QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☑ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
PART I. | FINANCIAL INFORMATION | PAGE | |
Item 1. | Financial Statements: | ||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | OTHER INFORMATION | ||
Item 1. | |||
Item 2. | |||
Item 6. | |||
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable: | |||||||
Trade, net of allowance for uncollectible accounts of $0 | |||||||
Unbilled and other | |||||||
Other current assets | |||||||
Total current assets | |||||||
Property and equipment | |||||||
Less accumulated depreciation | ( | ) | ( | ) | |||
Property and equipment, net | |||||||
Operating lease right-of-use assets | |||||||
Other assets, net | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued liabilities | |||||||
Income tax payable | |||||||
Current maturities of long-term debt | |||||||
Current operating lease liabilities | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Operating lease liabilities | |||||||
Deferred tax liabilities | |||||||
Other non-current liabilities | |||||||
Total liabilities | |||||||
Redeemable noncontrolling interests | |||||||
Shareholders’ equity: | |||||||
Common stock, no par, 240,000 shares authorized, 148,759 and 148,203 shares issued, respectively | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total shareholders’ equity | |||||||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net revenues | $ | $ | $ | $ | |||||||||||
Cost of sales | |||||||||||||||
Gross profit | |||||||||||||||
Selling, general and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income from operations | |||||||||||||||
Equity in losses of investment | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Loss on extinguishment of long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Royalty income and other | |||||||||||||||
Income before income taxes | |||||||||||||||
Income tax provision | |||||||||||||||
Net income | |||||||||||||||
Net loss attributable to redeemable noncontrolling interests | ( | ) | ( | ) | |||||||||||
Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||
Earnings per share of common stock: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized gain (loss) on hedges arising during the period | ( | ) | ( | ) | ( | ) | |||||||||
Reclassifications to net income | |||||||||||||||
Income taxes on hedges | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net change in hedges, net of tax | |||||||||||||||
Unrealized loss on note receivable arising during the period | ( | ) | |||||||||||||
Income taxes on note receivable | |||||||||||||||
Unrealized loss on note receivable, net of tax | ( | ) | |||||||||||||
Foreign currency translation loss | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other comprehensive income (loss), net of tax | ( | ) | ( | ) | |||||||||||
Comprehensive income | |||||||||||||||
Comprehensive loss attributable to redeemable noncontrolling interests | ( | ) | ( | ) | |||||||||||
Comprehensive income attributable to common shareholders | $ | $ | $ | $ |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) | — | — | — | ( | ) | |||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( | ) | ( | ) | — | ||||||||||||||
Unrealized gain on hedges, net of tax | — | — | — | — | ||||||||||||||||||
Issuance of redeemable noncontrolling interests | — | — | — | — | — | |||||||||||||||||
Accretion of redeemable noncontrolling interests | — | — | ( | ) | — | ( | ) | |||||||||||||||
Activity in company stock plans, net and other | ( | ) | ( | ) | — | — | ( | ) | — | |||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | $ |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | ( | ) | $ | $ | — | ||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( | ) | ( | ) | — | ||||||||||||||
Unrealized gain on hedges, net of tax | — | — | — | — | ||||||||||||||||||
Equity component of debt discount on convertible senior notes | — | ( | ) | — | — | ( | ) | — | ||||||||||||||
Activity in company stock plans, net and other | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | — |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) | — | — | — | ( | ) | |||||||||||||||||
Reclassification of deferred gain from sale and leaseback transaction to retained earnings | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( | ) | ( | ) | — | ||||||||||||||
Unrealized gain on hedges, net of tax | — | — | — | — | ||||||||||||||||||
Issuance of redeemable noncontrolling interests | — | — | — | — | — | |||||||||||||||||
Accretion of redeemable noncontrolling interests | — | — | ( | ) | — | ( | ) | |||||||||||||||
Activity in company stock plans, net and other | ( | ) | — | — | ( | ) | — | |||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | $ |
Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, December 31, 2017 | $ | $ | $ | ( | ) | $ | $ | — | ||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Reclassification of stranded tax effect to retained earnings | — | — | ( | ) | — | |||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( | ) | ( | ) | — | ||||||||||||||
Unrealized gain on hedges, net of tax | — | — | — | — | ||||||||||||||||||
Unrealized loss on note receivable, net of tax | — | — | — | ( | ) | ( | ) | — | ||||||||||||||
Equity component of debt discount on convertible senior notes | — | — | — | — | ||||||||||||||||||
Activity in company stock plans, net and other | ( | ) | — | — | ( | ) | — | |||||||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | — |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of debt discounts | |||||||
Amortization of debt issuance costs | |||||||
Share-based compensation | |||||||
Deferred income taxes | ( | ) | |||||
Equity in losses of investment | |||||||
Loss on extinguishment of long-term debt | |||||||
Unrealized gain on derivative contracts, net | ( | ) | ( | ) | |||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable, net | ( | ) | ( | ) | |||
Other current assets | ( | ) | ( | ) | |||
Income tax payable | ( | ) | ( | ) | |||
Accounts payable and accrued liabilities | |||||||
Other, net | ( | ) | |||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Capital expenditures | ( | ) | ( | ) | |||
STL acquisition, net | ( | ) | |||||
Proceeds from sale of assets | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Issuance of Convertible Senior Notes due 2023 | |||||||
Repurchase of Convertible Senior Notes due 2032 | ( | ) | |||||
Proceeds from term loan | |||||||
Repayment of term loan | ( | ) | ( | ) | |||
Repayment of Nordea Q5000 Loan | ( | ) | ( | ) | |||
Repayment of MARAD Debt | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
Payments related to tax withholding for share-based compensation | ( | ) | ( | ) | |||
Proceeds from issuance of ESPP shares | |||||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | |||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents: | |||||||
Balance, beginning of year | |||||||
Balance, end of period | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Contract assets (Note 9) | $ | $ | |||||
Prepaids | |||||||
Deferred costs (Note 9) | |||||||
Other receivable (Note 13) | |||||||
Other | |||||||
Total other current assets | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Prepaids | $ | $ | |||||
Deferred recertification and dry dock costs, net | |||||||
Deferred costs (Note 9) | |||||||
Charter deposit (1) | |||||||
Other receivable (Note 13) | |||||||
Goodwill (Note 2) | |||||||
Intangible assets with finite lives, net (Note 2) | |||||||
Other | |||||||
Total other assets, net | $ | $ |
(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. |
June 30, 2019 | December 31, 2018 | ||||||
Accrued payroll and related benefits | $ | $ | |||||
Investee losses in excess of investment (Note 4) | |||||||
Deferred revenue (Note 9) | |||||||
Asset retirement obligations (Note 13) | |||||||
Derivative liability (Note 17) | |||||||
Other | |||||||
Total accrued liabilities | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Investee losses in excess of investment (Note 4) | $ | $ | |||||
Deferred gain on sale of property (1) | |||||||
Deferred revenue (Note 9) | |||||||
Asset retirement obligations (Note 13) | |||||||
Derivative liability (Note 17) | |||||||
Other | |||||||
Total other non-current liabilities | $ | $ |
(1) | Relates to the sale and lease-back in January 2016 of our office and warehouse property located in Aberdeen, Scotland. The deferred gain had been amortized over a |
Three Months Ended | Six Months Ended | ||||||
June 30, 2019 | June 30, 2019 | ||||||
Operating lease cost | $ | $ | |||||
Variable lease cost | |||||||
Short-term lease cost | |||||||
Sublease income | ( | ) | ( | ) | |||
Net lease cost | $ | $ |
Vessels | Facilities and Equipment | Total | |||||||||
Remainder of 2019 | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total lease payments | $ | $ | $ | ||||||||
Less: imputed interest | ( | ) | ( | ) | ( | ) | |||||
Total operating lease liabilities | $ | $ | $ | ||||||||
Current operating lease liabilities | $ | $ | $ | ||||||||
Non-current operating lease liabilities | |||||||||||
Total operating lease liabilities | $ | 204,873 | $ | 28,307 | $ | 233,180 |
June 30, 2019 | ||
Weighted average remaining lease term | ||
Weighted average discount rate | % |
Six Months Ended | |||
June 30, 2019 | |||
Cash paid for operating lease liabilities | $ | ||
ROU assets obtained in exchange for new operating lease obligations |
Vessels | Facilities and Equipment | Total | |||||||||
2019 | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total lease payments | $ | $ | $ |
Term Loan (1) | 2022 Notes | 2023 Notes | MARAD Debt | Nordea Q5000 Loan | Total | ||||||||||||||||||
Less than one year | $ | $ | $ | $ | $ | $ | |||||||||||||||||
One to two years | |||||||||||||||||||||||
Two to three years | |||||||||||||||||||||||
Three to four years | |||||||||||||||||||||||
Four to five years | |||||||||||||||||||||||
Over five years | |||||||||||||||||||||||
Gross debt | |||||||||||||||||||||||
