NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Basis of Presentation and New Accounting Standards
The accompanying condensed consolidated financial statements include the accounts of Helix Energy Solutions Group, Inc. and its subsidiaries (collectively, “Helix” or the “Company”). Unless the context indicates otherwise, the terms “we,” “us” and “our” in this report refer collectively to Helix and its subsidiaries. All material intercompany accounts and transactions have been eliminated. These unaudited condensed consolidated financial statements have been prepared pursuant to instructions for the Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission (the “SEC”) and do not include all information and footnotes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP in U.S. dollars and are consistent in all material respects with those applied in our
2017
Annual Report on Form 10-K (“
2017
Form 10-K”). The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements and the related disclosures. Actual results may differ from our estimates. We have made all adjustments (which were normal recurring adjustments) that we believe are necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income (loss), and statements of cash flows, as applicable. The operating results for the
three-
month period ended
March 31, 2018
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2018
. Our balance sheet as of
December 31, 2017
included herein has been derived from the audited balance sheet as of
December 31, 2017
included in our
2017
Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in our
2017
Form 10-K.
Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current presentation format.
New accounting standards adopted
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASC Topic 606”). The FASB also issued several subsequent updates to promote more consistent interpretation and application of the principles outlined in the standard. ASC Topic 606 provides a five-step approach to account for revenue arising from contracts with customers in order for an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
We adopted ASC Topic 606 effective January 1, 2018 using the modified retrospective method by applying the five-step model to all contracts that were not completed as of the date of adoption. For contracts that were modified before the date of adoption, we have considered the modification guidance within the new standard and determined that the revenues recognized prior to adoption for such modified contracts were not impacted. We did not record any cumulative effect adjustment to the opening balance of our retained earnings as of January 1, 2018 as the adoption of ASC 606 had an insignificant impact on our prior year earnings. On our consolidated balance sheet, contract assets that were previously presented as “Other accounts receivable” are now a component of “Other current assets.” The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. ASC Topic 606 requires additional disclosures with regard to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We do not expect the adoption of this guidance to have a material impact on the measurement or recognition of our revenues on an ongoing basis. The impact of ASC Topic 606 for the three-month period ended March 31, 2018 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
As
Reported
|
|
Pro Forma Without Adoption of ASC 606
|
|
Effect of Change
|
Balance Sheet
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Unbilled and other
|
$
|
43,353
|
|
|
$
|
43,461
|
|
|
$
|
(108
|
)
|
Other current assets
|
46,236
|
|
|
45,340
|
|
|
896
|
|
Liabilities
|
|
|
|
|
|
Deferred tax liabilities
|
108,546
|
|
|
108,391
|
|
|
155
|
|
Equity
|
|
|
|
|
|
Retained earnings
|
351,876
|
|
|
351,243
|
|
|
633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
As
Reported
|
|
Pro Forma Without Adoption of ASC 606
|
|
Effect of Change
|
Statement of Operations
|
|
|
|
|
|
Net revenues
|
$
|
164,262
|
|
|
$
|
163,474
|
|
|
$
|
788
|
|
Loss from operations
|
(1,116
|
)
|
|
(1,904
|
)
|
|
788
|
|
Loss before income taxes
|
(2,473
|
)
|
|
(3,261
|
)
|
|
788
|
|
Income tax provision
|
87
|
|
|
(68
|
)
|
|
155
|
|
Net loss
|
(2,560
|
)
|
|
(3,193
|
)
|
|
633
|
|
In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows a reclassification from accumulated other comprehensive income (loss) (“OCI”) to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) that was enacted on December 22, 2017. We adopted this guidance as of January 1, 2018 by making the election to reclassify
$1.5 million
of net stranded tax benefits from Accumulated OCI to retained earnings (Note 8). On an ongoing basis, we release the income tax effects of individual items in Accumulated OCI as those items are sold or settled at the applicable statutory rate.
New accounting standards issued but not yet effective
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU amends the existing accounting standards for leases. The amendments are intended to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods. Early adoption is permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. Based on our current portfolio of leases including vessel charters, we expect to record right-of-use assets and lease liabilities on our balance sheet upon adoption of this guidance in the first quarter of 2019. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” 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. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU improves the financial reporting of hedging relationships to better align risk management activities in financial statements and makes certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
We do not expect any other recent accounting standards to have a material impact on our financial position, results of operations or cash flows.
Note 2 — Company Overview
We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. We seek to provide services and methodologies that we believe are critical to maximizing production economics. We provide services primarily in deepwater in the U.S. Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions. Our “life of field” services are segregated into
three
reportable business segments: Well Intervention, Robotics and Production Facilities (Note 12).
Our Well Intervention segment includes our vessels and/or equipment used to perform well intervention services in the U.S. Gulf of Mexico, North Sea, Brazil and West Africa. Our Well Intervention segment also includes intervention riser systems (“IRSs”), some of which we provide on a stand-alone basis, and subsea intervention lubricators (“SILs”). Our well intervention vessels include the
Q4000
, the
Q5000
, the
Seawell
, the
Well Enhancer
and
two
chartered monohull vessels, the
Siem H
elix
1
and the
Siem Helix 2
. We also have a semi-submersible well intervention vessel under construction, the
Q7000
.
Our Robotics segment includes remotely operated vehicles (“ROVs”), trenchers and ROVDrills that are designed to complement offshore construction and well intervention services and currently operates
three
ROV support vessels under long-term charter: the
Grand Canyon
, the
Grand Canyon II
and the
Grand Canyon III
. We also utilize spot vessels as needed. Our vessel charter for the
Deep Cygnus
was terminated on February 9, 2018, at which time we returned the vessel to its owner.
Our Production Facilities segment includes the
Helix Producer
I
(the “
HP I
”), a ship-shaped dynamically positioned floating production vessel, and the Helix Fast Response System (the “HFRS”), which provides certain operators access to our
Q4000
and
HP I
vessels in the event of a well control incident in the Gulf of Mexico. The
HP I
has been under contract to the Phoenix field operator since February 2013, currently under a fixed fee agreement through at least June 1, 2023. We are also party to an agreement providing various operators through March 31, 2019 with access to the HFRS for well control purposes. The Production Facilities segment also includes our ownership interest in Independence Hub, LLC (“Independence Hub”) (Note 5).
