considering all available information at the date of review. Capitalized Interest Interest from external borrowings is capitalized on major projects under development until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful life of the asset. Capitalized interest is excluded from our interest expense (Note 8) and is included as an investing cash outflow in the consolidated statements of cash flows. Equity Investment With respect to our investment accounted for using the equity method of accounting, losses in excess of the carrying amount of our equity investment are recognized when (i) we guaranteed the obligations of the investee, (ii) we are otherwise committed to provide further financial support for the investee, or (iii) it is anticipated that the investee’s return to profitability is imminent. Losses in excess of the carrying amount of our equity investment are presented as a liability in the consolidated balance sheets. 55 Table of Contents Leases Leases with a term greater than one year are recognized in the consolidated balance sheet as right-of-use (“ROU”) assets and lease liabilities. We have not recognized in the consolidated balance sheet leases with an initial term of one year or less. Lease liabilities and their corresponding ROU assets are recorded at the commencement date based on the present value of lease payments over the expected lease term. The lease term may include the option to extend or terminate the lease when it is reasonably certain that we will exercise the option. We use our incremental borrowing rate, which would be the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment, to calculate the present value of lease payments. ROU assets are adjusted for any initial direct costs paid or incentives received. We separate our long-term vessel charters between their lease components and non-lease services. We estimate the lease component using the residual approach by estimating the non-lease services, which primarily include crew, repair and maintenance, and regulatory certification costs. For all other leases, we have not separated the lease components and non-lease services. We recognize operating lease cost on a straight-line basis over the lease term for both (i) leases that are recognized in the consolidated balance sheet and (ii) short-term leases. We recognize lease cost related to variable lease payments that are not recognized in the consolidated balance sheet in the period in which the obligation is incurred. Goodwill Goodwill impairment is evaluated using a two-step process. The first step involves comparing a reporting unit’s fair value with its carrying amount. We have the option to assess qualitative factors to determine if it is necessary to perform the first step. If it is more likely than not that a reporting unit’s fair value is less than its carrying amount, we must perform the quantitative goodwill impairment test, which involves estimating the reporting unit’s fair value and comparing it to its carrying amount. If the reporting unit’s carrying amount exceeds its fair value, impairment loss is recognized in an amount equal to that excess, but not to exceed the goodwill’s carrying amount. We perform an impairment analysis of goodwill at least annually as of November 1 or more frequently whenever events or circumstances occur indicating that goodwill might be impaired. Our goodwill balance attributable to the acquisition of a controlling interest in Subsea Technologies Group Limited (“STL”) was fully impaired during 2020, and we had no goodwill in the accompanying consolidated balance sheet at December 31, 2020 (Note 7). Deferred Recertification and Dry Dock Costs Our vessels and certain well intervention equipment are required by regulation to be periodically recertified. Recertification costs for a vessel are typically incurred while the vessel is in dry dock. We defer and amortize recertification costs, including vessel dry dock costs, over the period that the certification applies, which generally ranges from 30 to 60 months if the appropriate permitting is obtained. A recertification process, including vessel dry dock, typically lasts between one to three months , a period during which a vessel or a piece of equipment is idle and generally not available to earn revenue. Major replacements and improvements that extend the economic useful life or functional operating capability of a vessel or a piece of equipment are capitalized and depreciated over the asset’s remaining economic useful life. We expense routine repairs and maintenance costs as they are incurred. As of December 31, 2020 and 2019, deferred recertification and dry dock costs, which were included within “Other assets, net” in the accompanying consolidated balance sheets (Note 3), totaled $ 21.5 million and $ 16.1 million (net of accumulated amortization of $ 21.8 million and $ 15.7 million), respectively. During the years ended December 31, 2020, 2019 and 2018, amortization expense related to deferred recertification and dry dock costs was $ 14.3 million, $ 12.4 million and $ 8.3 million, respectively. 56 Table of Contents Revenue Recognition Revenue from Contracts with Customers We generate revenue in our Well Intervention segment by supplying vessels, personnel and equipment to provide well intervention services, which involve providing marine access, serving as a deployment mechanism to the subsea well, connecting to and maintaining a secure connection to the subsea well and maintaining well control through the duration of the intervention services. We may also perform down-hole intervention work and provide certain engineering services. We generate revenue in our Robotics segment by operating ROVs, trenchers and a ROVDrill to provide subsea construction, inspection, repair and maintenance services to oil and gas companies as well as subsea trenching and burial of pipelines and cables as well as seabed clearing for the oil and gas and the renewable energy markets. We also provide integrated robotic services by supplying vessels that deploy ROVs and trenchers. Our Production Facilities segment generates revenue by supplying vessels, personnel and equipment for oil and natural gas processing, well control response services, and oil and gas production from owned properties. Our revenues are derived from short-term and long-term service contracts with customers. Our service contracts generally contain either provisions for specific time, material and equipment charges that are billed in accordance with the terms of such contracts (dayrate contracts) or lump sum payment provisions (lump sum contracts). We record revenues net of taxes collected from customers and remitted to governmental authorities. Contracts are classified as long-term if all or part of the contract is to be performed over a period extending beyond 12 months from the effective date of the contract. Long-term contracts may include multi-year agreements whereby the commitment for services in any one year may be short in duration. We generally account for our services under contracts with customers as a single performance obligation satisfied over time. The single performance obligation in our dayrate contracts is comprised of a series of distinct time increments in which we provide services. We do not account for activities that are immaterial or not distinct within the context of our contracts as separate performance obligations. Consideration received under a contract is allocated to the single performance obligation on a systematic basis that depicts the pattern of the provision of our services to the customer. The total transaction price for a contract is determined by estimating both fixed and variable consideration expected to be earned over the term of the contract. We generally do not provide significant financing to our customers and do not adjust contract consideration for the time value of money if extended payment terms are granted for less than one year. Estimated variable consideration, if any, is considered to be constrained and therefore is not included in the transaction price until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. At the end of each reporting period, we reassess and update our estimates of variable consideration and amounts of that variable consideration that should be constrained. Dayrate Contracts . Revenues generated from dayrate contracts generally provide for payment according to the rates per day as stipulated in the contract (e.g., operating rate, standby rate, and repair rate). Invoices billed to the customer are typically based on the varying rates applicable to operating status on an hourly basis. Dayrate consideration is allocated to the distinct hourly time increment to which it relates and is therefore recognized in line with the contractual rate billed for the services provided for any given hour. Similarly, revenues from contracts that stipulate a monthly rate are recognized ratably during the month. Dayrate contracts also may contain fees charged to the customer for mobilizing and/or demobilizing equipment and personnel. Mobilization and demobilization are considered contract fulfillment activities, and related fees (subject to any constraint on estimates of variable consideration) are allocated to the single performance obligation and recognized ratably over the term of the contract. Mobilization fees are generally billable to the customer in the initial phase of a contract and generate contract liabilities until they are recognized as revenue. Demobilization fees are generally received at the end of the contract and generate contract assets when they are recognized as revenue prior to becoming receivables from the customer. 