Unamortized debt discounts (2) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Unamortized debt issuance costs (3) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Total debt | |||||||||||||||||||||||
Less: current maturities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Long-term debt | $ | $ | $ | $ | $ | $ |
(1) | Term Loan pursuant to the Credit Agreement (as defined below) matures in December 2021. |
(2) | 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 to interest expense through September 2023. |
(3) | Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Interest expense | $ | $ | $ | $ | |||||||||||
Interest income | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net interest expense | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
U.S. statutory rate | % | % | % | % | |||||||
Foreign provision | ( | ) | ( | ) | ( | ) | ( | ) | |||
Other | |||||||||||
Effective rate | % | % | % | % |
June 30, 2019 | December 31, 2018 | ||||||
Cumulative foreign currency translation adjustment | $ | ( | ) | $ | ( | ) | |
Net unrealized loss on hedges, net of tax (1) | ( | ) | ( | ) | |||
Accumulated OCI | $ | ( | ) | $ | ( | ) |
(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 17) and is net of deferred income taxes totaling $ |
Well Intervention | Robotics | Production Facilities | Intercompany Eliminations (1) | Total Revenue | ||||||||||||||||
Three months ended June 30, 2019 | ||||||||||||||||||||
Short-term | $ | $ | $ | $ | $ | |||||||||||||||
Long-term (2) | ( | ) | ||||||||||||||||||
Total | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Three months ended June 30, 2018 | ||||||||||||||||||||
Short-term | $ | $ | $ | $ | $ | |||||||||||||||
Long-term (2) | ( | ) | ||||||||||||||||||
Total | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Six months ended June 30, 2019 | ||||||||||||||||||||
Short-term | $ | $ | $ | $ | $ | |||||||||||||||
Long-term (2) | ( | ) | ||||||||||||||||||
Total | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Six months ended June 30, 2018 | ||||||||||||||||||||
Short-term | $ | $ | $ | $ | $ | |||||||||||||||
Long-term (2) | ( | ) | ||||||||||||||||||
Total | $ | $ | $ | $ | ( | ) | $ |
(1) | Intercompany revenues among our business segments 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. |
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | ||||||||||||
Income | Shares | Income | Shares | ||||||||||
Basic: | |||||||||||||
Net income attributable to common shareholders | $ | $ | |||||||||||
Less: Undistributed earnings allocated to participating securities | ( | ) | ( | ) | |||||||||
Accretion of redeemable noncontrolling interests | ( | ) | |||||||||||
Net income available to common shareholders, basic | $ | $ | |||||||||||
Diluted: | |||||||||||||
Net income available to common shareholders, basic | $ | $ | |||||||||||
Effect of dilutive securities: | |||||||||||||
Share-based awards other than participating securities | |||||||||||||
Net income available to common shareholders, diluted | $ | $ |
Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | ||||||||||||
Income | Shares | Income | Shares | ||||||||||
Basic: | |||||||||||||
Net income attributable to common shareholders | $ | $ | |||||||||||
Less: Undistributed earnings allocated to participating securities | ( | ) | ( | ) | |||||||||
Accretion of redeemable noncontrolling interests | ( | ) | |||||||||||
Net income available to common shareholders, basic | $ | $ | |||||||||||
Diluted: | |||||||||||||
Net income available to common shareholders, basic | $ | $ | |||||||||||
Effect of dilutive securities: | |||||||||||||
Share-based awards other than participating securities | |||||||||||||
Net income available to common shareholders, diluted | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
2022 Notes | |||||||||||
2023 Notes | |||||||||||
2032 Notes (1) |
(1) | The 2032 Notes were fully redeemed in May 2018. |
Date of Grant | Shares/ Units | Grant Date Fair Value Per Share/Unit | Vesting Period | ||||||||||
January 2, 2019 (1) | $ | 33% per year over three years | |||||||||||
January 2, 2019 (2) | 100% on January 2, 2022 | ||||||||||||
January 2, 2019 (3) | 100% on January 1, 2021 | ||||||||||||
April 1, 2019 (3) | 100% on January 1, 2021 |
(1) | Reflects grants of restricted stock to our executive officers and select management employees. |
(2) | Reflects grants of performance share units (“PSUs”) to our executive officers and select management employees. 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 |
(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. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net revenues — | |||||||||||||||
Well Intervention | $ | $ | $ | $ | |||||||||||
Robotics | |||||||||||||||
Production Facilities | |||||||||||||||
Intercompany eliminations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total | $ | $ | $ | $ | |||||||||||
Income (loss) from operations — | |||||||||||||||
Well Intervention | $ | $ | $ | $ | |||||||||||
Robotics | ( | ) | ( | ) | ( | ) | |||||||||
Production Facilities | |||||||||||||||
Segment operating income | |||||||||||||||
Corporate, eliminations and other | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Well Intervention (1) | $ | $ | $ | $ | |||||||||||
Robotics | |||||||||||||||
Total | $ | $ | $ | $ |
(1) | Amounts in 2019 include $ |
June 30, 2019 | December 31, 2018 | ||||||
Well Intervention | $ | $ | |||||
Robotics | |||||||
Production Facilities | |||||||
Corporate and other | |||||||
Total | $ | $ |
AROs at January 1, 2019 | $ | ||
Liability incurred during the period (1) | |||
Liability settled during the period | ( | ) | |
Accretion expense | |||
AROs at June 30, 2019 | $ |
(1) | In connection with the acquisition on January 18, 2019 of certain assets related to the Droshky Prospect (Note 2), we assumed the AROs for the required P&A of those assets in exchange for agreed-upon amounts to be paid by Marathon Oil as the P&A work is completed. We initially recognized $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Interest paid, net of interest capitalized | $ | $ | |||||
Income taxes paid |
• | 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. |
(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). |
Fair Value at June 30, 2019 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Valuation Approach | |||||||||||||
Assets: | |||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | (c) | ||||||||||||
Liabilities: | |||||||||||||||||
Foreign exchange contracts — hedging instruments | (c) | ||||||||||||||||
Foreign exchange contracts — non-hedging instruments | (c) | ||||||||||||||||
Total net liability | $ | $ | $ | $ |
Fair Value at December 31, 2018 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Valuation Approach | |||||||||||||
Assets: | |||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | (c) | ||||||||||||
Liabilities: | |||||||||||||||||
Foreign exchange contracts — hedging instruments | (c) | ||||||||||||||||
Foreign exchange contracts — non-hedging instruments | (c) | ||||||||||||||||
Total net liability | $ | $ | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||||||||||
Principal Amount (1) | Fair Value (2) (3) | Principal Amount (1) | Fair Value (2) (3) | ||||||||||||
Term Loan (previously scheduled to mature June 2020) | $ | $ | $ | $ | |||||||||||
Term Loan (matures December 2021) | |||||||||||||||
Nordea Q5000 Loan (matures April 2020) | |||||||||||||||
MARAD Debt (matures February 2027) | |||||||||||||||
2022 Notes (mature May 2022) | |||||||||||||||
2023 Notes (mature September 2023) | |||||||||||||||
Total debt | $ | $ | $ | $ |
(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 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 fair value of the 2022 Notes and the 2023 Notes are for the entire instrument inclusive of the conversion feature reported in shareholders’ equity. |
June 30, 2019 | December 31, 2018 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Asset Derivative Instruments: | |||||||||||
Interest rate swaps | Other current assets | $ | Other current assets | $ | |||||||
Interest rate swaps | Other assets, net | Other assets, net | |||||||||
$ | $ | ||||||||||
Liability Derivative Instruments: | |||||||||||
Foreign exchange contracts | Accrued liabilities | $ | Accrued liabilities | $ | |||||||
Foreign exchange contracts | Other non-current liabilities | Other non-current liabilities | |||||||||
$ | $ |
June 30, 2019 | December 31, 2018 | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Liability Derivative Instruments: | |||||||||||
Foreign exchange contracts | Accrued liabilities | $ | Accrued liabilities | $ | |||||||
Foreign exchange contracts | Other non-current liabilities | Other non-current liabilities | |||||||||
$ | $ |
Unrealized Gain (Loss) Recognized in OCI | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Foreign exchange contracts | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
Interest rate swaps | ( | ) | ( | ) | ||||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ |
Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings | Gain (Loss) Reclassified from Accumulated OCI into Earnings | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Foreign exchange contracts | Cost of sales | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Interest rate swaps | Net interest expense | ||||||||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Location of Gain (Loss) Recognized in Earnings | Gain (Loss) Recognized in Earnings | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Foreign exchange contracts | Other expense, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ |
• | statements regarding our business strategy and any other business plans, forecasts or objectives, any or all of which are subject to change; |
• | statements regarding projections of revenues, gross margins, expenses, earnings or losses, working capital, debt and liquidity, or other financial items; |