Note 3 — Details of Certain Accounts
Other current assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Contract assets (Note 9)
|
$
|
896
|
|
|
$
|
—
|
|
Prepaids
|
13,557
|
|
|
10,102
|
|
Deferred costs (Note 9)
|
26,509
|
|
|
27,204
|
|
Other
|
5,274
|
|
|
4,462
|
|
Total other current assets
|
$
|
46,236
|
|
|
$
|
41,768
|
|
Other assets, net consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Note receivable
(1)
|
$
|
2,000
|
|
|
$
|
3,758
|
|
Prepaids
|
7,230
|
|
|
7,666
|
|
Deferred dry dock costs, net
|
10,836
|
|
|
12,368
|
|
Deferred costs (Note 9)
|
57,708
|
|
|
63,767
|
|
Charter fee deposit
(2)
|
12,544
|
|
|
12,544
|
|
Other
|
5,074
|
|
|
5,102
|
|
Total other assets, net
|
$
|
95,392
|
|
|
$
|
105,205
|
|
|
|
(1)
|
We have a note receivable in the form of convertible bonds issued to us by a customer as part of a payment forgiveness arrangement. The bonds mature on December 14, 2019 and bear interest at a rate of
5%
per annum payable annually. The amount at December 31, 2017 reflected the fair value of the bonds as of that date. In March 2018, we wrote down the convertible bonds to their fair value as of March 31, 2018 by reversing a
$0.6 million
unrealized gain previously recorded in Accumulated OCI and recording a
$1.1 million
other than temporary loss.
|
|
|
(2)
|
This amount deposited with the vessel owner is to be used to reduce our final charter payments for the
Siem Helix
2
.
|
Accrued liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Accrued payroll and related benefits
|
$
|
26,093
|
|
|
$
|
30,685
|
|
Deferred revenue (Note 9)
|
11,640
|
|
|
12,609
|
|
Derivative liability (Note 15)
|
9,057
|
|
|
10,625
|
|
Other
|
17,606
|
|
|
17,761
|
|
Total accrued liabilities
|
$
|
64,396
|
|
|
$
|
71,680
|
|
Other non-current liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Investee losses in excess of investment (Note 5)
|
$
|
7,302
|
|
|
$
|
7,567
|
|
Deferred gain on sale of property
(1)
|
5,931
|
|
|
5,838
|
|
Deferred revenue (Note 9)
|
8,662
|
|
|
8,744
|
|
Derivative liability (Note 15)
|
4,940
|
|
|
8,150
|
|
Other
|
11,261
|
|
|
10,391
|
|
Total other non-current liabilities
|
$
|
38,096
|
|
|
$
|
40,690
|
|
|
|
(1)
|
Relates to the sale and lease-back in January 2016 of our office and warehouse property located in Aberdeen, Scotland. The deferred gain is amortized over a
15
-year minimum lease term.
|
Note 4 — Statement of Cash Flow Information
We define cash and cash equivalents as cash and all highly liquid financial instruments with original maturities of three months or less. The following table provides supplemental cash flow information (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
Interest paid, net of interest capitalized
|
$
|
2,238
|
|
|
$
|
3,557
|
|
Income taxes paid
|
$
|
3,036
|
|
|
$
|
1,233
|
|
Our non-cash investing activities include addition of property and equipment for which payment has not been made. These non-cash capital additions totaled
$12.8 million
as of
March 31, 2018
and
$16.9 million
as of
December 31, 2017
.
Note 5 — Equity Investments
We have a
20%
ownership interest in Independence Hub that we account for using the equity method of accounting. Independence Hub owns the “Independence Hub” platform located in Mississippi Canyon Block 920 in the U.S. Gulf of Mexico in a water depth of
8,000
feet. Since we are committed to providing our pro-rata portion of the necessary level of financial support for Independence Hub to pay its obligations as they become due, we recorded liabilities of
$9.6 million
at
March 31, 2018
and
$9.8 million
at
December 31, 2017
for our share of the estimated obligations, net of remaining working capital. These liabilities are reflected in “Accrued liabilities” and “Other non-current liabilities” in the accompanying condensed consolidated balance sheets.
Note 6 —
Long-Term Debt
Scheduled maturities of our long-term debt outstanding as of
March 31, 2018
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
Loan
(1)
|
|
2022
Notes
|
|
2023 Notes
|
|
2032
Notes
(2)
|
|
MARAD
Debt
|
|
Nordea
Q5000
Loan
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
$
|
3,276
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
809
|
|
|
$
|
6,693
|
|
|
$
|
35,714
|
|
|
$
|
46,492
|
|
One to two years
|
5,147
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,027
|
|
|
35,714
|
|
|
47,888
|
|
Two to three years
|
27,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,378
|
|
|
80,357
|
|
|
115,344
|
|
Three to four years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,746
|
|
|
—
|
|
|
7,746
|
|
Four to five years
|
—
|
|
|
125,000
|
|
|
—
|
|
|
—
|
|
|
8,133
|
|
|
—
|
|
|
133,133
|
|
Over five years
|
—
|
|
|
—
|
|
|
125,000
|
|
|
—
|
|
|
36,797
|
|
|
—
|
|
|
161,797
|
|
Total debt
|
36,032
|
|
|
125,000
|
|
|
125,000
|
|
|
809
|
|
|
73,774
|
|
|
151,785
|
|
|
512,400
|
|
Current maturities
|
(3,276
|
)
|
|
—
|
|
|
—
|
|
|
(809
|
)
|
|
(6,693
|
)
|
|
(35,714
|
)
|
|
(46,492
|
)
|
Long-term debt, less current maturities
|
32,756
|
|
|
125,000
|
|
|
125,000
|
|
|
—
|
|
|
67,081
|
|
|
116,071
|
|
|
465,908
|
|
Unamortized debt discount
(3)
|
—
|
|
|
(13,188
|
)
|
|
(19,989
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,177
|
)
|
Unamortized debt issuance costs
(4)
|
(559
|
)
|
|
(2,162
|
)
|
|
(3,148
|
)
|
|
—
|
|
|
(4,391
|
)
|
|
(1,593
|
)
|
|
(11,853
|
)
|
Long-term debt
|
$
|
32,197
|
|
|
$
|
109,650
|
|
|
$
|
101,863
|
|
|
$
|
—
|
|
|
$
|
62,690
|
|
|
$
|
114,478
|
|
|
$
|
420,878
|
|
|
|
(1)
|
Term Loan borrowing pursuant to the Credit Agreement (amended and restated in June 2017) matures in
June 2020
. Scheduled maturities of the Term Loan have been adjusted to reflect prepayments made in March 2018.
|
|
|
(2)
|
Our Convertible Senior Notes due 2032 (the “2032 Notes”) that were not repurchased in March 2018 will be redeemed by us on May 4, 2018 and the holders of these notes may convert them at any time before the close of business on May 3, 2018. We have elected to deliver cash to satisfy our conversion obligation upon any conversion of the notes.
|
|
|
(3)
|
Our Convertible Senior Notes due 2022 (the “2022 Notes”) will increase to their face amount through accretion of the debt discount through
May 2022
. Our Convertible Senior Notes due 2023 (the “2023 Notes”) will increase to their face amount through accretion of the debt discount through
September 2023
.
|
|
|
(4)
|
Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement.
|
Below is a summary of certain components of our indebtedness:
Credit Agreement
On June 30, 2017, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a group of lenders led by Bank of America, N.A. (“Bank of America”). The amended and restated credit facility is comprised of a
$100 million
term loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”) of up to
$150 million
(the “Revolving Loans”). 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 up to
$100 million
with respect to an increase in the Revolving Credit Facility, additional term loans, or a combination thereof. As of
March 31, 2018
, we had no borrowings under the Revolving Credit Facility and our available borrowing capacity under that facility, based on the applicable leverage ratio covenant, totaled
$142.9 million
, net of
$3.0 million
of letters of credit issued under that facility.