57 Table of Contents We receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request. Reimbursable revenues are variable and subject to uncertainty as the amounts received and timing thereof are dependent on factors outside of our influence. Accordingly, these revenues are constrained and not recognized until the related costs are incurred on behalf of the customer. We are generally considered a principal in these transactions and record the associated revenues at the gross amounts billed to the customer. A dayrate contract modification involving an extension of the contract by adding days of services is generally accounted for prospectively as a separate contract, but may be accounted for as a termination of the existing contract and creation of a new contract if the consideration for the extended services does not represent their stand-alone selling prices. Lump Sum Contracts . Revenues generated from lump sum contracts are recognized over time. Revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost measure of progress for our lump sum contracts because it best depicts the progress toward satisfaction of our performance obligation, which occurs as we incur costs under those contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of cumulative costs incurred to date to the total estimated costs at completion of the performance obligation. Consideration, including lump sum mobilization and demobilization fees billed to the customer, is recorded proportionally as revenue in accordance with the cost-to-cost measure of progress. Consideration for lump sum contracts is generally due from the customer based on the achievement of milestones. As such, contract assets are generated to the extent we recognize revenues in advance of our rights to collect contract consideration and contract liabilities are generated when contract consideration due or received is greater than revenues recognized to date. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period in which the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If a current estimate of total contract costs to be incurred exceeds the estimate of total revenues to be earned, we recognize the projected loss in full when it is identified. A modification to a lump sum contract is generally accounted for as part of the existing contract and recognized as an adjustment to revenue on a cumulative catch-up basis. Income from Oil and Gas Production Income from oil and gas production is recognized according to monthly oil and gas production volumes from the oil and gas properties that we own, and is included in revenues from our Production Facilities segment. Income from Royalty Interests Income from royalty interests is recognized according to our share of monthly oil and gas production volumes and is reflected in “Royalty income and other” in the consolidated statements of operations. Income Taxes Deferred income taxes are based on the differences between financial reporting and tax bases of assets and liabilities. We utilize the liability method of computing deferred income taxes. The liability method is based on the amount of current and future taxes payable using tax rates and laws in effect at the balance sheet date. Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. We consider the undistributed earnings of our non-U.S. subsidiaries without operations in the U.S. to be permanently reinvested. We provide for uncertain tax positions and related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by local taxing authorities. At December 31, 2020, we believe that we have appropriately accounted for any unrecognized tax benefits. To the extent we prevail in matters for which a liability for an unrecognized tax benefit has been recognized or are required to pay amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected. 58 Table of Contents Share-Based Compensation Share-based compensation is measured at the grant date based on the estimated fair value of an award. Share-based compensation based solely on service conditions is recognized on a straight-line basis over the vesting period of the related shares. Forfeitures are recognized as they occur. Compensation cost for restricted stock is the product of the grant date fair value of each share and the number of shares granted and is recognized over the applicable vesting period on a straight-line basis. Compensation cost for our performance share unit (“PSU”) awards, which have a service condition and a market condition and are accounted for as equity awards, is measured based on the grant date estimated fair value and recognized over the vesting period on a straight-line basis. PSUs that are accounted for as liability awards are measured at their estimated fair value at each balance sheet date, and subsequent changes in fair value of the awards are recognized in earnings for the portion of the award for which the requisite service period has elapsed. Cumulative compensation cost for vested liability PSU awards equals the actual payout value upon vesting. Asset Retirement Obligations Asset retirement obligations (“AROs”) are recorded at fair value and consist of estimated costs for subsea infrastructure plug and abandonment (“P&A”) activities associated with our oil and gas properties. The estimated 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. Foreign Currency Because we operate in various regions around the world, we conduct a portion of our business in currencies other than the U.S. dollar. Results of operations for our non-U.S. dollar subsidiaries are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these non-U.S. dollar subsidiaries are translated into U.S. dollars using the exchange rate in effect, and the resulting translation adjustments are included in other comprehensive income (loss) (“OCI”). For transactions denominated in a currency other than a subsidiary’s functional currency, the effects of changes in exchange rates are reported in other income or expense in the consolidated statements of operations. For the years ended December 31, 2020, 2019 and 2018, our foreign currency transaction gains (losses) totaled $ 4.6 million, $ 1.5 million and $( 4.3 ) million, respectively. These realized amounts are exclusive of any gains or losses from our foreign currency exchange derivative contracts. Derivative Instruments and Hedging Activities Our business is exposed to market risks associated with interest rates and foreign currency exchange rates. Our risk management activities involve the use of derivative financial instruments to mitigate the impact of market risk exposure related to variable interest rates and foreign currency exchange rates. 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. Interest rate and foreign currency derivative instruments are reflected in the consolidated balance sheets at fair value. The capped call transactions (the “2026 Capped Calls”) we entered into in connection with the issuance of Convertible Senior Notes Due 2026 are recorded in shareholders’ equity and are not accounted for as derivatives (Note 8). We engage solely in cash flow hedges. Cash flow hedges are entered into to hedge the variability of cash flows related to a forecasted transaction or to be received or paid related to a recognized asset or liability. Changes in the fair value of derivative instruments that are designated as cash flow hedges are reported in OCI. These changes are subsequently reclassified into earnings when the hedged transactions affect earnings. Changes in the fair value of interest rate and foreign currency derivative instruments that do not qualify for hedge accounting are recorded in earnings. 59 Table of Contents We formally document all relationships between hedging instruments and the related hedged items, as well as our risk management objectives, strategies for undertaking various hedge transactions and our methods for assessing and testing correlation and hedge ineffectiveness. All hedging instruments are linked to the hedged asset, liability, firm commitment or forecasted transaction. We also assess, both at the inception of the hedge and on an ongoing basis, whether the derivative instruments that are designated as hedging instruments are highly effective in offsetting changes in cash flows of the hedged items. We discontinue hedge accounting if we determine that a derivative is no longer highly effective as a hedge, or if it is probable that a hedged transaction will not occur. If hedge accounting is discontinued because it is probable the hedged transaction will not occur, gains or losses on the hedging instruments are reclassified from accumulated OCI into earnings immediately. Earnings Per Share Basic earnings per share (“EPS”) is computed by dividing net income or loss attributable to common shareholders by the weighted average shares of our common stock outstanding. The calculation of diluted EPS is similar to that for basic EPS, except that the denominator includes dilutive common stock equivalents and the numerator excludes the effects of dilutive common stock equivalents, if any. We have shares of restricted stock issued and outstanding that are currently unvested. 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 EPS under the two-class method in periods in which we have earnings. Under the two-class method, the undistributed earnings available to common shareholders 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. For periods in which we have a net loss we do not use the two-class method as holders of our restricted shares are not obligated to share in such losses. Major Customers and Concentration of Risk We offer our products and services primarily in the offshore oil and gas and renewable markets. Oil and gas companies spend capital on exploration, drilling and production operations, the amount of which is generally dependent on the prevailing view of future oil and gas prices and volatility, which are subject to many external factors. Our customers consist primarily of major and independent oil and gas producers and suppliers, pipeline transmission companies, renewable energy companies and offshore engineering and construction firms. We perform ongoing credit evaluations of our customers and provide allowances for credit losses. The percentages of consolidated revenue from major customers (those representing 10% or more of our consolidated revenues) are as follows: 2020 — Petrobras ( 28 %) and BP ( 17 %); 2019 — Petrobras ( 29 %), BP ( 15 %) and Shell ( 13 %); and 2018 — Petrobras ( 28 %) and BP ( 15 %). Most of the concentration of revenues are in our Well Intervention segment. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value accounting rules establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: • Level 1. Observable inputs such as quoted prices in active markets; • Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of three valuation approaches as described in Note 20. 60 Table of Contents New Accounting Standards New accounting standards adopted In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASC 842”), which was updated by subsequent amendments. ASC 842 requires a lessee to recognize a lease ROU asset and related lease liability for most leases, including those classified as operating leases. ASC 842 also changes the definition of a lease and requires expanded quantitative and qualitative disclosures for both lessees and lessors. We adopted ASC 842 as of January 1, 2019 using the modified retrospective method. We also elected the package of practical expedients permitted under the transition guidance that, among other things, allows companies to carry forward their historical lease classification. Our adoption of ASC 842 resulted in the recognition of operating lease liabilities of $ 259.0 million and corresponding ROU assets of $ 253.4 million (net of existing prepaid/deferred rent balances) as of January 1, 2019. In addition, we reclassified the remaining deferred gain of $ 4.6 million (net of deferred taxes of $ 0.9 million) on a 2016 sale and leaseback transaction to retained earnings. Subsequent to adoption, leases in foreign currencies will generate foreign currency gains and losses, and we will no longer amortize the deferred gain from the aforementioned sale and leaseback transaction. Aside from these changes, ASC 842 has not had, and is not expected to have, a material impact on our net earnings or cash flows. See Note 6 for additional information regarding our leases. In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” which was updated by subsequent amendments. This ASU replaces the current incurred loss model for measurement of credit losses on financial assets (including trade receivables) with a forward-looking expected loss model based on historical experience, current conditions, and reasonable and supportable forecasts. Upon adoption of ASU No. 2016-13 on January 1, 2020, we recognized $ 0.6 million (net of deferred taxes of $ 0.2 million) related to the provision for current expected credit losses on our accounts receivable through a cumulative effect offset to retained earnings. The credit loss standard also resulted in the recognition of an additional $ 0.7 million in credit loss reserves on our accounts receivable for the year ended December 31, 2020. See Note 19 for additional information regarding allowance for credit losses on our accounts receivable. 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 requirement to separate certain convertible instruments, such as our Convertible Senior Notes Due 2022, Convertible Senior Notes Due 2023 and Convertible Senior Notes Due 2026 (Note 8), into liability and equity components. Consequently, those convertible instruments will be accounted for in their entirety as liabilities measured at their amortized cost. We have elected to early adopt ASU No. 2020-06 on a modified retrospective basis as of January 1, 2021. The adoption of this ASU will increase our long-term debt and decrease common stock by approximately $ 44.1 million and $ 41.5 million, respectively, as we reclassify the conversion features associated with our various outstanding convertible senior notes from equity to long-term debt. The adoption of this ASU will also increase our retained earnings and decrease deferred tax liabilities by approximately $ 6.7 million and $ 9.3 million, respectively. The embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Subsequent to its adoption, the ASU is also expected to reduce our interest expense as there will no longer be debt discounts associated with our outstanding convertible senior notes. Additionally, the ASU no longer permits the treasury stock method for convertible instruments and instead requires the application of the if-converted method to calculate the impact of our convertible senior notes on diluted EPS. We do not expect any other recent accounting standards to have a material impact on our financial position, results of operations or cash flows. 61 Table of Contents Note 3 — Details of Certain Accounts Other current assets consist of the following (in thousands): December 31, 2020 2019 Contract assets (Note 12) $ 2,446 $ 740 Prepaids 15,904 12,635 Deferred costs (Note 12) 23,522 28,340 Income tax receivable (Note 9) 20,787 1,261 Other receivable (Note 16) 29,782 — Other 9,651 7,474 Total other current assets $ 102,092 $ 50,450 Other assets, net consist of the following (in thousands): December 31, 2020 2019 Deferred recertification and dry dock costs, net (Note 2) $ 21,464 $ 16,065 Deferred costs (Note 12) 861 14,531 Charter deposit (1) 12,544 12,544 Other receivable (Note 16) — 27,264 Goodwill (Note 7) — 7,157 Intangible assets with finite lives, net (Note 2) 3,809 3,847 Other 1,335 3,100 Total other assets, net $ 40,013 $ 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. Accrued liabilities consist of the following (in thousands): December 31, 2020 2019 Accrued payroll and related benefits $ 24,768 $ 31,417 Accrued interest 7,098 3,942 Investee losses in excess of investment (Note 5) 1,499 4,069 Deferred revenue (Note 12) 8,140 11,568 AROs (Note 16) 30,913 — Other 14,617 11,393 Total accrued liabilities $ 87,035 $ 62,389 62 Table of Contents Other non-current liabilities consist of the following (in thousands): December 31, 2020 2019 Deferred revenue (Note 12) $ 1,869 $ 8,286 AROs (Note 16) — 28,258 Other 2,009 2,100 Total other non-current liabilities $ 3,878 $ 38,644 Note 4 — Property and Equipment The following is a summary of the gross components of property and equipment (dollars in thousands): December 31, Estimated Useful Life 2020 2019 Vessels 15 to 30 years $ 2,349,752 $ 2,323,314 ROVs, trenchers and ROVDrill 10 years 263,968 270,004 Machinery, equipment and leasehold improvements 5 to 15 years 335,187 328,956 Total property and equipment $ 2,948,907 $ 2,922,274 Note 5 — Equity Method Investments We have a 20 % ownership interest in Independence Hub, LLC (“Independence Hub”) that we account for using the equity method of accounting. Independence Hub owns the “Independence Hub” platform, which is nearing the completion of its decommissioning. The remaining liability balances for our share of Independence Hub’s estimated obligations, net of remaining working capital, were $ 1.5 million and $ 4.1 million at December 31, 2020 and 2019, respectively. Note 6 — Leases We charter vessels and lease facilities and equipment under non-cancelable contracts that expire on various dates through 2031. We also sublease some of our facilities under non-cancelable sublease agreements. As of December 31, 2020, the minimum sublease income to be received in the future totaled $ 2.1 million. The following table details the components of our lease cost in 2020 and 2019 (in thousands): Year Ended December 31, 2020 2019 Operating lease cost $ 64,742 $ 70,860 Variable lease cost 15,021 13,780 Short-term lease cost 37,524 20,384 Sublease income ( 1,286 ) ( 1,391 ) Net lease cost $ 116,001 $ 103,633 For the year ended December 31, 2018, total rental expense was approximately $ 147.8 million and total sublease rental income was $ 1.4 million. 63 Table of Contents Maturities of our operating lease liabilities as of December 31, 2020 are as follows (in thousands): Vessels Facilities and Equipment Total Less than one year $ 54,621 $ 6,028 $ 60,649 One to two years 52,106 5,435 57,541 Two to three years 34,580 4,649 39,229 Three to four years 2,470 4,374 6,844 Four to five years — 2,340 2,340 Over five years — 4,054 4,054 Total lease payments $ 143,777 $ 26,880 $ 170,657 Less: imputed interest ( 13,352 ) ( 4,697 ) ( 18,049 ) Total operating lease liabilities $ 130,425 $ 22,183 $ 152,608 Current operating lease liabilities $ 46,748 $ 4,851 $ 51,599 Non-current operating lease liabilities 83,677 17,332 101,009 Total operating lease liabilities $ 130,425 $ 22,183 $ 152,608 Maturities of our operating lease liabilities as of December 31, 2019 are as follows (in thousands): Vessels Facilities and Equipment Total Less than one year $ 60,210 $ 6,610 $ 66,820 One to two years 54,564 5,888 60,452 Two to three years 52,106 5,257 57,363 Three to four years 34,580 4,622 39,202 Four to five years 2,470 4,349 6,819 Over five years — 6,251 6,251 Total lease payments $ 203,930 $ 32,977 $ 236,907 Less: imputed interest ( 24,846 ) ( 6,449 ) ( 31,295 ) Total operating lease liabilities $ 179,084 $ 26,528 $ 205,612 Current operating lease liabilities $ 48,716 $ 5,069 $ 53,785 Non-current operating lease liabilities 130,368 21,459 151,827 Total operating lease liabilities $ 179,084 $ 26,528 $ 205,612 The following table presents the weighted average remaining lease term and discount rate: December 31, 2020 2019 Weighted average remaining lease term 3.1 years 4.0 years Weighted average discount rate 7.53 % 7.54 % 64 Table of Contents The following table presents other information related to our operating leases (in thousands): Year Ended December 31, 2020 2019 Cash paid for operating lease liabilities $ 66,026 $ 71,698 ROU assets obtained in exchange for new operating lease obligations 516 1,168 Note 7 — Business Combinations and Goodwill In May 2019, we acquired a 70 % controlling interest in 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 15) 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 OPEC+ price war, we impaired all of our goodwill, which consisted entirely of our goodwill in STL. The changes in the carrying amount of goodwill are as follows (in thousands): Well Intervention Balance at December 31, 2018 $ — Additions (1) 6,855 Other adjustments (2) 302 Balance at December 31, 2019 7,157 Other adjustments (2) ( 468 ) Impairment loss (3) ( 6,689 ) Balance at December 31, 2020 $ — (1) Relates to goodwill arising from the acquisition of a controlling interest in STL in May 2019. (2) Relates to foreign currency adjustments. (3) Relates to the impairment of the entire STL goodwill balance in March 2020. 