• | statements regarding our backlog and commercial contracts and rates thereunder; |
• | statements regarding our ability to enter into and/or perform commercial contracts, including the scope, timing and outcome of those contracts; |
• | statements regarding the acquisition, construction, completion, upgrades to or maintenance of vessels, systems or equipment and any anticipated costs or downtime related thereto, including the construction, completion and mobilization of the Q7000; |
• | statements regarding any financing transactions or arrangements, or our ability to enter into such transactions or arrangements; |
• | statements regarding potential legislative, governmental, regulatory, administrative or other public body actions, requirements, permits or decisions; |
• | statements regarding our trade receivables and their collectability; |
• | statements regarding potential developments, industry trends, performance or industry ranking; |
• | statements regarding general economic or political conditions, whether international, national or in the regional or local markets in which we do business; |
• | statements regarding our ability to retain our senior management and other key employees; |
• | statements regarding the underlying assumptions related to any projection or forward-looking statement; and |
• | any other statements that relate to non-historical or future information. |
• | the impact of domestic and global economic conditions and the future impact of such conditions on the oil and gas industry and the demand for our services; |
• | the impact of oil and gas price fluctuations and the cyclical nature of the oil and gas industry; |
• | the impact of any potential cancellation, deferral or modification of our work or contracts by our customers; |
• | the ability to effectively bid and perform our contracts, including the impact of equipment problems or failure; |
• | the impact of the imposition by our customers of rate reductions, fines and penalties with respect to our operating assets; |
• | unexpected future capital expenditures, including the amount and nature thereof; |
• | the effectiveness and timing of completion of our vessel and/or system upgrades and major maintenance items; |
• | unexpected delays in the delivery, chartering or customer acceptance, and terms of acceptance, of our assets; |
• | the effects of our indebtedness and our ability to reduce capital commitments; |
• | the results of our continuing efforts to control costs and improve performance; |
• | the success of our risk management activities; |
• | the effects of competition; |
• | the availability of capital (including any financing) to fund our business strategy and/or operations; |
• | the impact of current and future laws and governmental regulations, including tax and accounting developments, such as the 2017 Tax Act; |
• | the impact of the U.K. to potentially exit the European Union, known as Brexit, on our business, operations and financial condition, which is unknown at this time; |
• | the effect of adverse weather conditions and/or other risks associated with marine operations; |
• | the impact of foreign currency exchange controls and exchange rate fluctuations; |
• | the effectiveness of our current and future hedging activities; |
• | the potential impact of a loss of one or more key employees; and |
• | the impact of general, market, industry or business conditions. |
• | worldwide economic activity and general economic and business conditions, including available access to global capital and capital markets; |
• | the global supply and demand for oil and natural gas; |
• | political and economic uncertainty and geopolitical unrest, including regional conflicts and economic and political conditions in the Middle East and other oil-producing regions; |
• | actions taken by the Organization of Petroleum Exporting Countries; |
• | the availability and discovery rate of new oil and natural gas reserves in offshore areas; |
• | the exploration and production of onshore shale oil and natural gas; |
• | the cost of offshore exploration for and production and transportation of oil and natural gas; |
• | the level of excess production capacity; |
• | the ability of oil and gas companies to generate funds or otherwise obtain external capital for capital projects and production operations; |
• | the sale and expiration dates of offshore leases in the United States and overseas; |
• | technological advances affecting energy exploration, production, transportation and consumption; |
• | potential acceleration of the development of alternative fuels; |
• | shifts in end-customer preferences toward fuel efficiency and the use of natural gas; |
• | weather conditions and natural disasters; |
• | environmental and other governmental regulations; and |
• | domestic and international tax laws, regulations and policies. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 16,823 | $ | 17,784 | $ | 18,141 | $ | 15,224 | |||||||
Adjustments: | |||||||||||||||
Income tax provision | 2,876 | 298 | 3,200 | 385 | |||||||||||
Net interest expense | 2,205 | 3,599 | 4,303 | 7,495 | |||||||||||
Loss on extinguishment of long-term debt | 18 | 76 | 18 | 1,181 | |||||||||||
Other expense, net | 1,311 | 3,441 | 145 | 2,516 | |||||||||||
Depreciation and amortization | 28,003 | 27,877 | 56,512 | 55,659 | |||||||||||
EBITDA | 51,236 | 53,075 | 82,319 | 82,460 | |||||||||||
Adjustments: | |||||||||||||||
Realized losses from foreign exchange contracts not designated as hedging instruments | (912 | ) | (806 | ) | (1,781 | ) | (1,496 | ) | |||||||
Other than temporary loss on note receivable | — | — | — | (1,129 | ) | ||||||||||
Adjusted EBITDA | $ | 50,324 | $ | 52,269 | $ | 80,538 | $ | 79,835 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities | $ | 32,561 | $ | 87,666 | |||
Less: Capital expenditures, net of proceeds from sale of assets | (24,933 | ) | (41,969 | ) | |||
Free cash flow | $ | 7,628 | $ | 45,697 |
Three Months Ended June 30, | Increase/ (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Net revenues — | ||||||||||||||
Well Intervention | $ | 159,074 | $ | 161,759 | $ | (2,685 | ) | (2 | )% | |||||
Robotics | 45,446 | 39,060 | 6,386 | 16 | % | |||||||||
Production Facilities | 15,621 | 16,343 | (722 | ) | (4 | )% | ||||||||
Intercompany eliminations | (18,413 | ) | (12,537 | ) | (5,876 | ) | ||||||||
$ | 201,728 | $ | 204,625 | $ | (2,897 | ) | (1 | )% | ||||||
Gross profit (loss) — | ||||||||||||||
Well Intervention | $ | 30,237 | $ | 38,033 | $ | (7,796 | ) | (20 | )% | |||||
Robotics | 5,137 | (1,485 | ) | 6,622 | (3) | |||||||||
Production Facilities | 4,900 | 6,994 | (2,094 | ) | (30 | )% | ||||||||
Corporate, eliminations and other | (340 | ) | (645 | ) | 305 | |||||||||
$ | 39,934 | $ | 42,897 | $ | (2,963 | ) | (7 | )% | ||||||
Gross margin — | ||||||||||||||
Well Intervention | 19% | 24% | ||||||||||||
Robotics | 11% | (4)% | ||||||||||||
Production Facilities | 31% | 43% | ||||||||||||
Total company | 20% | 21% | ||||||||||||
Number of vessels or robotics assets (1) / Utilization (2) | ||||||||||||||
Well Intervention vessels | 6/94% | 6/88% | ||||||||||||
Robotics assets | 51/41% | 55/38% | ||||||||||||
Chartered robotics vessels | 4/92% | 5/70% |
(1) | Represents the number of vessels or robotics assets as of the end of the period, including vessels under both short-term and long-term charters, and excluding acquired vessels prior to their in-service dates and vessels disposed of and/or taken out of service. |
(2) | Represents the average utilization rate, which is calculated by dividing the total number of days the vessels or robotics assets generated revenues by the total number of available calendar days in the applicable period. The average utilization rates of chartered robotics vessels during the three-month periods ended June 30, 2019 and 2018 include 24 and 54 spot vessel days, respectively, at near full utilization. |
(3) | Percent calculation not meaningful. |
Three Months Ended June 30, | Increase/ (Decrease) | ||||||||||
2019 | 2018 | ||||||||||
Well Intervention | $ | 9,812 | $ | 4,215 | $ | 5,597 | |||||
Robotics | 8,601 | 8,322 | 279 | ||||||||
$ | 18,413 | $ | 12,537 | $ | 5,876 |
Six Months Ended June 30, | Increase/ (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
Net revenues — | ||||||||||||||
Well Intervention | $ | 281,305 | $ | 291,328 | $ | (10,023 | ) | (3 | )% | |||||
Robotics | 84,487 | 66,229 | 18,258 | 28 | % | |||||||||
Production Facilities | 30,874 | 32,664 | (1,790 | ) | (5 | )% | ||||||||
Intercompany eliminations | (28,115 | ) | (21,334 | ) | (6,781 | ) | ||||||||
$ | 368,551 | $ | 368,887 | $ | (336 | ) | — | % | ||||||
Gross profit (loss) — | ||||||||||||||
Well Intervention | $ | 43,747 | $ | 55,721 | $ | (11,974 | ) | (21 | )% | |||||
Robotics | 3,548 | (13,383 | ) | 16,931 | 127 | % | ||||||||
Production Facilities | 9,671 | 14,451 | (4,780 | ) | (33 | )% | ||||||||
Corporate, eliminations and other | (778 | ) | (909 | ) | 131 | |||||||||
$ | 56,188 | $ | 55,880 | $ | 308 | 1 | % | |||||||
Gross margin — | ||||||||||||||
Well Intervention | 16% | 19% | ||||||||||||
Robotics | 4% | (20)% | ||||||||||||
Production Facilities | 31% | 44% | ||||||||||||
Total company | 15% | 15% | ||||||||||||
Number of vessels or robotics assets (1) / Utilization (2) | ||||||||||||||
Well Intervention vessels | 6/84% | 6/80% | ||||||||||||
Robotics assets | 51/40% | 55/34% | ||||||||||||
Chartered robotics vessels | 4/90% | 5/63% |
(1) | Represents the number of vessels or robotics assets as of the end of the period, including vessels under both short-term and long-term charters, and excluding acquired vessels prior to their in-service dates and vessels disposed of and/or taken out of service. |
(2) | Represents the average utilization rate, which is calculated by dividing the total number of days the vessels or robotics assets generated revenues by the total number of available calendar days in the applicable period. The average utilization rates of chartered robotics vessels during the six-month periods ended June 30, 2019 and 2018 include 108 and 96 spot vessel days, respectively, at near full utilization. |