The Term Loan and the Revolving Loans (together, the “Loans”), at our election, bear interest either in relation to Bank of America’s base rate or to a LIBOR rate. The Term Loan or portions thereof bearing interest at the base rate will bear interest at a per annum rate equal to the base rate plus
3.25%
. The Term Loan or portions thereof bearing interest at a LIBOR rate will bear interest per annum at the LIBOR rate selected by us plus a margin of
4.25%
. The interest rate on the Term Loan was
6.13%
as of
March 31, 2018
. The Revolving Loans or portions thereof bearing interest at the base rate will bear interest at a per annum rate equal to the base rate plus a margin ranging from
1.75%
to
3.25%
. The Revolving Loans or portions thereof bearing interest at a LIBOR rate will bear interest per annum at the LIBOR rate selected by us plus a margin ranging from
2.75%
to
4.25%
. A letter of credit fee is payable by us equal to its applicable margin for LIBOR rate Loans times the daily amount available to be drawn under the applicable letter of credit. Margins on the Revolving Loans will vary in relation to the Consolidated Total Leverage Ratio (as defined below) provided for in the Credit Agreement. We also pay a fixed commitment fee of
0.50%
per annum on the unused portion of our Revolving Credit Facility.
The Term Loan principal is required to be repaid in
quarterly
installments totaling
5%
in the first loan year,
10%
in the second loan year and
15%
in the third loan year, with a balloon payment at maturity. Installment amounts are subject to adjustment for any prepayments on the Term Loan. We may elect to prepay amounts outstanding under the Term Loan without premium or penalty, but may not reborrow any amounts prepaid. We may prepay amounts outstanding under the Revolving Credit Facility without premium or penalty and may reborrow any amounts prepaid up to the amount of the Revolving Credit Facility. The Loans mature on
June 30, 2020
.
The Credit Agreement and the other documents entered into in connection with the Credit Agreement include terms and conditions, including covenants, which we consider customary for this type of transaction. The covenants include certain restrictions on our and 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 financial ratio requirements of EBITDA to interest charges (“Consolidated Interest Coverage Ratio”) and funded debt to EBITDA (“Consolidated Total Leverage Ratio”), and provided that if there are no Loans outstanding, the funded debt ratio requirement permits us to offset a certain amount of cash against the funded debt used in the calculation (“Consolidated Net Leverage Ratio”). After the initial Term Loan is repaid in full, if there are any Loans outstanding including unreimbursed draws under letters of credit issued under the Revolving Credit Facility, we are also required to ensure that the ratio of our total secured indebtedness to EBITDA (“Consolidated Secured Leverage Ratio”) does not exceed the maximum permitted ratio. The Credit Agreement also obligates us to maintain certain cash levels depending on the type of indebtedness outstanding. These financial covenant requirements are detailed as follows:
|
|
(a)
|
The minimum required Consolidated Interest Coverage Ratio:
|
|
|
|
|
|
Four Fiscal Quarters Ending
|
Minimum Consolidated
Interest Coverage Ratio
|
|
|
|
March 31, 2018 and each fiscal quarter thereafter
|
2.50
|
|
to 1.00
|
|
|
(b)
|
The maximum permitted Consolidated Total Leverage Ratio or Consolidated Net Leverage Ratio:
|
|
|
|
|
|
Four Fiscal Quarters Ending
|
Maximum Consolidated
Total or Net Leverage Ratio
|
|
|
|
March 31, 2018
|
5.50
|
|
to 1.00
|
June 30, 2018
|
5.25
|
|
to 1.00
|
September 30, 2018
|
5.00
|
|
to 1.00
|
December 31, 2018 through and including March 31, 2019
|
4.50
|
|
to 1.00
|
June 30, 2019 through and including September 30, 2019
|
4.25
|
|
to 1.00
|
December 31, 2019
|
4.00
|
|
to 1.00
|
March 31, 2020 and each fiscal quarter thereafter
|
3.50
|
|
to 1.00
|
|
|
(c)
|
The maximum permitted Consolidated Secured Leverage Ratio:
|
|
|
|
|
|
Four Fiscal Quarters Ending
|
Maximum Consolidated
Secured Leverage Ratio
|
|
|
|
March 31, 2018 through and including June 30, 2018
|
3.00
|
|
to 1.00
|
September 30, 2018 and each fiscal quarter thereafter
|
2.50
|
|
to 1.00
|
|
|
(d)
|
The minimum required Unrestricted Cash and Cash Equivalents:
|
|
|
|
|
Consolidated Total Leverage Ratio
|
Minimum Cash
(1)
|
|
|
Greater than or equal to 4.00 to 1.00
|
$100,000,000
|
Greater than or equal to 3.50 to 1.00 but less than 4.00 to 1.00
|
$50,000,000
|
Less than 3.50 to 1.00
|
$0
|
|
|
(1)
|
This minimum cash balance is not required to be maintained in any particular bank account or to be segregated from other cash balances in bank accounts that we use in our ordinary course of business. Because the use of this cash is not legally restricted notwithstanding this maintenance covenant, we present it on our balance sheet as cash and cash equivalents. As of
March 31, 2018
, we were required to, and did, maintain an aggregate cash balance of at least
$100 million
in compliance with this covenant.
|
We may from time to time designate one or more of our foreign subsidiaries as subsidiaries which are not generally subject to the covenants in the Credit Agreement (the “Unrestricted Subsidiaries”). The debt and EBITDA of Unrestricted Subsidiaries are not included in the calculations of our financial covenants, except for the debt and EBITDA of Helix Q5000 Holdings, S.a.r.l., a wholly owned subsidiary incorporated in Luxembourg (“Q5000 Holdings”). Our obligations under the Credit Agreement are guaranteed by our domestic subsidiaries (except Cal Dive I - Title XI, Inc.) and Canyon Offshore Limited, a wholly owned Scottish subsidiary. Our obligations under the Credit Agreement and of such guarantors under their guarantee are secured by (i) most of the assets of the parent, (ii) the shares of our domestic subsidiaries (other than Cal Dive I - Title XI, Inc.) and Canyon Offshore Limited, and (iii) most of the assets of our domestic subsidiaries (other than Cal Dive I - Title XI, Inc.) and Canyon Offshore Limited. In addition, these obligations are secured by pledges of up to 66% of the shares of certain foreign subsidiaries.