65 Table of Contents Note 8 — Long-Term Debt Long-term debt consists of the following (in thousands): December 31, 2020 2019 Term Loan (matures December 2021) $ 29,750 $ 33,250 2022 Notes (mature May 2022) 35,000 125,000 2023 Notes (mature September 2023) 30,000 125,000 2026 Notes (mature February 2026) 200,000 — MARAD Debt (matures February 2027) 56,410 63,610 Nordea Q5000 Loan (matures January 2021) (1) 53,572 89,286 Unamortized debt discounts ( 45,692 ) ( 22,540 ) Unamortized debt issuance costs ( 9,477 ) ( 7,753 ) Total debt 349,563 405,853 Less current maturities ( 90,651 ) ( 99,731 ) Long-term debt $ 258,912 $ 306,122 (1) We repaid the Nordea Q5000 Loan in January 2021. Credit Agreement 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”). The Credit Agreement is comprised of a Term Loan with a remaining balance of $ 29.8 million as of December 31, 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 December 31, 2020, the Term Loan is classified as current in the accompanying consolidated balance sheet. As of December 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 $ 160.2 million, net of $ 2.8 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. The Term Loan 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 of 2.25 %. 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 3.40 % as of December 31, 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 %. Borrowings under the Revolving Credit Facility 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 ranging from 2.50 % to 3.50 %. A letter of credit fee is payable by us equal to the applicable margin for LIBOR rate loans multiplied by the daily amount available to be drawn under the applicable letter of credit. Margins on borrowings under the Revolving Credit Facility will vary in relation to the Consolidated Total Leverage Ratio (as defined below) as provided for in the Credit Agreement. 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 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. We may prepay indebtedness outstanding under the Revolving Credit Facility without premium or penalty, and may reborrow any amounts prepaid up to the amount available under the Revolving Credit Facility. 66 Table of Contents Our obligations under the Credit Agreement, and those of our subsidiary guarantors under their guarantee, are secured by (i) most of the assets of the parent company, (ii) the shares of our domestic subsidiaries (other than Cal Dive I - Title XI, Inc.) and of Helix Robotics Solutions Limited and (iii) most of the assets of our domestic subsidiaries (other than Cal Dive I - Title XI, Inc.) and of Helix Robotics Solutions Limited. 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, 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. In addition, the Credit Agreement obligates us to meet minimum ratio requirements of EBITDA to interest charges (Consolidated Interest Coverage Ratio), funded debt to EBITDA (Consolidated Total Leverage Ratio) and secured funded debt to EBITDA (Consolidated Secured Leverage Ratio). We may designate one or more of our new foreign subsidiaries as subsidiaries not generally subject to the covenants in the Credit Agreement (the “Unrestricted Subsidiaries”). 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 to Helix. In June 2019, in connection with an amendment of the Credit Agreement we wrote off the remaining unamortized debt issuance costs associated with a lender exiting the Credit Agreement. In March 2018, we prepaid $ 61 million of the then-existing term loan with a portion of the net proceeds from the 2023 Notes and wrote off $ 0.9 million of unamortized debt issuance costs. These write-offs are presented as “Loss on extinguishment of long-term debt” in the accompanying consolidated statements of operations. Convertible Senior Notes Due 2022 (“2022 Notes”) 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. The 2022 Notes mature on May 1, 2022 unless earlier converted, redeemed or repurchased. During certain periods and subject to certain conditions, the 2022 Notes are convertible by the holders into shares of our common stock at an initial conversion rate of 71.9748 shares of our common stock per $1,000 principal amount (which represents an initial conversion price of approximately $ 13.89 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 November 1, 2019, the 2022 Notes were not redeemable. Beginning November 1, 2019, if certain conditions are met, we may redeem all or any portion of the 2022 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 2022 Notes). Holders of the 2022 Notes may require us to repurchase the notes following a “fundamental change” (as defined in the indenture governing the 2022 Notes). 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 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. 67 Table of Contents 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 an extinguishment gain of $ 3.3 million. The remaining unamortized debt discount of the 2022 Notes was $ 1.3 million and $ 8.0 million at December 31, 2020 and 2019, respectively. 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) and $ 16.9 million ($ 11.0 million net of tax) at December 31, 2020 and 2019, respectively. 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 years ended December 31, 2020, 2019 and 2018, interest expense (including amortization of the debt discount) related to the 2022 Notes totaled $ 6.2 million, $ 8.4 million and $ 8.1 million, respectively. With the adoption of ASU No. 2020-06 beginning January 1, 2021, the 2022 Notes will no longer be reported at a discount. See Note 2 for the effect of ASU No. 2020-06. Convertible Senior Notes Due 2023 (“2023 Notes”) 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. The 2023 Notes mature on September 15, 2023 unless earlier converted, redeemed or repurchased. During certain periods and subject to certain conditions, the 2023 Notes are convertible by the holders into shares of our common stock at an initial conversion rate of 105.6133 shares of our common stock per $1,000 principal amount (which represents an initial conversion price of approximately $ 9.47 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 March 15, 2021, the 2023 Notes are not redeemable. On or after March 15, 2021, if certain conditions are met, we may redeem all or any portion of the 2023 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 2023 Notes). Holders of the 2023 Notes may require us to repurchase the notes following a “fundamental change” (as defined in the indenture governing the 2023 Notes). The indenture governing the 2023 Notes contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee under the indenture or the holders of not less than 25 % in aggregate principal amount then outstanding under the 2023 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 2023 Notes together with any accrued and unpaid interest thereon will become immediately due and payable. 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 an extinguishment gain of $ 5.9 million. The remaining unamortized debt discount of the 2023 Notes was $ 2.7 million and $ 14.5 million at December 31, 2020 and 2019, respectively. 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) and $ 20.1 million ($ 15.9 million net of tax) at December 31, 2020 and 2019, respectively. 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 years ended December 31, 2020, 2019 and 2018, interest expense (including amortization of the debt discount) related to the 2023 Notes totaled $ 6.1 million, $ 8.4 million and $ 6.4 million, respectively. With the adoption of ASU No. 2020-06 beginning January 1, 2021, the 2023 Notes will no longer be reported at a discount. See Note 2 for the effect of ASU No. 2020-06. 68 Table of Contents 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 10, we used approximately $ 10.5 million of the net proceeds to enter into the 2026 Capped Calls. We used 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. In order to reduce the potential dilution of the 2026 Notes to shareholders’ equity, we entered into the 2026 Capped Calls, which effectively increase the conversion price of the 2026 Notes to approximately $ 8.42 per share. However, the 2026 Capped Calls are separate transactions from the 2026 Notes and do not change the holders’ rights under the 2026 Notes, and holders of the 2026 Notes do not have any rights with respect to the 2026 Capped Calls (Note 10). 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 the year ended December 31, 2020, interest expense (including amortization of the debt discount) related to the 2026 Notes was $ 7.2 million. The remaining unamortized debt discount of the 2026 Notes was $ 41.7 million at December 31, 2020. With the adoption of ASU No. 2020-06 beginning January 1, 2021, the 2026 Notes will no longer be reported at a discount. See Note 2 for the effect of ASU No. 2020-06. MARAD Debt This U.S. 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 . The MARAD Debt is collateralized by the Q4000 and is guaranteed 50 % by us. The MARAD Debt is payable in equal semi-annual installments, matures in February 2027 and bears interest at a rate of 4.93 %. 69 Table of Contents Nordea Credit Agreement In September 2014, Q5000 Holdings entered into a credit agreement (the “Nordea Credit Agreement”) with a syndicated bank lending group for a term loan (the “Nordea Q5000 Loan”) in an amount of up to $ 250 million. The Nordea Q5000 Loan was funded in the amount of $ 250 million in April 2015 at the time the Q5000 vessel was delivered to us. Helix Vessel Finance S.à r.l., Q5000 Holdings's parent, which is a wholly owned Luxembourg subsidiary of Helix, has 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 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. The amendment increased the margin to 2.75 %, maintained the existing quarterly amortization requirements, and extended the final maturity to January 31, 2021 with a balloon payment on that date of $ 53.6 million. The remaining principal balance and unamortized debt issuance costs related to the Nordea Q5000 Loan are classified as current in the accompanying consolidated balance sheets. We repaid the remaining balance of the Nordea Q5000 Loan at its maturity on January 29, 2021. Other We previously issued additional convertible senior notes in March 2012, which were originally scheduled to mature on March 15, 2032 (the “2032 Notes”). In 2018, we fully redeemed the remaining $ 60.1 million in aggregate principal amount of the 2032 Notes and recognized a corresponding $ 0.2 million loss. The loss is presented as “Loss on extinguishment of long-term debt” in the accompanying consolidated statement of operations. 