Six Months Ended June 30, | Increase/ (Decrease) | ||||||||||
2019 | 2018 | ||||||||||
Well Intervention | $ | 13,037 | $ | 6,167 | $ | 6,870 | |||||
Robotics | 15,078 | 15,167 | (89 | ) | |||||||
$ | 28,115 | $ | 21,334 | $ | 6,781 |
June 30, 2019 | December 31, 2018 | ||||||
Net working capital | $ | 157,308 | $ | 259,440 | |||
Long-term debt (1) | 307,455 | 393,063 | |||||
Liquidity (2) | 432,489 | 426,813 |
(1) | Long-term debt does not include the current maturities portion of our long-term debt as that amount is included in net working capital. Long-term debt is also net of unamortized debt discount and debt issuance costs. See Note 6 for information relating to our long-term debt. |
(2) | Liquidity, as defined by us, is equal to cash and cash equivalents plus available capacity under the Revolving Credit Facility, which capacity is reduced by letters of credit drawn against that facility. Our liquidity at June 30, 2019 included cash and cash equivalents of $261.1 million and $171.3 million of available borrowing capacity under the Revolving Credit Facility (Note 6). Our liquidity at December 31, 2018 included cash and cash equivalents of $279.5 million and $147.4 million of available borrowing capacity under our then-existing revolving credit facility. |
June 30, 2019 | December 31, 2018 | ||||||
Term Loan (previously scheduled to mature June 2020) | $ | — | $ | 33,321 | |||
Term Loan (matures December 2021) | 34,523 | — | |||||
Nordea Q5000 Loan (matures April 2020) | 106,506 | 123,980 | |||||
MARAD Debt (matures February 2027) | 63,300 | 66,443 | |||||
2022 Notes (mature May 2022) (1) | 113,950 | 112,192 | |||||
2023 Notes (mature September 2023) (2) | 106,209 | 104,379 | |||||
Total debt | $ | 424,488 | $ | 440,315 |
(1) | The 2022 Notes will increase to their face amount through accretion of the debt discount through May 1, 2022. |
(2) | The 2023 Notes will increase to their face amount through accretion of the debt discount through September 15, 2023. |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash provided by (used in): | |||||||
Operating activities | $ | 32,561 | $ | 87,666 | |||
Investing activities | (29,014 | ) | (41,969 | ) | |||
Financing activities | (22,469 | ) | (22,963 | ) |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Capital expenditures: | |||||||
Well Intervention | $ | (26,621 | ) | $ | (41,756 | ) | |
Robotics | (139 | ) | (64 | ) | |||
Production Facilities | (109 | ) | (104 | ) | |||
Other | (589 | ) | (45 | ) | |||
STL acquisition, net | (4,081 | ) | — | ||||
Proceeds from sale of assets | 2,525 | — | |||||
Net cash used in investing activities | $ | (29,014 | ) | $ | (41,969 | ) |
Total (1) | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||
Term Loan | $ | 35,000 | $ | 3,500 | $ | 31,500 | $ | — | $ | — | |||||||||
Nordea Q5000 Loan | 107,143 | 107,143 | — | — | — | ||||||||||||||
MARAD Debt | 67,081 | 7,027 | 15,124 | 16,672 | 28,258 | ||||||||||||||
2022 Notes (2) | 125,000 | — | 125,000 | — | — | ||||||||||||||
2023 Notes (3) | 125,000 | — | — | 125,000 | — | ||||||||||||||
Interest related to debt (4) | 60,955 | 20,079 | 29,257 | 9,707 | 1,912 | ||||||||||||||
Property and equipment (5) | 86,074 | 85,768 | 306 | — | — | ||||||||||||||
Operating leases (6) | 452,755 | 118,039 | 198,346 | 128,283 | 8,087 | ||||||||||||||
Total cash obligations | $ | 1,059,008 | $ | 341,556 | $ | 399,533 | $ | 279,662 | $ | 38,257 |
(1) | Excludes unsecured letters of credit outstanding at June 30, 2019 totaling $3.7 million. These letters of credit may be issued to support various obligations, such as contractual obligations, contract bidding and insurance activities. |
(2) | Notes mature in May 2022. The 2022 Notes can be converted prior to their stated maturity if the closing price of our common stock for at least 20 days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter exceeds $18.06 per share, which is 130% of the conversion price. At June 30, 2019, the conversion trigger was not met. See Note 6 for additional information. |
(3) | Notes mature in September 2023. The 2023 Notes can be converted prior to their stated maturity if the closing price of our common stock for at least 20 days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter exceeds $12.31 per share, which is 130% of the conversion price. At June 30, 2019, the conversion trigger was not met. See Note 6 for additional information. |
(4) | Interest payment obligations were calculated using stated coupon rates for fixed rate debt and interest rates applicable at June 30, 2019 for variable rate debt. |
(5) | Primarily reflects costs associated with the Q7000, which is currently under completion (Note 14). |
(6) | Operating leases include vessel charters and facility and equipment leases. At June 30, 2019, our commitment related to long-term vessel charters totaled approximately $410.8 million, of which $173.9 million is related to the non-lease (services) components that are not included in operating lease liabilities on our balance sheet. |
Period | (a) Total number of shares purchased (1) | (b) Average price paid per share | (c) Total number of shares purchased as part of publicly announced program | (d) Maximum number of shares that may yet be purchased under the program (2) | |||||||||
April 1 to April 30, 2019 | — | $ | — | — | 4,668,594 | ||||||||
May 1 to May 31, 2019 | 64,262 | 7.82 | — | 4,668,594 | |||||||||
June 1 to June 30, 2019 | — | — | — | 4,668,594 | |||||||||
64,262 | $ | 7.82 | — |
(1) | Includes shares forfeited in satisfaction of tax obligations upon vesting of restricted shares. |
(2) | Under the terms of our stock repurchase program, the issuance of shares to members of our Board and to certain employees, including shares issued under the ESPP to participating employees (Note 11), increases the number of shares available for repurchase. For additional information regarding our stock repurchase program, see Note 9 to our 2018 Form 10-K. |
Exhibit Number | Description | Filed or Furnished Herewith or Incorporated by Reference from the Following Documents (Registration or File Number) | ||
3.1 | ||||
3.2 | ||||
4.1 | ||||
10.1 | ||||
10.2 | ||||
10.3 | ||||
10.4 | ||||
31.1 | ||||
31.2 | ||||
32.1 | ||||
101.INS | XBRL Instance Document. | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||
101.SCH | XBRL Schema Document. | Filed herewith | ||
101.CAL | XBRL Calculation Linkbase Document. | Filed herewith | ||
101.PRE | XBRL Presentation Linkbase Document. | Filed herewith | ||
101.DEF | XBRL Definition Linkbase Document. | Filed herewith | ||
101.LAB | XBRL Label Linkbase Document. | Filed herewith |
HELIX ENERGY SOLUTIONS GROUP, INC. (Registrant) | ||||
Date: | July 26, 2019 | By: | /s/ Owen Kratz | |
Owen Kratz President and Chief Executive Officer (Principal Executive Officer) | ||||
Date: | July 26, 2019 | By: | /s/ Erik Staffeldt | |
Erik Staffeldt Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
HELIX ENERGY SOLUTIONS GROUP, INC. | JOHNSON | ||||
By: | /s/ Owen Kratz | /s/ Alisa Johnson | |||
Name: | Owen Kratz | Alisa Johnson | |||
Title: | President and Chief Executive Officer |
1. | Purpose. The purpose of this Agreement is to set forth the terms and conditions of Executive’s employment with the Company. This Agreement represents both Parties’ intentions with respect to the terms and conditions of Executive’s employment with the Company. |
2. | Definitions. For the purposes of this Agreement, the following words shall have the following meanings: |
(a) | “Affiliate” means any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, another Person. The term “control” includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. With respect to any amount under this Agreement that is deferred compensation subject to Code Section 409A, for the purposes of Code Section 409A only, Affiliate shall mean all Persons with whom the Company would be considered a single employer under Code Section 414(b) or 414(c) and for the purposes of a Separation from Service (as defined in Section 2(o)) and determining the controlled group but using fifty percent (50%) instead of eighty percent (80%) pursuant to Treasury Regulation § 1.409A-1(h)(3). |
(b) | “AICP” or “Annual Incentive Compensation Plan” means any Company annual incentive compensation cash bonus plan in which Executive participates, as in effect from time to time. |
(c) | “Annual Cash Compensation” means, with respect to a Change in Control, the sum of (i) the amount of Executive’s Base Annual Salary for the year in which the Change in Control occurs and (ii) the target AICP bonus which could be payable to Executive |
(d) | “Base Annual Salary” means Executive’s base annual salary as described in Section 5(a) hereof. |
(e) | “Board” means the board of directors of the Company. |
(f) | “Cause” means in connection with a termination of Executive’s employment by the Company: (i) embezzlement or theft by Executive of any property of the Company or its Affiliates; (ii) any breach by Executive of any material provision of this Agreement; (iii) any act by Executive constituting a felony or otherwise involving theft, fraud, gross dishonesty, or moral turpitude; (iv) negligence or willful misconduct on the part of Executive in the performance of his duties as an employee, officer, or director of the Company or its Affiliates; (v) Executive’s breach of his fiduciary obligations to the Company or its Affiliates; (vi) Executive’s material violation or breach of the policies or procedures of the Company and its Affiliates (including but not limited to blackout periods for trading Common Stock); or (vii) any chemical dependence of Executive which adversely affects the performance of his duties and responsibilities to the Company or its Affiliates. |