In March 2018, we recognized a
$0.9 million
loss to write off the unamortized debt issuance costs related to
$61 million
of the Term Loan that was prepaid with a portion of the net proceeds from the 2023 Notes. The loss is presented as “Loss on extinguishment of long-term debt” in the accompanying consolidated statement of operations.
Convertible Senior Notes Due 2022
On November 1, 2016, we completed a public offering and sale of our 2022 Notes in the aggregate principal amount of
$125 million
. The net proceeds from the issuance of the 2022 Notes were
$121.7 million
, after deducting the underwriter’s discounts and commissions and offering expenses. We used net proceeds from the issuance of the 2022 Notes as well as cash on hand to repurchase and retire
$125 million
in principal of the 2032 Notes (see “Convertible Senior Notes Due 2032” below) in separate, privately negotiated transactions.
The 2022 Notes bear interest at a 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 (as described in the indenture governing the 2022 Notes), 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 are not redeemable. On or after 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.” 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 are accounted for by separating the net proceeds between long-term debt and shareholders’ equity. In connection with the issuance of the 2022 Notes, we recorded a debt discount of
$16.9 million
(
$11.0 million
net of tax) as a result of separating the equity component. The effective interest rate for the 2022 Notes is
7.3%
after considering the effect of the accretion of the related debt discount that represented the equity component of the 2022 Notes at their inception. The remaining unamortized amount of the debt discount of the 2022 Notes was
$13.2 million
at
March 31, 2018
and
$13.9 million
at
December 31, 2017
.
Convertible Senior Notes Due 2023
On March 20, 2018, we completed a public offering and sale of our 2023 Notes in the aggregate principal amount of
$125 million
. The net proceeds from the issuance of the 2023 Notes were approximately
$121 million
, after deducting the underwriters’ discounts and commissions and estimated offering expenses. We used the net proceeds from the issuance of the 2023 Notes to fund the required repurchase of
$59.3 million
in principal of the 2032 Notes and to prepay
$61 million
of our Term Loan.
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 (as described in the indenture governing the 2023 Notes), 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.” 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 are accounted for by separating the net proceeds between long-term debt and shareholders’ equity. In connection with the issuance of the 2023 Notes, we recorded a debt discount of
$20.1 million
(
$15.9 million
net of tax) as a result of separating the equity component. The effective interest rate for the 2023 Notes is
7.8%
after considering the effect of the accretion of the related debt discount that represented the equity component of the 2023 Notes at their inception. The remaining unamortized amount of the debt discount of the 2023 Notes was
$20.0 million
at
March 31, 2018
.
Convertible Senior Notes Due 2032
In March 2012, we completed a public offering and sale of our 2032 Notes in the aggregate principal amount of
$200 million
,
$0.8 million
of which are currently outstanding. The 2032 Notes bear interest at a rate of
3.25%
per annum, and were originally scheduled to mature on
March 15, 2032
. Pursuant to the indenture governing the 2032 Notes, the notes are convertible in certain circumstances and during certain periods at an initial conversion rate of 39.9752 shares of our common stock per $1,000 principal amount (which represents an initial conversion price of approximately
$25.02
per share of common stock), subject to adjustment in certain circumstances as set forth in the indenture governing the 2032 Notes.
In accordance with the indenture governing the 2032 Notes, the holders of the 2032 Notes could require us to repurchase in cash some or all of their 2032 Notes at a repurchase price equal to
100%
of the principal amount of the 2032 Notes, plus accrued and unpaid interest (including contingent interest, if any) up to but excluding the applicable repurchase date, on March 15, 2018, March 15, 2022 and March 15, 2027, or, subject to specified exceptions, at any time prior to the 2032 Notes’ maturity following a “fundamental change,” as defined in the indenture governing the 2032 Notes. In addition, pursuant to the indenture governing the 2032 Notes, the notes were not redeemable by us prior to March 20, 2018, and on or after March 20, 2018, we, at our option, may redeem some or all of the 2032 Notes in cash, at any time upon at least 30 days’ notice, at a price equal to
100%
of the principal amount plus accrued and unpaid interest (including contingent interest, if any) up to but excluding the redemption date.
We made a tender offer for the repurchase of the 2032 Notes on the first repurchase date as required by the indenture governing the 2032 Notes, and as a result we repurchased
$59.3 million
in aggregate principal amount of the 2032 Notes on March 20, 2018. The total repurchase price was
$59.5 million
, including
$0.2 million
in fees. We recognized a
$0.2 million
loss in connection with the repurchase of the notes. The loss is presented as “Loss on extinguishment of long-term debt” in the accompanying consolidated statement of operations. We subsequently issued a notice of redemption on April 3, 2018 with a redemption date of May 4, 2018 with respect to the remaining 2032 Notes, during which period the notes are convertible by the holders.
The 2032 Notes are accounted for by separating the net proceeds between long-term debt and shareholders’ equity. In connection with the issuance of the 2032 Notes, we recorded a debt discount of
$35.4 million
and a separate equity component of
$22.5 million
. The effective interest rate for the 2032 Notes is
6.9%
after considering the effect of the accretion of the related debt discount that represented the equity component of the 2032 Notes at their inception. The debt discount of the 2032 Notes was fully amortized at
March 31, 2018
. At
December 31, 2017
, the remaining unamortized amount of the debt discount was
$0.5 million
.
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%
.
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. The parent company of Q5000 Holdings, Helix Vessel Finance S.à r.l., also a wholly owned Luxembourg subsidiary, 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.
The Nordea Q5000 Loan bears interest at a LIBOR rate plus a margin of
2.5%
. The Nordea Q5000 Loan matures on
April 30, 2020
and is repayable in scheduled
quarterly
principal installments of
$8.9 million
with a balloon payment of
$80.4 million
at maturity. Q5000 Holdings may elect to prepay amounts outstanding under the Nordea Q5000 Loan without premium or penalty, but may not reborrow any amounts prepaid. Quarterly principal installments are subject to adjustment for any prepayments on this debt. In June 2015, we entered into various interest rate swap contracts to fix the one-month LIBOR rate on a portion of our borrowings under the Nordea Q5000 Loan (Note 15). The total notional amount of the swaps (initially
$187.5 million
) decreases in proportion to the reduction in the principal amount outstanding under our Nordea Q5000 Loan. The fixed LIBOR rates are approximately 150 basis points.
The Nordea Credit Agreement and related loan documents include terms and conditions, including covenants and prepayment requirements, that we consider customary for this type of transaction. The covenants include restrictions on Q5000 Holdings’s ability to grant liens, incur indebtedness, make investments, merge or consolidate, sell or transfer assets, and pay dividends. In addition, the Nordea Credit Agreement obligates Q5000 Holdings to meet certain minimum financial requirements, including liquidity, consolidated debt service coverage and collateral maintenance.