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 December 31, 2020, we were in compliance with these covenants. Scheduled maturities of our long-term debt outstanding as of December 31, 2020 are as follows (in thousands): Term Loan 2022 Notes 2023 Notes 2026 Notes MARAD Debt Nordea Q5000 Loan Total Less than one year $ 29,750 $ — $ — $ — $ 7,560 $ 53,572 $ 90,882 One to two years — 35,000 — — 7,937 — 42,937 Two to three years — — 30,000 — 8,333 — 38,333 Three to four years — — — — 8,749 — 8,749 Four to five years — — — — 9,186 — 9,186 Over five years — — — 200,000 14,645 — 214,645 Gross debt 29,750 35,000 30,000 200,000 56,410 53,572 404,732 Unamortized debt discounts (1) — ( 1,325 ) ( 2,651 ) ( 41,716 ) — — ( 45,692 ) Unamortized debt issuance costs (2) ( 191 ) ( 198 ) ( 427 ) ( 5,572 ) ( 3,049 ) ( 40 ) ( 9,477 ) Total debt 29,559 33,477 26,922 152,712 53,361 53,532 349,563 Less current maturities ( 29,559 ) — — — ( 7,560 ) ( 53,532 ) ( 90,651 ) Long-term debt $ — $ 33,477 $ 26,922 $ 152,712 $ 45,801 $ — $ 258,912 (1) The 2022 Notes, the 2023 Notes and the 2026 Notes will increase to their face amounts through accretion of their debt discounts to interest expense through May 2022, September 2023 and February 2026, respectively. See Note 2 for future accounting changes related to these discounts. (2) Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement. 70 Table of Contents The following table details the components of our net interest expense (in thousands): Year Ended December 31, 2020 2019 2018 Interest expense $ 30,538 $ 31,186 $ 32,617 Capitalized interest (1) ( 1,182 ) ( 20,246 ) ( 15,629 ) Interest income ( 825 ) ( 2,607 ) ( 3,237 ) Net interest expense $ 28,531 $ 8,333 $ 13,751 (1) The significant reduction in capitalized interest in 2020 was attributable to the conclusion of our planned major capital commitments following the completion of the Q7000 . Note 9 — Income Taxes We and our subsidiaries file a consolidated U.S. federal income tax return. We believe that our recorded deferred tax assets and liabilities are reasonable. However, tax laws and regulations are subject to interpretation, and the outcomes of tax disputes are inherently uncertain; therefore, our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions. Components of income tax provision (benefit) reflected in the consolidated statements of operations consist of the following (in thousands): Year Ended December 31, 2020 2019 2018 Current $ ( 14,818 ) $ 4,374 $ 4,830 Deferred ( 3,883 ) 3,485 ( 2,430 ) $ ( 18,701 ) $ 7,859 $ 2,400 Domestic $ ( 15,074 ) $ 3,715 $ ( 3,161 ) Foreign ( 3,627 ) 4,144 5,561 $ ( 18,701 ) $ 7,859 $ 2,400 Components of income (loss) before income taxes are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Domestic $ ( 3,406 ) $ 2,219 $ ( 28,838 ) Foreign 4,789 63,337 59,836 $ 1,383 $ 65,556 $ 30,998 The U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, is an economic stimulus package designed to aid in offsetting the economic damage caused by the ongoing COVID-19 pandemic and includes various changes to U.S. income tax regulations. 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 a $ 7.6 million net tax benefit in the year ended December 31, 2020, consisting of an $ 18.9 million current tax benefit, which is reflected in our income tax receivable at December 31, 2020, 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. 71 Table of Contents During the year ended December 31, 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. 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 income tax provision (benefit) at the U.S. statutory rate and our actual income tax provision (benefit) are as follows: Year Ended December 31, 2020 2019 2018 Taxes at U.S. statutory rate $ 290 21.0 % $ 13,767 21.0 % $ 6,510 21.0 % Foreign tax provision ( 3,426 ) ( 247.7 ) ( 6,557 ) ( 10.0 ) ( 4,941 ) ( 15.9 ) CARES Act ( 7,596 ) ( 549.2 ) — — — — Subsidiary restructuring ( 8,333 ) ( 602.5 ) — — — — Other 364 26.2 649 1.0 831 2.6 Income tax provision (benefit) $ ( 18,701 ) ( 1,352.2 ) % $ 7,859 12.0 % $ 2,400 7.7 % Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes. The nature of these differences and the income tax effect of each are as follows (in thousands): December 31, 2020 2019 Deferred tax liabilities: Depreciation $ 153,226 $ 166,239 Debt discounts on 2022 Notes, 2023 Notes and 2026 Notes 9,298 4,643 Total deferred tax liabilities $ 162,524 $ 170,882 Deferred tax assets: Net operating losses $ ( 59,794 ) $ ( 64,178 ) Reserves, accrued liabilities and other ( 11,631 ) ( 13,203 ) Total deferred tax assets ( 71,425 ) ( 77,381 ) Valuation allowance 19,722 18,631 Net deferred tax liabilities $ 110,821 $ 112,132 At December 31, 2020, our U.S. net operating losses available for carryforward totaled $ 197.4 million, of which $ 85.1 million occurred after the passage of the 2017 Tax Act and are not subject to expiration. The U.S. net operating loss carryforwards generated prior to 2018 in the amount of $ 112.3 million will begin to expire in 2035 if unused. Realization of net operating losses is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of these tax attributes will be utilized. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period are reduced. At December 31, 2020, we had a $ 2.9 million valuation allowance recorded against our U.S. deferred tax assets for foreign tax credits. Management believes it is more likely than not that we will not be able to utilize the foreign tax credits prior to their expiration. At December 31, 2020, we had a $ 16.8 million valuation allowance related to certain non-U.S. deferred tax assets, primarily net operating losses from our Robotics segment in the U.K., as management believes it is more likely than not that we will not be able to utilize the tax benefits. Additional valuation allowances may be made in the future if in management’s opinion it is more likely than not that future tax benefits will not be utilized. 72 Table of Contents At December 31, 2020, we had accumulated undistributed earnings generated by our non-U.S. subsidiaries without operations in the U.S. of approximately $ 62.2 million. Due to the enactment of the U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”), repatriations of foreign earnings will generally be free of U.S. federal tax but may be subject to changes in future tax legislation that may result in taxation. Indefinite reinvestment is determined by management’s intentions concerning our future operations. We intend to indefinitely reinvest these earnings, as well as future earnings from our non-U.S. subsidiaries without operations in the U.S., to fund our international operations. In addition, we expect future U.S. cash generation will be sufficient to meet future U.S. cash needs. We have not provided deferred income taxes on the accumulated earnings and profits from our non-U.S. subsidiaries without operations in the U.S. as we consider them permanently reinvested. Due to complexities in the tax laws and the manner of repatriation, it is not practicable to estimate the unrecognized amount of deferred income taxes associated with these undistributed earnings. We recorded an uncertain tax position of $ 0.7 million in 2020 related to a research and development credit taken on our 2019 U.S. Federal Income Tax Return and certain expenses not reversed for tax purposes. We account for tax-related interest in interest expense and tax penalties in selling, general and administrative expenses. We did not record any interest related to these positions in 2020 as the amount was immaterial. The statute of limitations on $ 0.3 million of uncertain tax positions expired in 2019. Therefore, as of December 31, 2019, there were no unrecognized tax benefits related to uncertain tax positions. We file tax returns in the U.S. and in various state, local and non-U.S. jurisdictions. We anticipate that any potential adjustments to our state, local and non-U.S. jurisdiction tax returns by taxing authorities would not have a material impact on our financial position. The tax periods from 2013, 2014, and 2018 through 2020 remain open to review and examination by the Internal Revenue Service. In non-U.S. jurisdictions, the open tax periods include 2013 through 2020. Note 10 — Shareholders’ Equity Our amended and restated Articles of Incorporation provide for authorized Common Stock of 240,000,000 shares with no stated par value per share and 5,000,000 shares of preferred stock, $ 0.01 par value per share, issuable in one or more series. In connection with the 2026 Notes offering (Note 8), we entered into the 2026 Capped Calls with three separate option counterparties. 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, which corresponds to the shares into which the 2026 Notes are initially convertible. The capped call shares are subject to certain anti-dilution adjustments. Each capped call option has an initial strike price of approximately $ 6.97 per share, which corresponds to the initial conversion price of the 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 consolidated balance sheet. 