(g) | “Change in Control” means a “Change in Control Event” within the meaning of Treasury Regulation § 1.409A-3(i)(5) and described in paragraphs (i), (ii) or (iii) below or any combination thereof as permitted in the Treasury Regulations with respect to the Company: |
(i) | A change in ownership that occurs when one person or a group (as determined for the purposes of Code Section 409A) acquires stock that, combined with stock previously owned, controls more than fifty percent (50%) of the value or voting power of the stock of the Company (incremental increases in ownership by a person or group that already owns fifty percent (50%) of the Company prior to such increase do not result in a change in ownership); |
(ii) | A change in effective control that occurs on the date that, during any 12-month period, either (x) any person or group acquires stock possessing forty-five percent (45%) or more of the voting power of the Company, or (y) the majority of the Board (or, if applicable, the board of directors of the Company’s ultimate parent) is replaced by persons whose appointment or election is not endorsed by a majority of the Board (or, if applicable, the board of directors of such ultimate parent) prior to the date of the appointment or election; or |
(iii) | A change in ownership of a substantial portion of the assets that occurs on the date that a person or a group acquires, during any 12-month period, assets of the Company having a total gross fair market value equal to eighty-five percent (85%) or more of the total gross fair market value of all of the Company’s assets; provided, however, that there is no change in control event under this paragraph (iii) when there is a transfer to: (w) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (x) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company immediately after the asset transfer; (y) a person, or more than one person acting as a group, that owns immediately after the asset transfer, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or (z) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in item (y) within the meaning of Code Section 409A. For the purposes of this paragraph (iii), “gross fair market value” shall have the meaning as provided in Code Section 409A. |
(h) | “Code” means the Internal Revenue Code of 1986, as amended. |
(i) | “Common Stock” means common stock, no par value, of the Company, or any successor security issued in lieu thereof. |
(j) | “Compensation Committee” means the compensation committee of the Board. |
(k) | “Confidential Information” means information (i) disclosed to or known by Executive as a consequence of or through his employment with the Company; (ii) not generally known outside the Company; and (iii) which relates to any aspect of the Company, its Affiliates or their business, research, or development. “Confidential Information” includes, but is not limited to, the Company’s and its Affiliate’s trade secrets, proprietary information, business plans, marketing plans, financial information, compensation and benefit information, cost and pricing information, customer contacts, suppliers, vendors, and information provided to the Company or its Affiliates by a third party under restrictions against disclosure or use by the Company, its Affiliates or others. |
(l) | “Conflict of Interest” means any activity which might adversely affect the Company or its Affiliates, including ownership of a material interest in any supplier, contractor, distributor, subcontractor, customer, or other entity with which the Company or its Affiliates does business. |
(m) | “Copyright Works” means materials for which copyright protection may be obtained including, but not limited to: literary works (including all written material), computer programs, artistic and graphic works (including designs, graphs, drawings, blueprints, and other works), recordings, models, photographs, slides, motion pictures, and audio‑visual works, regardless of the form or manner in which documented or recorded. |
(n) | “Company” means Helix Energy Solutions Group, Inc., a Minnesota corporation. |
(o) | “Date of Termination” means the date of termination of Executive’s employment by the Company and that is a “Separation from Service” within the meaning of Code Section 409A, which means a termination of Executive’s employment with the Company (and its controlled group within the meaning of Treasury Regulation § 1.409A-1(h)(3)) in accordance with the Company’s policies and procedures; provided, however, that the Company and Executive reasonably anticipate that no further services will be performed after the termination date or that the level of bona fide services Executive will perform after such date (whether as an employee or an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period or the full period of service to the Company if Executive has been providing services to the Company for less than 36 months. As used in this Agreement, references to termination of the Executive’s employment shall mean Executive’s “Separation from Service” within the meaning of Code Section 409A. |
(p) | “Disability” or “Disabled” means any physical or mental incapacity, disease or affliction, as determined by a legally qualified medical practitioner selected by the Company which prevents Executive to a substantial degree from performing his obligations after reasonable accommodation from the Company. |
(q) | “Effective Date” means May 1, 2019. |
(r) | “Equity-Based Awards” means stock options, restricted stock, restricted stock units, performance vesting stock, performance stock units, and any other award granted by the Company, which derives its value based upon the Common Stock, regardless whether such award is ultimately intended to be settled in stock or cash. |
(s) | “Good Reason” means, in connection with a termination of employment by Executive, the occurrence of any of the following without Executive’s written consent (except in connection with the termination of employment of Executive by the Company for Cause or Disability): |
(i) | a material diminution in Executive’s Base Annual Salary; |
(ii) | a material diminution in Executive’s authority, duties, or responsibilities; |
(iii) | a material change in geographic location at which Executive must perform the services; or |
(iv) | any other action or inaction that constitutes a material breach by the Company of the terms of this Agreement. |
(t) | “Inventions” means inventions (whether patentable or not), discoveries, improvements, designs, and ideas (whether or not shown or described in writing or reduced to practice) including, and in addition to any such Confidential Information or Copyright Works. |
(u) | “LTIP” or “Long Term Incentive Plan” means the Company’s 2005 Long-Term Incentive Plan (as amended and restated effective January 1, 2017) or other long-term incentive plan of the Company pursuant to which Executive receives Equity Based Awards, as in effect from time to time. |
(v) | “Person” means, for the purposes of the term Affiliate in Section 2(a) hereof, and as used in Section 7(e) hereof, any individual, partnership, corporation, limited liability company, group, trust or other legal entity. |
(w) | “Retirement” means a termination of Executive’s employment under circumstances as shall constitute retirement from the Company based on age and/or years of employment, as determined by the Board, in its sole discretion, in accordance with written policies adopted by the Board from time to time; in absence of the adoption of such policy, Executive’s resignation on or after attainment of age 65 shall be deemed to be “Retirement” for purposes of this Agreement. |
3. | Duration. This Agreement shall become effective on the Effective Date and shall terminate on the second (2nd) anniversary of the Effective Date, unless earlier terminated as hereinafter provided, provided that commencing on the second anniversary date of the Effective Date and each second anniversary date thereafter, the term of this Agreement shall automatically be extended for two additional years unless, no later than ninety (90) days prior to the applicable anniversary date, the Company or Executive shall give written notice to the other that it or he, respectively, does not wish to extend the term of this Agreement, in which case this Agreement shall terminate on the applicable anniversary date. |
4. | Duties and Responsibilities. Commencing on the Effective Date, Executive shall diligently render his services to the Company as Senior Vice President, General Counsel and Corporate Secretary in a manner customary for such officers or equivalent positions and in accordance with the Company’s directives, and shall use his best efforts and good faith in fulfilling such responsibilities and in accomplishing such directives. Executive agrees to devote his full-time efforts, abilities, and attention to the business of the Company, and shall not engage in any activities which will interfere with such efforts. Executive shall well and faithfully serve the Company during the continuance of his employment hereunder and shall use his best efforts to promote the interests of the Company. Executive’s principal place of employment will be at the Company’s corporate headquarters in Houston, Texas. Executive hereby acknowledges that he is a fiduciary with respect to the Company and its Affiliates and shall act in accordance and otherwise comply with his fiduciary obligation to the Company and its Affiliates. |
5. | Compensation and Benefits. In return for the services to be provided by Executive pursuant to this Agreement, the Company agrees to pay Executive as follows: |
(a) | Base Annual Salary. Executive shall receive a Base Annual Salary annually of $300,000 payable every two weeks, subject to deduction of statutorily required amounts, including but not limited to, withholding for federal, state and local income taxes, and amounts payable by employees of the Company for employee benefits. The annual salary to be paid by the Company to Executive shall be reviewed at least annually and may from time to time be increased (but may not be decreased) as approved by the Company (any such increased amount shall then be referred to as “Base Annual Salary” for the purposes of this Agreement). |