Other
In accordance with our Credit Agreement, the 2022 Notes, the 2023 Notes, the 2032 Notes, the MARAD Debt agreements and the Nordea Credit Agreement, we are required to comply with certain covenants, including certain financial ratios such as a consolidated interest coverage ratio and various leverage ratios, as well as the maintenance of minimum cash balance, net worth, working capital and debt-to-equity requirements. As of
March 31, 2018
, we were in compliance with these covenants.
The following table details the components of our net interest expense (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
Interest expense
|
$
|
8,299
|
|
|
$
|
10,240
|
|
Interest income
|
(590
|
)
|
|
(346
|
)
|
Capitalized interest
|
(3,813
|
)
|
|
(4,668
|
)
|
Net interest expense
|
$
|
3,896
|
|
|
$
|
5,226
|
|
Note 7 — Income Taxes
On December 22, 2017, the 2017 Tax Act was enacted. The 2017 Tax Act is comprehensive tax reform legislation that contains significant changes to corporate taxation, including a permanent reduction of the corporate income tax rate from
35%
to
21%
, a mandatory one-time tax on un-repatriated accumulated earnings of foreign subsidiaries, a partial limitation on the deductibility of business interest expense, and a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a partial territorial system (along with rules that create a new U.S. minimum tax on earnings of foreign subsidiaries).
We recognized the income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, to the 2017 Tax Act. SAB 118 allows for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. We believe the provisional amounts recorded during the fourth quarter of 2017 continue to represent a reasonable estimate of the accounting implications of the 2017 Tax Act. We did not identify any items for which the income tax effects of the 2017 Tax Act could not be reasonably estimated as of
March 31, 2018
.
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, and therefore our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.
Our estimated annual effective tax rate, adjusted for discrete tax items, is applied to our pretax loss for the current interim period in 2018 as we have determined that a return to the annualized effective tax rate method is appropriate for 2018. A year-to-date effective tax rate method was used for recording income taxes for the comparative interim period in 2017 based on expectations that a small change in our estimated ordinary income could result in a large change in the estimated annual effective tax rate.
The effective tax rates for the
three-
month periods ended
March 31, 2018
and
2017
were
(3.5)%
and
21.9%
, respectively. The variance was primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as the reduction of the U.S. corporate income tax rate from
35%
to
21%
as a result of the 2017 Tax Act.
Income taxes are provided based on the U.S. statutory rate and at the local statutory rate for each foreign jurisdiction adjusted for items that are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes. The primary differences between the U.S. statutory rate and our effective rate are as follows:
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
U.S. statutory rate
|
21.0
|
%
|
|
35.0
|
%
|
Foreign provision
|
(19.1
|
)
|
|
(11.1
|
)
|
Other
|
(5.4
|
)
|
|
(2.0
|
)
|
Effective rate
|
(3.5
|
)%
|
|
21.9
|
%
|
Note 8 —
Shareholders’ Equity
The components of Accumulated OCI are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Cumulative foreign currency translation adjustment
|
$
|
(57,998
|
)
|
|
$
|
(62,689
|
)
|
Unrealized loss on hedges, net of tax
(1)
|
(6,159
|
)
|
|
(7,507
|
)
|
Unrealized gain on note receivable, net of tax
(2)
|
—
|
|
|
409
|
|
Accumulated other comprehensive loss
|
$
|
(64,157
|
)
|
|
$
|
(69,787
|
)
|
|
|
(1)
|
Relates to foreign currency hedges for the
Grand Canyon II
and
Grand Canyon III
charters as well as interest rate swap contracts for the Nordea Q5000 Loan (Note 15). Balance at
March 31, 2018
was net of deferred income taxes totaling
$1.6 million
. Balance at
December 31, 2017
was net of deferred income taxes of
$4.0 million
,
$1.6 million
of which was reclassified to retained earnings on January 1, 2018 pursuant to the adoption of ASU No. 2018-02 (Note 1).
|
|
|
(2)
|
Balance at
December 31, 2017
was net of deferred income taxes of
$0.2 million
,
$0.1 million
of which was reclassified to retained earnings on January 1, 2018 pursuant to the adoption of ASU No. 2018-02 (Note 1).
|
Note 9 —
Revenue from Contracts with Customers
We generate revenue in our Well Intervention segment by supplying the vessels, personnel
,
and intervention 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 also perform down-hole intervention work and provide certain engineering services. We generate revenue in our Robotics segment by operating ROVs, trenchers and ROVDrills 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 for the oil and gas and the renewable energy industries. We also provide integrated robotic services by supplying the vessels that deploy the ROVs and trenchers. Our Production Facilities segment generates revenue by providing the personnel, vessel and equipment for oil and natural gas processing as well as well control response services.
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 provisions (lump sum contracts). We record revenues net of taxes collected from customers and remitted to governmental authorities.
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 for these activities as well as contract fulfillment activities 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 do not generally 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. The estimated amount of variable consideration is constrained and is only included in the transaction price to the extent that 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, repair rate). The 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 demobilizing equipment and personnel. Mobilization and demobilization fees are associated with contract fulfillment activities, and related revenue (subject to any constraint on estimates of variable consideration) is allocated to the single performance obligation and recognized ratably over the initial 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. See further discussion on contract liabilities under “Contract balances” below.
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 uncertainty is resolved, which typically occurs when 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 additional days of services is generally accounted prospectively for 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 (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Disaggregation of revenue
The following table provides information about disaggregated revenue for the
three-
month period ended
March 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well Intervention
|
|
Robotics
|
|
Production Facilities
|
|
Intercompany Elimination
(1)
|
|
Total Revenue
|
By contract duration —
|
|
|
|
|
|
|
|
|
|
Short-term
|
$
|
42,027
|
|
|
$
|
20,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62,351
|
|
Long-term
(2)
|
87,542
|
|
|
6,845
|
|
|
16,321
|
|
|
(8,797
|
)
|
|
101,911
|
|
Total
|
$
|
129,569
|
|
|
$
|
27,169
|
|
|
$
|
16,321
|
|
|
$
|
(8,797
|
)
|
|
$
|
164,262
|
|
|
|
(1)
|
Intercompany revenues between Robotics and Well Intervention are under agreements that are considered long-term.
|
|
|
(2)
|
Contracts are classified as long-term if all or part of the contract is to be performed over a period extending beyond
12
months from the effective date of the contract. Long-term contracts may include multi-year agreements whereby the commitment for services in any one year may be short in duration.
|
Contract balances
Accounts receivable are recognized when our right to consideration becomes unconditional. Accounts receivable that have been billed to customers are recorded as trade accounts receivable while accounts receivable that have not been billed to customers are recorded as unbilled accounts receivable.