73 Table of Contents The components of accumulated OCI are as follows (in thousands): December 31, 2020 2019 Cumulative foreign currency translation adjustment $ ( 51,620 ) $ ( 64,455 ) Net unrealized loss on hedges, net of tax (1) — ( 285 ) Accumulated OCI $ ( 51,620 ) $ ( 64,740 ) (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 21). Note 11 — Stock Buyback Program Our Board of Directors (our “Board”) has granted us the authority to repurchase shares of our common stock in an amount equal to any equity issued to our employees, officers and directors under our share-based compensation plans, including share-based awards under our existing long-term incentive plans and shares issued to our employees under our Employee Stock Purchase Plan (the “ESPP”) (Note 14). We may continue to make repurchases pursuant to this authority from time to time as additional equity is issued under our stock-based plans depending on prevailing market conditions and other factors. As described in an announced plan, all repurchases may be commenced or suspended at any time as determined by management. We have not purchased any shares available under this program since 2015. As of December 31, 2020, 6,913,705 shares of our common stock were available for repurchase under the program. Note 12 — Revenue from Contracts with Customers Disaggregation of Revenue The following table provides information about disaggregated revenue by contract duration (in thousands): Well Intervention Robotics Production Facilities Intercompany Eliminations (1) Total Revenue Year ended December 31, 2020 Short-term $ 206,812 $ 117,439 $ — $ — $ 324,251 Long-term 332,437 60,579 58,303 ( 42,015 ) 409,304 Total $ 539,249 $ 178,018 $ 58,303 $ ( 42,015 ) $ 733,555 Year ended December 31, 2019 Short-term $ 214,926 $ 94,501 $ — $ — $ 309,427 Long-term 378,374 77,171 61,210 ( 74,273 ) 442,482 Total $ 593,300 $ 171,672 $ 61,210 $ ( 74,273 ) $ 751,909 Year ended December 31, 2018 Short-term $ 199,294 $ 89,072 $ — $ — $ 288,366 Long-term 361,274 69,917 64,400 ( 44,139 ) 451,452 Total $ 560,568 $ 158,989 $ 64,400 $ ( 44,139 ) $ 739,818 (1) Intercompany revenues among our business segments are under agreements that are considered long-term. 74 Table of Contents Contract Balances Contract assets are rights to consideration in exchange for services that we have provided to a customer when those rights are conditioned on our future performance. Contract assets generally consist of (i) demobilization fees recognized ratably over the contract term but invoiced upon completion of the demobilization activities and (ii) revenue recognized in excess of the amount billed to the customer for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract assets are reflected in “Other current assets” in the accompanying consolidated balance sheets (Note 3). Contract assets as of December 31, 2020 and 2019 were $ 2.4 million and $ 0.7 million, respectively. We had no credit losses on our contract assets for the years ended December 31, 2020, 2019 and 2018. Contract liabilities are obligations to provide future services to a customer for which we have already received, or have the unconditional right to receive, the consideration for those services from the customer. Contract liabilities may consist of (i) advance payments received from customers, including upfront mobilization fees allocated to a single performance obligation and recognized ratably over the contract term and/or (ii) amounts billed to the customer in excess of revenue recognized for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract liabilities are reflected as “Deferred revenue,” a component of “Accrued liabilities” and “Other non-current liabilities” in the accompanying consolidated balance sheets (Note 3). Contract liabilities as of December 31, 2020 and 2019 totaled $ 10.0 million and $ 19.9 million, respectively. Revenue recognized for the years ended December 31, 2020, 2019 and 2018 included $ 11.6 million, $ 10.1 million and $ 11.6 million, respectively, that were included in the contract liability balance as 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 December 31, 2020, $ 406.7 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $ 301.2 million in 2021, $ 72.9 million in 2022 and $ 32.6 million in 2023 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 December 31, 2020. For the year ended December 31, 2019, revenues recognized from performance obligations satisfied (or partially satisfied) in previous years were $ 2.1 million, which resulted from the recognition of previously constrained variable consideration for contractual adjustments related to withholding taxes in Brazil. For the years ended December 31, 2020 and 2018, revenues recognized from performance obligations satisfied (or partially satisfied) in previous years were immaterial. Contract Fulfillment Costs Contract fulfillment costs consist of costs incurred in fulfilling a contract with a customer. Our contract fulfillment costs primarily relate to costs incurred for mobilization of personnel and equipment at the beginning of a contract and costs incurred for demobilization at the end of a contract. Mobilization costs are deferred and amortized ratably over the contract term (including anticipated contract extensions) based on the pattern of the provision of services to which the contract fulfillment costs relate. Demobilization costs are recognized when incurred at the end of the contract. Deferred contract costs are reflected as “Deferred costs,” a component of “Other current assets” and “Other assets, net” in the accompanying consolidated balance sheets (Note 3). Our deferred contract costs as of December 31, 2020 and 2019 totaled $ 24.4 million and $ 42.9 million, respectively. For the years ended December 31, 2020, 2019 and 2018, we recorded $ 35.8 million, $ 31.5 million and $ 33.1 million, respectively, related to amortization of deferred contract costs. There were no associated impairment losses for any period presented. 75 Table of Contents Note 13 — Earnings Per Share The computations of the numerator (income) and denominator (shares) to derive the basic and diluted EPS amounts presented on the face of the accompanying consolidated statements of operations are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Income Shares Income Shares Income Shares Basic: Net income attributable to common shareholders $ 22,174 $ 57,919 $ 28,598 Less: Undistributed earnings allocated to participating securities ( 140 ) ( 487 ) ( 273 ) Accretion of redeemable noncontrolling interests ( 2,400 ) ( 143 ) — Net income available to common shareholders, basic $ 19,634 148,993 $ 57,289 147,536 $ 28,325 146,702 Diluted: Net income available to common shareholders, basic $ 19,634 148,993 $ 57,289 147,536 $ 28,325 146,702 Effect of dilutive securities: Share-based awards other than participating securities — 904 — 2,041 — 128 Undistributed earnings reallocated to participating securities 1 — 6 — 1 — Net income available to common shareholders, diluted $ 19,635 149,897 $ 57,295 149,577 $ 28,326 146,830 The following weighted average potentially dilutive shares related to the 2022 Notes, the 2023 Notes, the 2026 Notes and the 2032 Notes were excluded from the diluted EPS calculation as they were anti-dilutive (in thousands): Year Ended December 31, 2020 2019 2018 2022 Notes 6,537 8,997 8,997 2023 Notes 9,391 13,202 10,344 2026 Notes 10,891 — — 2032 Notes (1) — — 524 (1) The 2032 Notes were fully redeemed in 2018. Note 14 — Employee Benefit Plans Defined Contribution Plan We sponsor a defined contribution 401(k) retirement plan. Our discretionary contributions are in the form of cash and consist of a 50 % match of each participant’s contribution up to 5 % of the participant’s salary. For the years ended December 31, 2020 and 2019, we made discretionary employer contributions of $ 1.6 million and $ 1.0 million, respectively, to the 401(k) plan. 76 Table of Contents Employee Stock Purchase Plan On May 15, 2019, our shareholders approved an amendment to and restatement of the ESPP to: (i) increase the shares authorized for issuance by 1.5 million shares and (ii) delegate to an internal administrator the authority to establish the maximum shares purchasable during a purchase period. As of December 31, 2020 , 1.8 million shares were available for issuance under the ESPP. Eligible employees who participate in the ESPP may purchase shares of our common stock through payroll deductions on an after-tax basis over a four-month period beginning on January 1, May 1, and September 1 of each year during the term of the ESPP, subject to certain restrictions and limitations established by the Compensation Committee of our Board and Section 423 of the Internal Revenue Code. The per share price of common stock purchased under the ESPP is equal to 85 % of the lesser of its fair market value on (i) the first trading day of the purchase period or (ii) the last trading day of the purchase period. The ESPP currently has a purchase limit of 260 shares per employee per purchase period. 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”). The 2005 Incentive Plan is administered by the Compensation Committee of our Board. The Compensation Committee also determines the type of award to be made to each participant and, as set forth in the related award agreement, the terms, conditions and limitations applicable to each award. The Compensation Committee may grant stock options, restricted stock, restricted stock units (“RSUs”), PSUs and cash awards. Awards that have been granted to employees under the 2005 Incentive Plan have a vesting period of three years (or 33 % per year) with the exception of PSUs, which vest 100 % on the third anniversary date of the grant. On May 15, 2019, our shareholders approved an amendment to and restatement of the 2005 Incentive Plan to: (i) authorize 7.0 million additional shares for issuance pursuant to our equity incentive compensation strategy, (ii) establish a maximum award limit applicable to independent members of our Board under the 2005 Incentive Plan, (iii) require, subject to certain exceptions, that all awards under the 2005 Incentive Plan have a minimum vesting or restriction period of one year and (iv) remove certain requirements with respect to performance-based compensation under Section 162(m) of the Internal Revenue Code that were repealed by the 2017 Tax Act. The 2005 Incentive Plan currently has 17.3 million shares authorized for issuance, which includes a maximum of 2.0 million shares that may be granted as incentive stock options. As of December 31, 2020, there were 6.8 million shares available for issuance under the 2005 Incentive Plan and no incentive stock options are currently outstanding. The following grants of share-based awards were made in 2020 under the 2005 Incentive Plan: Date of Grant Shares/ Units Grant Date Fair Value Per Share/Unit Vesting Period January 2, 2020 (1) 369,938 $ 9.63 33% per year over three years January 2, 2020 (2) 369,938 $ 13.15 100% on January 2, 2023 January 2, 2020 (3) 5,679 $ 9.63 100% on January 1, 2022 April 1, 2020 (3) 43,351 $ 1.64 100% on January 1, 2022 July 1, 2020 (3) 19,407 $ 3.47 100% on January 1, 2022 October 1, 2020 (3) 24,831 $ 2.41 100% on January 1, 2022 December 10, 2020 (4) 204,546 $ 4.40 100% on December 10, 2021 (1) Reflects grants of restricted stock to our executive officers and select management employees. (2) Reflects grants of PSUs to our executive officers and select management employees. These awards when vested can only be settled in shares of our common stock. (3) Reflects grants of restricted stock to certain independent members of our Board who have elected to take their quarterly fees in stock in lieu of cash. (4) Reflects annual equity grants to each independent member of our Board. 