(b) | Annual Incentive Compensation Plan. Executive shall be eligible to receive an Annual Incentive Compensation Plan bonus, with the components, target and maximum amounts based on a percentage of Executive’s Base Annual Salary, each as determined by the Board or Compensation Committee, in its sole discretion, subject to the terms of the AICP. Subject to the foregoing, a portion of the annual AICP bonus may be based upon the Company’s financial performance and a portion of the AICP may be based upon achievement of Executive’s individual performance objectives, all as may be determined by the Board or Compensation Committee, in its sole discretion. For 2019, Executive’s target bonus shall be prorated such that prior to Executive’s being elected as Senior Vice President, General Counsel and Corporate Secretary, Executive’s target bonus shall be 75% of his then base annual salary, and with respect from the period of time during 2019 that Executive has served as the Company’s Senior Vice President, General Counsel and Corporate Secretary, Executive’s target bonus shall be 100% of his Base Annual Salary set forth in Section 5(a) above. AICP bonuses for each calendar year shall be payable in the following calendar year as determined by the Board or Compensation Committee; provided, however, that payment, if any, shall be made no later than March 15th of such following year. |
(c) | Long Term Incentive Plan. As a senior management executive of the Company, Executive shall participate annually in the Long Term Incentive Plan as determined by and on such terms approved by the Company, the Board or the Compensation Committee, in its sole discretion. The LTIP may include stock options, restricted stock, restricted stock units and/or other types of compensation. |
(d) | Benefits. Executive shall be entitled to participate in the Company’s various employee benefit plans as the same may be constituted from time to time, including without limitation, the Company’s 401(k) plan, in the same manner as other senior management executives of the Company, subject to the terms and conditions of the plans, as same may be amended or terminated pursuant to their terms from time to time as determined by the Company in its sole discretion. |
(e) | Expenses. Executive shall be reimbursed by the Company for all reasonable business expenses incurred by Executive in performance of his duties hereunder upon the submission of appropriate vouchers, bills or receipts for such expenses in accordance with the Company’s policy, and upon Executive’s reasonable documentation of such expenses, the expenses shall be paid in a cash lump sum payment as soon as reasonably practicable, but in no event later than March 15th of the calendar year following the calendar year in which the expenses are incurred. |
(f) | Vacation. Executive will be provided four (4) weeks’ paid vacation in each calendar year, to be accrued at a prorata monthly rate, and additional paid holidays and similar rights and privileges as are enjoyed generally by Company’s senior management executives. Vacation shall be subject to the Company’s policy and vacation days must be taken in accordance with the Company’s policy for senior management executives, as may be amended from time to time. |
6. | Termination. |
(a) | Death, Disability or Retirement. The Company may terminate Executive’s employment if he is Disabled for six (6) consecutive months or for a total of six (6) months during any 12-month period. Executive’s employment will be automatically terminated upon his death or Retirement. |
(b) | Termination for Cause. The Company may terminate Executive’s employment immediately for Cause by written notice to Executive. |
(c) | Termination Without Cause. The Company may terminate Executive’s employment without Cause and for any reason upon written notice to Executive. |
(d) | Termination by Executive Without Good Reason. Executive may terminate his employment upon 30 days’ written notice to the Company. In the event Executive terminates his employment in this manner, he shall remain in the Company’s employ subject to all terms and conditions of this Agreement for the entire 30-day period unless instructed otherwise by the Company in writing. |
(e) | Termination by Executive for Good Reason. Executive may terminate his employment for “Good Reason” by giving the Company advance written notice of such intent and the grounds thereof within a period not to exceed 30 days after the existence of the event constituting Good Reason. After Executive gives such notice, the Company shall have 30 days to correct the Good Reason event, and if the Company does not correct the Good Reason event within the prescribed time, Executive must terminate his employment within 61 days of the date of the event constituting Good Reason in order to be entitled to any benefits under Section 7(d) of this Agreement. In addition, once an event constitutes Good Reason, if the Company does not correct the event and if Executive does not give notice (as described above) and terminate his employment within 61 days of the event, such specific instance of the event shall no longer constitute Good Reason under this Agreement. |
(f) | Resignation of All Positions. Executive agrees that after any termination of his employment, he will tender his resignation from any position he may hold as an officer or director of the Company or any Affiliate or otherwise associated companies. |
7. | Severance and Change in Control Payments and Benefits. Executive shall be entitled to the following compensation under the following circumstances: |
(a) | Death, Disability or Retirement. In the event Executive’s employment is terminated as a result of his death, Disability or Retirement, Executive’s rights under any Equity-Based Awards or other compensation rights or awards shall be determined in accordance with the controlling plan documents and award agreements and his unpaid Base Annual Salary shall be paid through the Date of Termination in accordance with the Company’s normal payroll practices. Any unpaid AICP bonus for a calendar year preceding the calendar year of Executive’s Date of Termination shall be paid when the AICP bonus for other participants is paid but in no event later than March 15th of the calendar year following the end of the calendar year of the applicable AICP bonus. Executive’s award under any AICP to which he would otherwise be entitled in the calendar year of his Date of Termination shall be prorated for the period of his participation in the AICP during the relevant calendar year, and payable at the same time other participants in the AICP receive payment but in no event later than March 15th of the calendar year following the calendar year of the Date of Termination. Executive shall be reimbursed for all expenses incurred and in accordance with Section 5(f); Executive shall be paid all accrued unused vacation in accordance with the Company’s vacation policy, as amended from time to time, and Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time. |
(b) | Termination for Cause or Resignation of Executive Without Good Reason. If Executive is terminated by the Company for Cause or if Executive resigns or otherwise terminates without Good Reason, no AICP bonus for the calendar year of his Date of Termination will be paid, all other benefits and rights, including Equity-Based Awards shall be determined under the then governing plans and award agreements, and his unpaid Base Annual Salary shall be paid through to the Date of Termination in accordance with the Company’s normal payroll practices. Any unpaid AICP bonus for a calendar year preceding the calendar year of Executive’s Date of Termination shall be paid in accordance with the terms of the applicable AICP and when the AICP bonus for other participants is paid but in no event later than March 15th of the calendar year following the end of the calendar year of the applicable AICP bonus. Executive shall be reimbursed for all expenses incurred and in accordance with Section 5(e); Executive shall be paid all accrued unused vacation in accordance with the Company’s vacation policy, as amended from time to time, and Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time. |
(c) | Termination Without Cause. In the event Executive’s employment with the Company is terminated by the Company without Cause, the Company shall pay Executive an amount equal to his Base Annual Salary for the year in which the termination occurs in a lump sum cash payment as soon as administratively feasible following the Date of Termination but no later than 70 days after the Date of Termination (subject to Section 7(h)). There shall be an automatic acceleration of the vesting of any Equity-Based Awards granted to Executive by the Company that were scheduled to vest by their terms within 12 months following the Date of Termination, and to the extent the provisions of this Section 7(c) change the terms of such Equity-Based Awards held by Executive now or in the future, this Section 7(c) shall be deemed an amendment to the agreement between Company and Executive setting forth the terms of such awards and shall form part of such agreement. Except as provided in the previous sentence, Executive’s rights under any Equity-Based Awards or other compensation rights or awards shall be determined according to the controlling plan documents and award agreements, and the benefits provided in this Section 7(c) regarding Executive’s Equity-Based Awards shall be in addition to, and not in limitation of, the value or benefit of any Equity-Based Awards, the exercisability, vesting or payment of which is accelerated or otherwise enhanced pursuant to the terms of the LTIP or agreement heretofore or hereafter adopted between Executive and the Company regarding Equity-Based Awards granted to Executive. Executive’s unpaid Base Annual Salary shall be paid through his Date of Termination in accordance with the Company’s normal payroll practices. Any unpaid AICP bonus for a year preceding the calendar year of Executive’s Date of Termination shall be paid when the AICP bonus for other participants is paid but in no event later than March 15th of the calendar year following the end of the calendar year of the applicable AICP bonus. In addition, the Company shall pay Executive his award under any AICP for the calendar year of his Date of Termination (a) calculated on the basis of the Company and Executive having fully met all performance criteria (financial, personal or otherwise) for a target bonus (which will not include any multiplier that may be applicable to result in a maximum bonus), (b) paid on the basis of a deemed 12-month calendar year participation in the plan, and (c) payable at the same time other participants in the plan receive payment but no later than March 15th of the calendar year following the end of the calendar year of the Date of Termination. Executive shall be reimbursed for all expenses incurred and in accordance with Section 5(e); Executive shall be paid all accrued unused vacation in accordance with the Company’s vacation policy, as amended from time to time, and Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time. |