Contract assets are rights to consideration in exchange for services that we have transferred to a customer when that right is conditional on our future performance. Contract assets may 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” on the accompanying condensed consolidated balance sheet. Contract assets as of January 1, 2018 were immaterial while contract assets as of
March 31, 2018
were
$0.9 million
. Impairment losses recognized on our accounts receivable and contract assets were immaterial for the
three-
month period ended
March 31, 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 from the customer. Contract liabilities may consist of (i) advance payments received from customers, including upfront mobilization fees allocated to the single performance obligation and recognized ratably over the contract term and (ii) the amount 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” on the accompanying condensed consolidated balance sheet. Contract liabilities as of January 1, 2018 and
March 31, 2018
totaled
$21.4 million
and
$20.3 million
, respectively. Revenue recognized for the
three-
month period ended
March 31, 2018
included
$8.6 million
that was included in the contract liability balance at the beginning of the period.
We report the net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period.
Performance obligations
As of
March 31, 2018
,
$1.5 billion
related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with
$426.0 million
in 2018,
$444.0 million
in 2019 and
$676.3 million
in 2020 and thereafter. These amounts included 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 within our contracts, and the expected timing for revenue recognition is based on the estimated start date and duration of each contract according to the information known at March 31, 2018.
For the
three-
month period ended
March 31, 2018
, revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.
Contract costs
Contract costs consist of costs incurred in fulfilling a contract with a customer. Our contract 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 these contact 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” on the accompanying condensed consolidated balance sheet. Our deferred contract costs totaled
$84.2 million
as of
March 31, 2018
. For the
three-
month period ended
March 31, 2018
, we recorded
$8.9 million
related to amortization of deferred contract costs and there were no associated impairment losses.
Note 10 — Earnings Per Share
We have shares of restricted stock issued and outstanding that are currently unvested. Holders of shares of unvested restricted stock are entitled to the same liquidation and dividend rights as the holders of our unrestricted common stock and the shares of restricted stock are thus considered participating securities. Under applicable accounting guidance, the undistributed earnings for each period are allocated based on the participation rights of both the common shareholders and holders of any participating securities as if earnings for the respective periods had been distributed. Because both the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, we are required to compute earnings per share (“EPS”) amounts under the two class method in periods in which we have earnings. For periods in which we have a net loss we do not use the two class method as holders of our restricted shares are not obligated to share in such losses.
The presentation of basic EPS amounts on the face of the accompanying condensed consolidated statements of operations is computed by dividing net income or loss by the weighted average shares of our common stock outstanding. The calculation of diluted EPS is similar to basic EPS, except that the denominator includes dilutive common stock equivalents and the income included in the numerator excludes the effects of the impact of dilutive common stock equivalents, if any.
We had net losses for the
three
-month periods ended
March 31, 2018
and
2017
. Accordingly, our diluted EPS calculation for these periods was equivalent to our basic EPS calculation since diluted EPS excluded any assumed exercise or conversion of common stock equivalents. These common stock equivalents were excluded because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in the applicable periods. Shares that otherwise would have been included in the diluted per share calculations assuming we had earnings are as follows (in thousands):
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
Diluted shares (as reported)
|
146,653
|
|
|
143,244
|
|
Share-based awards
|
243
|
|
|
261
|
|
Total
|
146,896
|
|
|
143,505
|
|
In addition, the following potentially dilutive shares related to the 2022 Notes, the 2023 Notes and the 2032 Notes were excluded from the diluted EPS calculation because we have the right and the intention to settle any such future conversions in cash (Note 6) (in thousands):
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
2022 Notes
|
8,997
|
|
|
8,997
|
|
2023 Notes
|
1,614
|
|
|
—
|
|
2032 Notes
|
2,113
|
|
|
2,403
|
|
Note 11 — Employee Benefit Plans
Long-Term Incentive Plan
As of
March 31, 2018
, there were
1.8 million
shares of our common stock available for issuance under our long-term incentive plan, the 2005 Long-Term Incentive Plan, as amended and restated January 1, 2017 (the “2005 Incentive Plan”). During the
three
-month period ended
March 31, 2018
, the following grants of share-based awards were made under the 2005 Incentive Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Grant
|
|
|
Shares/Units
|
|
|
|
Grant Date
Fair Value
Per Share
|
|
|
Vesting Period
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2018
(1)
|
|
|
449,271
|
|
|
|
|
$
|
7.54
|
|
|
|
33% per year over three years
|
January 2, 2018
(2)
|
|
|
449,271
|
|
|
|
|
$
|
10.44
|
|
|
|
100% on January 2, 2021
|
January 2, 2018
(3)
|
|
|
8,247
|
|
|
|
|
$
|
7.54
|
|
|
|
100% on January 1, 2020
|
|
|
(1)
|
Reflects grants of restricted stock to our executive officers.
|
|
|
(2)
|
Reflects grants of performance share units (“PSUs”) to our executive officers. The PSUs provide for an award based on the performance of our common stock over a
three
-year period with the maximum amount of the award being
200%
of the original awarded PSUs and the minimum amount being
zero
. For the 2018 awards, vested PSUs can only be settled in shares of our common stock.
|
|
|
(3)
|
Reflects grants of restricted stock to certain independent members of our Board of Directors (the “Board”) who have made an election to take their quarterly fees in stock in lieu of cash.
|
Compensation cost for restricted stock is the product of grant date fair value of each share and the number of shares granted and is recognized over the applicable vesting periods on a straight-line basis. Forfeitures are recognized as they occur. For the
three-
month periods ended
March 31, 2018
and
2017
,
$1.5 million
and
$2.0 million
, respectively, were recognized as share-based compensation related to restricted stock.
The estimated fair value of PSUs is determined using a Monte Carlo simulation model. Compensation cost for PSUs that are accounted for as equity awards is measured based on the estimated grant date fair value and recognized over the vesting period on a straight-line basis. PSUs that are accounted for as liability awards are measured based on the estimated fair value at the balance sheet date and changes in fair value of the awards are recognized in earnings. Cumulative compensation cost for vested liability PSU awards equals the actual cash payout that occurs upon vesting. The PSUs granted in 2017 and 2018 are accounted for as equity awards whereas awards granted prior to 2017 are accounted for as liability awards. For the
three-
month periods ended
March 31, 2018
and
2017
,
$1.0 million
and
$2.2 million
, respectively, were recognized as share-based compensation related to PSUs. The liability balance for unvested PSUs was
$10.2 million
at
March 31, 2018
and
$11.1 million
at
December 31, 2017
. We paid
$0.9 million
in cash to settle the 2015 PSU awards when they vested in January 2018.
Additionally in January 2018, we granted
$5.0 million
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
three-
month period ended
March 31, 2018
,
$0.4 million
was recognized as compensation cost.
Employee Stock Purchase Plan
We have an employee stock purchase plan (the “ESPP”). The ESPP has
1.5 million
shares authorized for issuance, of which
0.6 million
shares were available for issuance as of
March 31, 2018
. The ESPP currently has a purchase limit of
130
shares per employee per purchase period.
For more information regarding our employee benefit plans, including our long-term incentive stock-based and cash plans and our employee stock purchase plan, see Note 11 to our
2017
Form 10-K.