77 Table of Contents In January 2021, we granted our executive officers 452,381 RSUs and 452,381 PSUs under the 2005 Incentive Plan. The grant date fair value of the RSUs was $ 4.20 per unit or $ 1.9 million. The grant date fair value of the PSUs was $ 5.33 per unit or $ 2.4 million. Also in January 2021, we granted $ 3.4 million of fixed value cash awards to select management employees under the 2005 Incentive Plan. Restricted Stock Awards We grant restricted stock to members of our Board, executive officers and select management employees. The following table summarizes information about our restricted stock: Year Ended December 31, 2020 2019 2018 Shares Grant Date Fair Value (1) Shares Grant Date Fair Value (1) Shares Grant Date Fair Value (1) Awards outstanding at beginning of year 1,173,045 $ 6.81 1,320,989 $ 7.40 1,579,218 $ 7.63 Granted 667,752 7.06 846,835 6.02 614,286 7.46 Vested (2) ( 631,498 ) 7.52 ( 993,361 ) 6.92 ( 823,310 ) 7.88 Forfeited ( 32,348 ) 5.41 ( 1,418 ) 8.82 ( 49,205 ) 7.62 Awards outstanding at end of year 1,176,951 $ 6.61 1,173,045 $ 6.81 1,320,989 $ 7.40 (1) Represents the weighted average grant date fair value, which is based on the quoted closing market price of our common stock on the trading day prior to the date of grant. (2) Total fair value of restricted stock that vested during the years ended December 31, 2020, 2019 and 2018 was $ 5.4 million, $ 6.5 million and $ 6.4 million, respectively. For the years ended December 31, 2020, 2019 and 2018, $ 4.2 million, $ 6.2 million and $ 6.0 million, respectively, were recognized as share-based compensation related to restricted stock. Future compensation cost associated with unvested restricted stock at December 31, 2020 totaled approximately $ 4.4 million. The weighted average vesting period related to unvested restricted stock at December 31, 2020 was approximately 1.2 years. Performance Share Unit Awards We grant PSUs to our executive officers and from time to time select management employees. PSUs granted in 2020, 2019 and 2018 are to be settled solely in shares of our common stock and therefore are accounted for as equity awards. The payout at vesting of these PSUs is based on the performance of our common stock over a three-year period compared to the performance of other companies in a peer group selected by the Compensation Committee of our Board, with the maximum amount of the award being 200 % of the original awarded PSUs and the minimum amount being zero . 78 Table of Contents The following table summarizes information about our equity PSU awards: Year Ended December 31, 2020 2019 2018 Units Grant Date Fair Value (1) Units Grant Date Fair Value (1) Units Grant Date Fair Value (1) Equity PSU awards outstanding at beginning of year 1,565,044 $ 10.17 1,006,360 $ 11.76 613,665 $ 12.64 Granted 369,938 13.15 688,540 7.60 449,271 10.44 Vested ( 589,335 ) 12.64 — — — — Forfeited ( 48,521 ) 7.60 ( 129,856 ) 8.91 ( 56,576 ) 10.83 Equity PSU awards outstanding at end of year 1,297,126 $ 9.99 1,565,044 $ 10.17 1,006,360 $ 11.76 (1) Represents the weighted average grant date fair value, which is determined using a Monte Carlo simulation model. For the years ended December 31, 2020, 2019 and 2018, $ 4.0 million, $ 5.1 million and $ 3.8 million, respectively, were recognized as share-based compensation related to equity PSU awards. Future compensation cost associated with unvested equity PSU awards at December 31, 2020 totaled approximately $ 4.6 million. The weighted average vesting period related to unvested equity PSU awards at December 31, 2020 was approximately 1.0 year. In January 2021, 368,038 equity PSU awards granted in 2018 vested at 200 %, representing 736,075 shares of our common stock with a total market value of $ 3.1 million. In January 2020, 589,335 equity PSU awards granted in 2017 vested at 200 %, representing 1,178,670 shares of our common stock with a total market value of $ 11.4 million. For the year ended December 31, 2018, $ 0.9 million were recognized as share-based compensation related to liability PSU awards. During 2019 and 2018, we cash settled liabilities of $ 11.1 million and $ 0.9 million, respectively, related to PSU awards granted in 2016 and 2015, respectively. Cash Awards In 2020, 2019 and 2018, we granted $ 4.7 million, $ 4.6 million and $ 5.2 million, respectively, of fixed value cash awards to select management employees under the 2005 Incentive Plan. The value of these cash awards is recognized on a straight-line basis over a vesting period of three years . For the years ended December 31, 2020, 2019 and 2018, we recognized compensation costs of $ 4.4 million and $ 3.2 million and $ 1.7 million, respectively, which reflected the cash payouts made in January 2021, 2020 and 2019, respectively. Note 15 — Business Segment Information We have three reportable business segments: Well Intervention, Robotics and Production Facilities. Our U.S., U.K. and Brazil well intervention operating segments are aggregated into the Well Intervention segment for financial reporting purposes. Our Well Intervention segment includes our vessels and/or equipment used to access offshore wells for the purpose of performing well enhancement or decommissioning operations 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, SILs and the ROAM, 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 globally. 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 HP I , the HFRS and our ownership of oil and gas properties (Note 16). All material intercompany transactions between the segments have been eliminated. 79 Table of Contents We evaluate our performance based on operating income of each reportable segment. Certain financial data by reportable segment are summarized as follows (in thousands): Year Ended December 31, 2020 2019 2018 Net revenues — Well Intervention $ 539,249 $ 593,300 $ 560,568 Robotics 178,018 171,672 158,989 Production Facilities 58,303 61,210 64,400 Intercompany eliminations ( 42,015 ) ( 74,273 ) ( 44,139 ) Total $ 733,555 $ 751,909 $ 739,818 Income (loss) from operations — Well Intervention $ 26,855 $ 89,564 $ 87,643 Robotics 13,755 7,261 ( 14,054 ) Production Facilities 15,975 17,160 27,263 Segment operating income 56,585 113,985 100,852 Goodwill impairment (1) ( 6,689 ) — — Corporate, eliminations and other ( 36,871 ) ( 45,988 ) ( 49,309 ) Total 13,025 67,997 51,543 Net interest expense ( 28,531 ) ( 8,333 ) ( 13,751 ) Other non-operating income (expense), net 16,889 5,892 ( 6,794 ) Income before income taxes $ 1,383 $ 65,556 $ 30,998 Capital expenditures — Well Intervention $ 19,523 $ 139,212 $ 136,164 Robotics 257 417 151 Production Facilities — 123 325 Corporate and other 464 1,102 443 Total $ 20,244 $ 140,854 $ 137,083 Depreciation and amortization — Well Intervention $ 101,756 $ 80,153 $ 76,943 Robotics 15,952 16,459 19,175 Production Facilities 15,652 15,658 14,070 Corporate and eliminations 349 450 334 Total $ 133,709 $ 112,720 $ 110,522 (1) Relates to the impairment of the entire STL goodwill balance (Note 7). Intercompany segment amounts are derived primarily from equipment and services provided to other business segments. Intercompany segment revenues are as follows (in thousands): Year Ended December 31, 2020 2019 2018 Well Intervention (1) $ 15,039 $ 43,484 $ 14,218 Robotics 26,976 30,789 29,921 Total $ 42,015 $ 74,273 $ 44,139 (1) Amount in the year ended December 31, 2019 included $ 27.5 million associated with the P&A work on our oil and gas properties in our Production Facilities segment (Note 16). 80 Table of Contents Revenues by individually significant geographic location are as follows (in thousands): Year Ended December 31, 2020 2019 2018 U.S. $ 304,563 $ 297,162 $ 271,260 U.K. 133,005 193,903 194,434 Brazil 208,565 216,796 208,054 Other 87,422 44,048 66,070 Total $ 733,555 $ 751,909 $ 739,818 Our operational assets work in various regions around the world such as the Gulf of Mexico, Brazil, the North Sea, Asia Pacific and West Africa. The following table provides our property and equipment, net of accumulated depreciation, by individually significant geographic location (in thousands): December 31, 2020 2019 U.S. $ 750,986 $ 808,683 U.K. (1) 764,070 782,246 Brazil 267,896 281,698 Singapore 12 10 Total $ 1,782,964 $ 1,872,637 (1) Includes certain assets that are based in the U.K. but may operate in the North Sea, West Africa and other regions, including the Q7000 . Segment assets are comprised of all assets attributable to each reportable segment. Corporate and other includes all assets not directly identifiable with our business segments, most notably the majority of our cash and cash equivalents. The following table reflects total assets by reportable segment (in thousands): December 31, 2020 2019 Well Intervention $ 2,134,081 $ 2,180,180 Robotics 132,550 151,478 Production Facilities 129,773 142,624 Corporate and other 101,874 122,449 Total $ 2,498,278 $ 2,596,731 81 Table of Contents Note 16 — Asset Retirement Obligations The following table describes the changes in our AROs (both current and long-term) for the years ended December 31, 2020 and 2019 (in thousands): 2020 2019 AROs at January 1, $ 28,258 $ — Liability incurred during the period — 53,294 Liability settled during the period — ( 28,296 ) Revisions in estimated cash flows — 822 Accretion expense 2,655 2,438 AROs at December 31, $ 30,913 $ 28,258 Our AROs relate to our Droshky oil and gas properties that we acquired from Marathon Oil Corporation (“Marathon Oil”) in January 2019. In connection with assuming the P&A of those assets, we are entitled to receive agreed-upon amounts from Marathon Oil as the P&A work is completed. Note 17 — Commitments and Contingencies and Other Matters Commitments 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 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 Siem Helix 1 charter expires June 2023 and the Siem Helix 2 charter expires February 2024. We have time charter agreements for the Grand Canyon II and Grand Canyon III vessels for use in our robotics operations. The expiration date of the Grand Canyon II charter was extended in February 2021 from April 2021 until December 2021, with an option to renew. 