(d) | Termination by Executive for Good Reason. In the event that Executive terminates his employment with the Company for Good Reason, the Company shall pay Executive an amount equal to his Base Annual Salary for the year in which termination occurs in a lump sum cash payment as soon as administratively feasible following the Date of Termination but no later than 70 days after the Date of Termination (subject to Section 7(h)). There shall be an automatic acceleration of the vesting of any Equity-Based Awards granted to Executive by the Company that were scheduled to vest by their terms within 12 months following the Date of Termination, and to the extent the provisions of this Section 7(d) change the terms |
(e) | Change in Control. Notwithstanding the foregoing subsections (a) - (d) of this Section 7 and in lieu thereof, if within the period beginning with the date of a Change in Control and continuing through the second anniversary thereof, the Company terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason, then: |
(i) | The Company shall pay Executive as soon as administratively feasible after the date of the Change in Control but no later than 70 days following the date of the Change in Control a lump sum cash amount equal to two (2) times Executive’s Annual Cash Compensation; |
(ii) | Executive’s rights under any Equity-Based Awards or other compensation rights, benefits or awards shall be as provided in the governing plan and/or award agreements (subject to paragraph (iv) below); |
(iii) | Any unpaid AICP bonus for a calendar year preceding the calendar year of the Change in Control shall be paid when the AICP bonus for other participants is paid but in no event later than March 15th of the calendar year following the end of the calendar year of the applicable AICP bonus; |
(iv) | Notwithstanding the provision of any agreement to the contrary, the Company shall cause all of Executive’s existing unvested Equity-Based Awards to be accelerated and vested immediately as of the date of the Change in Control and payment or issuance of shares of Common Stock shall be made pursuant to the applicable plans and/or award agreements (for the avoidance of doubt, the benefits provided for in this Section 7(e)(iv) regarding Executive’s Equity-Based Awards shall be in addition to, and not in limitation of, the value or benefit of any Equity-Based Awards, the exercisability, vesting or payment of which is accelerated or otherwise enhanced pursuant to the terms of the LTIP or other agreement heretofore or hereafter adopted between Executive and the Company regarding Equity-Based Awards granted to Executive). |
(v) | Executive shall be promptly reimbursed all reasonable business expenses incurred by him upon reasonable documentation and in accordance with Company policy prior to the date of the Change in Control to be paid no later than March 15th following the end of the calendar year in which the expenses were incurred; |
(vi) | Company shall pay a lump sum amount equal to the cost of continuation of group health coverage under COBRA for a period of 18 months based upon the rates of such COBRA coverage for the coverage as in effect for Executive (and his dependents, if applicable) on the date of the Change in Control to be paid in a cash lump sum payment at the same time payment under Section 7(e)(i)is made; |
(vii) | If any payments are payable under this Section 7(e), in no event will any amounts be paid or payable under Section 7(a)-(d). |
(f) | Release of All Claims. In order to receive any payments (other than any unpaid Base Annual Salary and accrued vacation through to his Date of Termination, if applicable) pursuant to Section 7(c) or (d), Executive shall first be required to execute and return a release in a form and substance satisfactory to the Company which releases the Company and its Affiliates, and their officers, employees, and directors and any employee benefit plan (and any other Company related person as specified in the release) (the “Company Group”) of any claims which Executive may have as against the Company Group and such release must be effective and not revoked within the time prescribed in the release and the release must be returned and effective within the time period specified by the Company in the release but in no event later than 60 days after Executive’s Date of Termination if payments are made pursuant to Section 7(c) or (d). |
(g) | No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment or other benefit required to be paid to Executive pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned by Executive as a result of employment. The Company’s obligation to make the payments provided for in this Agreement (including, but not limited to, the payments under Section 7(c), (d) or (e)), and otherwise perform its obligations hereunder shall not be affected by any counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others, exclusive of payroll withholdings required by law. |
(h) | Specified Employees. Notwithstanding any other provision herein, if Executive is a “Specified Employee” (as that term is defined in Code Section 409A) as of his Date of Termination, then any amounts under this Agreement which are payable upon his “Separation from Service” (within the meaning of Code Section 409A) and subject to the provisions of Code Section 409A and not otherwise excluded under Code Section 409A, shall not be paid until the first (1st) business day that is at least six (6) months after the date after Executive’s Date of Termination (the “Waiting Period”). Any payments that would have been made to Executive during the Waiting Period but for this Section 7(h) shall instead be made to Executive in the form of a lump sum payment on the date that payments commence pursuant to the preceding sentence with interest (calculated at the short-term applicable federal rate compounded semi-annually) on the amount not paid during the Waiting Period from the Date of Termination through the date of payment. |
8. | Inventions, Confidential Information, Patents, and Copyright Works. |
(a) | Notification of Company. Upon conception, all Inventions, Confidential Information, and Copyright Works shall become the property of the Company (or the United States Government where required by law) whether or not patent or copyright registration applications are filed for such subject matter. Executive will communicate to the Company promptly and fully all Inventions, or suggestions (whether or not patentable), all Confidential Information or Copyright Works made, designed, created, or conceived by Executive (whether made, designed, created, or conceived solely by Executive or jointly with others) during the period of his employment with the Company: (a) which relate to the actual or anticipated business, research, activities, or development of the Company at the time of the conception; or (b) which result from or are suggested by any work which Executive has done or may do for or on behalf of the Company; or (c) which are developed, tested, improved, or investigated either in part or entirely on time for which Executive was paid by the Company, or using any resources of the Company. |
(b) | Transfer of Rights. Executive agrees, during his employment with the Company, to assign and transfer to and does hereby assign and transfer to the Company Executive’s entire right, title, and interest in all Inventions, Confidential Information, Copyright Works and patents prepared, made or conceived by or in behalf of Executive (solely or jointly with others): (a) which relate in any way to the actual or anticipated business of the Company, or (b) which relate in any way to the actual or anticipated research or development of the Company, or (c) which are suggested by or result, directly or indirectly, from any task assigned to Executive or in which Executive otherwise engages in behalf of the Company. Executive also agrees to do all things necessary to transfer to the Company Executive’s entire right, title, and interest in and to all such Inventions, Confidential Information, Copyright Works or patents as the Company may request, on such forms as the Company may provide, at any time during or after Executive’s employment. Executive will promptly and fully assist the Company during and subsequent to his employment in every lawful way to obtain, protect, and enforce the Company’s patent, copyrights, trade secret or other proprietary rights for Inventions, Confidential Information, Copyright Works or patents in any and all countries. |