Note 12 — 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 business segment for financial reporting purposes. Our Well Intervention segment includes our vessels and/or equipment used to perform well intervention services in the U.S. Gulf of Mexico, North Sea, Brazil and West Africa. Our Well Intervention segment also includes IRSs, some of which we provide on a stand-alone basis, and SILs. Our well intervention vessels include the
Q4000
, the
Q5000
, the
Seawell
, the
Well Enhancer
and the chartered
Siem Helix 1
and
Siem Helix 2
vessels. Our Robotics segment includes ROVs, trenchers and ROVDrills that are designed to complement offshore construction and well intervention services and currently operates
three
ROV support vessels under long-term charter: the
Grand Canyon
, the
Grand Canyon II
and the
Grand Canyon III
. Our Production Facilities segment includes the
HP I
, the HFRS and our investment in Independence Hub that is accounted for under the equity method. All material intercompany transactions between the segments have been eliminated.
We evaluate our performance primarily based on operating income of each reportable segment. Certain financial data by reportable segment are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Net revenues —
|
|
|
|
Well Intervention
|
$
|
129,569
|
|
|
$
|
74,621
|
|
Robotics
|
27,169
|
|
|
21,968
|
|
Production Facilities
|
16,321
|
|
|
16,375
|
|
Intercompany elimination
|
(8,797
|
)
|
|
(8,436
|
)
|
Total
|
$
|
164,262
|
|
|
$
|
104,528
|
|
|
|
|
|
Income (loss) from operations —
|
|
|
|
Well Intervention
|
$
|
13,877
|
|
|
$
|
1,418
|
|
Robotics
|
(14,317
|
)
|
|
(16,306
|
)
|
Production Facilities
|
7,359
|
|
|
6,924
|
|
Corporate and other
|
(8,256
|
)
|
|
(9,962
|
)
|
Intercompany elimination
|
221
|
|
|
221
|
|
Total
|
$
|
(1,116
|
)
|
|
$
|
(17,705
|
)
|
Intercompany segment amounts are derived primarily from equipment and services provided to other business segments at rates consistent with those charged to third parties. Intercompany segment revenues are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
Well Intervention
|
$
|
1,952
|
|
|
$
|
1,373
|
|
Robotics
|
6,845
|
|
|
7,063
|
|
Total
|
$
|
8,797
|
|
|
$
|
8,436
|
|
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):
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
|
|
|
Well Intervention
|
$
|
1,834,166
|
|
|
$
|
1,830,733
|
|
Robotics
|
155,297
|
|
|
179,853
|
|
Production Facilities
|
134,892
|
|
|
138,292
|
|
Corporate and other
|
214,793
|
|
|
213,959
|
|
Total
|
$
|
2,339,148
|
|
|
$
|
2,362,837
|
|
Note 13 — Commitments and Contingencies and Other Matters
Commitments
We have charter agreements with Siem Offshore AS for the
Siem Helix 1
and
Siem Helix 2
vessels used in connection with our contracts with Petrobras to perform well intervention work offshore Brazil. We have charter agreements for the
Grand Canyon
,
Grand Canyon II
and
Grand Canyon III
vessels for use in our robotics operations. The charter agreements expire in October 2019 for the
Grand Canyon
, in April 2021 for the
Grand Canyon II
and in May 2023 for the
Grand Canyon III
. We also had a charter agreement for the
Deep Cygnus
that we terminated on February 9, 2018, at which time we returned the vessel to its owner.
In September 2013, we executed a contract with the same shipyard in Singapore that constructed the
Q5000
vessel for the construction of a newbuild semi-submersible well intervention vessel, the
Q7000
, to be built to North Sea standards. Pursuant to the contract and subsequent amendments,
20%
of the contract price was paid upon the signing of the contract in 2013,
20%
was paid in 2016,
20%
was paid in December 2017,
20%
is to be paid on December
31, 2018, and
20%
is to be paid upon the delivery of the vessel, which at our option can be deferred until December
31, 2019. We are also contractually committed to reimburse the shipyard for its costs in connection with the deferment of the
Q7000
’s delivery beyond 2017. At
March 31, 2018
, our total investment in the
Q7000
was
$306.7 million
, including
$207.6 million
of installment payments to the shipyard. Currently equipment is being manufactured and installed for the completion of the vessel.
Contingencies and Claims
We believe that there are currently no contingencies that would have a material adverse effect on our financial position, results of operations or cash flows.
Litigation
We are involved in various other legal proceedings, some involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act based on alleged negligence. In addition, from time to time we incur other claims, such as contract and employment-related disputes, in the normal course of business.
Note 14 — 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 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 various 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 that are accounted for as cash flow hedges and of our note receivable in the form of convertible bonds that are accounted for as investments in available-for-sale debt securities 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. These modeling techniques require us to make estimations of future prices, price correlation, volatility and liquidity based on market data. Our actual results may differ from our estimates, and these differences could be positive or negative. The following tables provide additional information relating to those financial instruments measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
March 31, 2018 Using
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Valuation
Approach
|
Assets:
|
|
|
|
|
|
|
|
|
|
Note receivable
|
$
|
—
|
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
|
|
Interest rate swaps
|
—
|
|
|
1,502
|
|
|
—
|
|
|
1,502
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
—
|
|
|
13,997
|
|
|
—
|
|
|
13,997
|
|
|
(c)
|
Total liability
|
$
|
—
|
|
|
$
|
10,495
|
|
|
$
|
—
|
|
|
$
|
10,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2017 Using
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Valuation
Approach
|
Assets:
|
|
|
|
|
|
|
|
|
|
Note receivable
|
$
|
—
|
|
|
$
|
3,758
|
|
|
$
|
—
|
|
|
$
|
3,758
|
|
|
|
Interest rate swaps
|
—
|
|
|
966
|
|
|
—
|
|
|
$
|
966
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
—
|
|
|
12,467
|
|
|
—
|
|
|
12,467
|
|
|
(c)
|
Total net liability
|
$
|
—
|
|
|
$
|
7,743
|
|
|
$
|
—
|
|
|
$
|
7,743
|
|
|
|
The principal amount and estimated fair value of our long-term debt are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Principal Amount
(1)
|
|
Fair
Value
(2) (3)
|
|
Principal Amount
(1)
|
|
Fair
Value
(2) (3)
|
|
|
|
|
|
|
|
|
Term Loan (matures June 2020)
|
$
|
36,032
|
|
|
$
|
36,437
|
|
|
$
|
97,500
|
|
|
$
|
98,231
|
|
Nordea Q5000 Loan (matures April 2020)
|
151,785
|
|
|
152,164
|
|
|
160,714
|
|
|
160,111
|
|
MARAD Debt (matures February 2027)
|
73,774
|
|
|
80,135
|
|
|
77,000
|
|
|
82,058
|
|
2022 Notes (mature May 2022)
|
125,000
|
|
|
119,531
|
|
|
125,000
|
|
|
124,219
|
|
2023 Notes (mature September 2023)
|
125,000
|
|
|
126,094
|
|
|
—
|
|
|
—
|
|
2032 Notes (to be redeemed May 2018)
|
809
|
|
|
809
|
|
|
60,115
|
|
|
60,040
|
|
Total debt
|
$
|
512,400
|
|
|
$
|
515,170
|
|
|
$
|
520,329
|
|
|
$
|
524,659
|
|
|
|
(1)
|
Principal amount includes current maturities and excludes the related unamortized debt discount and debt issuance costs. See Note 6 for additional disclosures on our long-term debt.