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 of our planned major 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. Litigation 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. In addition, from time to time we receive other claims, such as contract and employment-related disputes, in the normal course of business. Note 18 — Statement of Cash Flow Information The following table provides supplemental cash flow information (in thousands): Year Ended December 31, 2020 2019 2018 Interest paid, net of interest capitalized $ 15,943 $ 1,909 $ 7,369 Income taxes paid 7,434 8,856 5,705 82 Table of Contents Our capital additions include the acquisition of property and equipment for which payment has not been made. As of December 31, 2020 and 2019, these non-cash capital additions totaled $ 1.6 million and $ 10.2 million, respectively. Note 19 — Allowance Accounts The following table sets forth the activity in our valuation accounts for each of the three years in the period ended December 31, 2020 (in thousands): Allowance for Credit Losses Deferred Tax Asset Valuation Allowance Balance at December 31, 2017 $ 2,752 $ 12,337 Deductions (1) ( 2,752 ) — Adjustments (2) — 5,603 Balance at December 31, 2018 — 17,940 Adjustments (2) — 691 Balance at December 31, 2019 — 18,631 Additions (3) 2,684 — Adjustments (2) (4) 785 1,091 Balance at December 31, 2020 $ 3,469 $ 19,722 (1) The decrease in allowance for credit losses reflects the write-offs of accounts receivable that are either settled or deemed uncollectible (2) The increase in valuation allowance primarily reflects additional net operating losses in our Robotics segment in the U.K. for which insufficient future taxable income exists to offset the losses. (3) The additions in allowance for credit losses reflect credit loss reserves during 2020. (4) The adjustment in allowance for credit losses reflects provision for current expected credit losses upon the adoption of ASU No. 2016-13 on January 1, 2020. See Note 2 for a detailed discussion regarding our accounting policy on accounts receivable and allowance for credit losses as well as the adoption of ASU No. 2016-13. See Note 9 for a detailed discussion of the valuation allowance related to our deferred tax assets. Note 20 — Fair Value Measurements Assets and liabilities measured at fair value are based on one or more of three valuation approaches as follows: (a) Market Approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. (b) Cost Approach. Amount that would be required to replace the service capacity of an asset (replacement cost). (c) Income Approach. Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). Our financial instruments include cash and cash equivalents, receivables, accounts payable, long-term debt and derivative instruments. The carrying amount of cash and cash equivalents, trade and other current receivables as well as accounts payable approximates fair value due to the short-term nature of these instruments. The fair value of our derivative instruments (Note 21) reflects our best estimate and is based upon exchange or over-the-counter quotations whenever they are available. Quoted valuations may not be available due to location differences or terms that extend beyond the period for which quotations are available. Where quotes are not available, we utilize other valuation techniques or models to estimate market values. The fair value of our interest rate swaps is calculated as the discounted cash flows of the difference between the rate fixed by the hedging instrument and the LIBOR forward curve over the remaining term of the hedging instrument. The fair value of our foreign currency 83 Table of Contents exchange contracts is calculated as the discounted cash flows of the difference between the fixed payment specified by the hedging instrument and the expected cash inflow of the forecasted transaction using a foreign currency forward curve. These modeling techniques require us to make estimations of future prices, price correlation, volatility and liquidity based on market data. As of December 31, 2020, there were no financial instruments measured at fair value on a recurring basis. The following table provides additional information relating to those financial instruments measured at fair value on a recurring basis as of December 31, 2019 (in thousands): Fair Value at December 31, 2019 Valuation Approach Level 1 Level 2 Level 3 Total Assets: Interest rate swaps $ — $ 44 $ — $ 44 (c) Liabilities: 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): December 31, 2020 2019 Principal Amount (1) Fair Value (2) (3) Principal Amount (1) Fair Value (2) (3) Term Loan (matures December 2021) $ 29,750 $ 28,969 $ 33,250 $ 32,959 Nordea Q5000 Loan (matures January 2021) (4) 53,572 53,598 89,286 89,398 MARAD Debt (matures February 2027) 56,410 62,318 63,610 68,643 2022 Notes (mature May 2022) 35,000 33,513 125,000 134,225 2023 Notes (mature September 2023) 30,000 28,650 125,000 162,188 2026 Notes (mature February 2026) 200,000 211,383 — — Total debt $ 404,732 $ 418,431 $ 436,146 $ 487,413 (1) Principal amount includes current maturities and excludes the related unamortized debt discount and debt issuance costs. See Note 8 for additional disclosures on our long-term debt. (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 loans, 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, 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. We repaid the Nordea Q5000 Loan in January 2021. (Note 8). 84 Table of Contents Note 21 — Derivative Instruments and Hedging Activities 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 8). These swap contracts expired in April 2020. Our interest rate swap contracts qualified for cash flow hedge accounting treatment. 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 the Norwegian kroner through July 2019 and February 2020, respectively. A portion of our foreign currency exchange contracts qualified for hedge accounting treatment. We had no derivative instruments that were designated as hedging instruments as of December 31, 2020. The following table presents the balance sheet location and fair value of our derivative instruments that were designated as hedging instruments as of December 31, 2019 (in thousands): December 31, 2019 Balance Sheet Location Fair Value Asset Derivative Instruments: Interest rate swaps Other current assets $ 44 $ 44 Liability Derivative Instruments: Foreign exchange contracts Accrued liabilities $ 401 $ 401 We had no derivative instruments that were not designated as hedging instruments as of December 31, 2020. The following table presents the balance sheet location and fair value of our derivative instruments that were not designated as hedging instruments as of December 31, 2019 (in thousands): December 31, 2019 Balance Sheet Location Fair Value Liability Derivative Instruments: Foreign exchange contracts Accrued liabilities $ 601 $ 601 The following tables present the impact that derivative instruments designated as hedging instruments had on our accumulated OCI (net of tax) and our consolidated statements of operations (in thousands): Unrealized Gain (Loss) Recognized in OCI Year Ended December 31, 2020 2019 2018 Foreign exchange contracts $ ( 54 ) $ ( 315 ) $ ( 1,453 ) Interest rate swaps ( 41 ) ( 365 ) 606 $ ( 95 ) $ ( 680 ) $ ( 847 ) 85 Table of Contents Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings Gain (Loss) Reclassified from Accumulated OCI into Earnings Year Ended December 31, 2020 2019 2018 Foreign exchange contracts Cost of sales $ ( 455 ) $ ( 6,125 ) $ ( 7,709 ) Interest rate swaps Net interest expense 3 655 508 $ ( 452 ) $ ( 5,470 ) $ ( 7,201 ) The following table presents the impact that derivative instruments not designated as hedging instruments had on our consolidated statements of operations (in thousands): Location of Loss Recognized in Earnings Loss Recognized in Earnings Year Ended December 31, 2020 2019 2018 Foreign exchange contracts Other income (expense), net $ ( 81 ) $ ( 378 ) $ ( 901 ) $ ( 81 ) $ ( 378 ) $ ( 901 ) Note 22 — Quarterly Financial Information (Unaudited) In addition to being affected by the timing of oil and gas company expenditures, offshore marine construction activities may fluctuate as a result of weather conditions. Historically, a substantial portion of our services has been performed during the summer and fall months. As a result, a disproportionate portion of our revenues and net income is earned during such periods. The following is a summary of consolidated quarterly financial information (in thousands, except per share amounts): Quarter Ended March 31, June 30, September 30, December 31, 2020 Net revenues $ 181,021 $ 199,147 $ 193,490 $ 159,897 Gross profit 2,010 29,576 34,628 13,695 Net income (loss) ( 13,928 ) 5,450 24,445 4,117 Net income (loss) attributable to common shareholders ( 11,938 ) 5,450 24,499 4,163 Basic earnings (loss) per common share $ ( 0.09 ) $ 0.04 $ 0.16 $ 0.03 Diluted earnings (loss) per common share $ ( 0.09 ) $ 0.04 $ 0.16 $ 0.03 2019 Net revenues $ 166,823 $ 201,728 $ 212,609 $ 170,749 Gross profit 16,254 39,934 55,074 26,576 Net income 1,318 16,823 31,622 7,934 Net income attributable to common shareholders 1,318 16,854 31,695 8,052 Basic earnings per common share $ 0.01 $ 0.11 $ 0.21 $ 0.05 Diluted earnings per common share $ 0.01 $ 0.11 $ 0.21 $ 0.05 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 86 Table of Contents