|
|
|
(2)
|
The estimated fair value of the 2022 Notes and the 2023 Notes was determined using Level 1 inputs under the market approach. The fair value of the Term Loan, the Nordea Q5000 Loan and the MARAD Debt was estimated using Level 2 fair value inputs under the market approach, which was determined using a third party evaluation of the remaining average life and outstanding principal balance of the indebtedness as compared to other obligations in the marketplace with similar terms.
|
|
|
(3)
|
The principal amount and fair value of the convertible notes are for the entire instrument inclusive of the conversion feature reported in shareholders’ equity.
|
Note 15 — 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 hedge 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 certain derivative contracts, including interest rate swaps and foreign currency exchange contracts. All derivative instruments are reflected in the accompanying condensed consolidated balance sheets at fair value.
We engage solely in cash flow hedges. Hedges of cash flow exposure are entered into to hedge a forecasted transaction or the variability of cash flows 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 Accumulated OCI to the extent that the hedges are effective. These changes are subsequently reclassified into earnings when the hedged transactions settle. The ineffective portion of changes in the fair value of cash flow hedges is recognized immediately in earnings. In addition, any change in the fair value of a derivative instrument that does not qualify for hedge accounting is recorded in earnings in the period in which the change occurs.
For additional information regarding our accounting for derivative instruments and hedging activities, see Notes 2 and 17 to our
2017
Form 10-K.
Interest Rate Risk
From time to time, we enter into interest rate swaps to stabilize cash flows related to our long-term variable interest rate debt. In June 2015 we entered into various interest rate swap contracts to fix the interest rate on
$187.5 million
of our Nordea Q5000 Loan borrowings (Note 6). These swap contracts, which are settled monthly, began in June 2015 and extend through April 2020. Our interest rate swap contracts qualify for cash flow hedge accounting treatment. Changes in the fair value of interest rate swaps are reported in Accumulated OCI to the extent the swaps are effective. These changes are subsequently reclassified into earnings when the anticipated interest is recognized as interest expense. The ineffective portion of the interest rate swaps, if any, is recognized immediately in earnings within the line titled “Net interest expense.” The amount of ineffectiveness associated with our interest rate swap contracts was immaterial for all periods presented.
Foreign Currency Exchange Rate Risk
Because we operate in various regions around the world, we conduct a portion of our business in currencies other than the U.S. dollar. We enter into foreign currency exchange contracts from time to time to stabilize expected cash outflows related to our vessel charters that are denominated in foreign currencies.
In February 2013, we entered into similar foreign currency exchange contracts to hedge our foreign currency exposure associated with the
Grand Canyon II
and
Grand Canyon III
charter payments denominated in Norwegian kroner through July 2019 and February 2020, respectively. Unrealized losses associated with the effective portion of our foreign currency exchange contracts that qualify for hedge accounting treatment are included in our Accumulated OCI (net of tax). Reflected in “Other income (expense), net” in the accompanying condensed consolidated statements of operations are changes in unrealized losses associated with the foreign currency exchange contracts that are not designated as cash flow hedges. Hedge ineffectiveness also is reflected in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. There were no gains or losses associated with hedge ineffectiveness for the
three-
month periods ended
March 31, 2018
and
2017
.
Quantitative Disclosures Relating to Derivative Instruments
The following table presents the balance sheet location and fair value of our derivative instruments that were designated as hedging instruments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Asset Derivative Instruments:
|
|
|
|
|
|
|
|
Interest rate swaps
|
Other current assets
|
|
$
|
670
|
|
|
Other current assets
|
|
$
|
311
|
|
Interest rate swaps
|
Other assets, net
|
|
832
|
|
|
Other assets, net
|
|
655
|
|
|
|
|
$
|
1,502
|
|
|
|
|
$
|
966
|
|
|
|
|
|
|
|
|
|
Liability Derivative Instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
Accrued liabilities
|
|
$
|
6,396
|
|
|
Accrued liabilities
|
|
$
|
7,492
|
|
Foreign exchange contracts
|
Other non-current liabilities
|
|
2,827
|
|
|
Other non-current liabilities
|
|
4,975
|
|
|
|
|
$
|
9,223
|
|
|
|
|
$
|
12,467
|
|
The following table presents the balance sheet location and fair value of our derivative instruments that were not designated as hedging instruments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Liability Derivative Instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
Accrued liabilities
|
|
$
|
2,661
|
|
|
Accrued liabilities
|
|
$
|
3,133
|
|
Foreign exchange contracts
|
Other non-current liabilities
|
|
2,113
|
|
|
Other non-current liabilities
|
|
3,175
|
|
|
|
|
$
|
4,774
|
|
|
|
|
$
|
6,308
|
|
The following tables present the impact that derivative instruments designated as hedging instruments had on our Accumulated OCI (net of tax) and our condensed consolidated statements of operations (in thousands). We estimate that as of
March 31, 2018
,
$4.6 million
of losses in Accumulated OCI associated with our derivative instruments is expected to be reclassified into earnings within the next 12 months.
|
|
|
|
|
|
|
|
|
|
Unrealized Gain Recognized
in OCI
(Effective Portion)
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
|
|
|
Foreign exchange contracts
|
$
|
1,588
|
|
|
$
|
671
|
|
Interest rate swaps
|
565
|
|
|
238
|
|
|
$
|
2,153
|
|
|
$
|
909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Reclassified from
Accumulated OCI into Earnings
|
|
Gain (Loss) Reclassified from
Accumulated OCI into Earnings
(Effective Portion)
|
|
|
Three Months Ended
March 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Foreign exchange contracts
|
Cost of sales
|
|
$
|
(1,656
|
)
|
|
$
|
(3,221
|
)
|
Interest rate swaps
|
Net interest expense
|
|
29
|
|
|
(269
|
)
|
|
|
|
$
|
(1,627
|
)
|
|
$
|
(3,490
|
)
|
The following table presents the impact that derivative instruments not designated as hedging instruments had on our condensed consolidated statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain
Recognized in Earnings
|
|
Gain Recognized in Earnings
|
|
|
Three Months Ended
March 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Foreign exchange contracts
|
Other income (expense), net
|
|
$
|
844
|
|
|
$
|
52
|
|
|
|
|
$
|
844
|
|
|
$
|
52
|
|