(c) | Notice of Rights Under State Statutes. No provision in this Agreement is intended to require assignment of any of Executive’s rights in an Invention for which no equipment, supplies, facilities, Confidential Information, Copyright Works, Inventions, patents or information of the Company was used, and which was (1) developed entirely on Executive’s own time; (2) does not relate directly or indirectly to the business of the Company or to the actual or demonstrably anticipated research or development of the Company; and (3) does not result from any work performed by Executive for the Company or assigned to Executive by the Company. |
(d) | Rights in Copyrights. Unless otherwise agreed in writing by the Company, all Copyright Works prepared wholly or partially by Executive (alone or jointly with others) within the scope of his employment with the Company, shall be deemed a “work made for hire” under the copyright laws and shall be owned by the Company. Executive understands that any assignment or release of such works can only be made by the Company. Executive will do everything reasonably necessary to enable the Company or its nominee to protect its rights in such works. Executive agrees to execute all documents and to do all things necessary to vest in the Company Executive’s right and title to copyrights in such works. Executive shall not assist or work with any third party that is not an employee of the Company to create or prepare any Copyright Works without the prior written consent of the Company. |
(e) | Assistance in Preparation of Applications. During and after employment Executive will promptly and fully assist, if requested by the Company, in the preparation and filing of patents and Copyright Works registrations in any and all countries selected by the Company and will assign to the Company Executive’s entire right, title, and interest in and to such patents and Copyright Works registrations, as well as all Inventions or Copyright Works to which such patents and Copyright Works registrations pertain, to enable any such properties to be prosecuted under the direction of the Company and to ensure that any patent or Copyright Works registration obtained will validly issue to the Company. |
(f) | Execute Documents. During and after employment Executive will promptly sign any and all lawful papers, take all lawful oaths, and do all lawful acts, including testifying, at the request of the Company, in connection with the procurement, grant, enforcement, maintenance, exploitation, or defense against assertion of any patent, trademark, copyright, trade secret or related rights, including applications for protection or registration thereof. Such lawful papers include, but are not limited to, any and all powers, assignments, affidavits, declarations and other papers deemed by the Company to be necessary or advisable. |
(g) | Keep Records. Executive will keep and regularly maintain adequate and current written records of all Inventions, Confidential Information, and Copyright Works he participates in creating, conceiving, developing, and manufacturing. Such records shall be kept and maintained in the form of notes, sketches, drawings, reports, or other documents relating thereto, bearing at least the date of preparation and the signatures or name of each employee contributing to the subject matter reflected in the record. Such records shall be and shall remain the exclusive property of the Company and shall be available to the Company at all times. |
(h) | Return of Documents, Equipment, Etc. All writings, records, and other documents and things comprising, containing, describing, discussing, explaining, or evidencing any Inventions, Confidential Information, or Copyright Works and all equipment, components, parts, tools, and the like in Executive’s custody or possession that have been obtained or prepared in the course of Executive’s employment with the Company shall be the exclusive property of the Company, shall not be copied and/or removed from the premises of the Company, except in pursuit of the business of the Company, and shall be delivered to the Company, without Executive retaining any copies, upon notification of the termination of Executive’s employment or at any other time requested by the Company. The Company shall have the right to retain, access, and inspect all property of Executive of any kind in the office, work area, and on the premises of the Company upon termination of Executive’s employment and at any time during employment by the Company, to ensure compliance with the terms of this Agreement. |
(i) | Other Contracts. Executive represents and warrants that he is not a party to any existing contract relating to the granting or assignment to others of any interest in Inventions, Confidential Information, Copyright Works or patents hereafter made by Executive except insofar as copies of such contracts, if any, are attached to this Agreement. |
(j) | Assignment After Termination. Executive recognizes that ideas, Inventions, Confidential Information, Copyright Works, Copyright Works registrations or patents relating to his activities while working for the Company that are conceived or made by Executive, alone or with others, within one (1) year after termination of his employment may have been conceived in significant part while Executive was employed by the Company. Accordingly, Executive agrees that such ideas, Inventions, Confidential Information, Copyright Works, Copyright Works registrations or patents shall be presumed to have been conceived and made during his employment with the Company and are to be assigned to the Company in accordance with this Section 8. |
(k) | Prior Conceptions. At the end of this Section 8(k), Executive has set forth, if any, what he represents and warrants to be a complete list of all Inventions, if any, patented or unpatented, or Copyright Works, including a brief description thereof (without revealing any confidential or proprietary information of any other Party) which Executive participated in the conception, creation, development, or making of prior to his employment with the Company and for which Executive claims full or partial ownership or other interest, or which are in the physical possession of a former employer and which are therefore excluded from the scope of this Agreement. |
9. | Non‑Competition, Non‑Solicitation, and Confidentiality. The Company and Executive acknowledge and agree that while Executive is employed pursuant to this Agreement, the Company will give Executive access to Confidential Information of the Company and its Affiliates to which Executive did not have access prior to signing this Agreement and which Executive may need and use during such employment, the receipt of which is hereby acknowledged by Executive; Executive will be provided under this Agreement (i) specialized training on how to perform his duties and (ii) contact with the Company’s and its Affiliates’ customers and potential customers. In consideration of all of the foregoing, the Company and Executive agree as follows: |
(a) | Non-Competition During Employment. Executive agrees that for the duration of this Agreement, he will not compete with the Company by engaging in the conception, design, development, production, marketing, or servicing in the offshore energy services industry (for purposes of this Section 9, the “Services”), and that he will not work for, in any capacity, assist, or become affiliated with as an owner, partner, employee, contractor, joint venture or otherwise, either directly or indirectly, any individual or business which performs the Services. |
(b) | Non-Competition After Employment. Executive agrees that for a period of one (1) year after termination of his employment with the Company for any reason he will not compete with the Company by engaging in the Services, and that he will not work for, in any capacity, assist, or become affiliated with as an owner, partner, employee, contractor, joint venture or otherwise, either directly or indirectly, any individual or business that performs the Services; provided, however, that Executive may accept employment with a business that performs the Services if Executive is employed by a division, affiliate, or subsidiary that does not perform the Services and Executive understands and agrees that he cannot perform any services for the division, subsidiary, or affiliate which does compete with the Company in the provision of the Services. |
(c) | Conflicts of Interest. Executive agrees that for the duration of this Agreement, he will not engage, either directly or indirectly, in any Conflict of Interest, and that Executive will promptly inform a corporate officer of the Company as to each offer received by Executive to engage in any such activity. Executive further agrees to disclose to the Company any other facts of which Executive becomes aware which might involve or give rise to a Conflict of Interest or potential Conflict of Interest. |
(d) | Non-Solicitation of Customers. Executive further agrees that, for the duration of this Agreement, and for a period of one (1) year after the termination of his employment with the Company for any reason, he will not solicit or accept any business for the provision of the Services from any customer or client or prospective customer or client with whom Executive dealt, had contact with or during the time Executive was employed by the Company. |
(e) | Non-Solicitation of Employees. Executive agrees that for the duration of this Agreement, and for a period of one (1) year after the termination of his employment with the Company for any reason, he will not either directly or indirectly, on his own behalf or on behalf of others, solicit, attempt to hire, or hire any person employed by the Company to work for Executive or for any other entity, firm, corporation, or individual; provided, however, that nothing in this Section 9(e) shall prohibit a future employer of Executive from soliciting, attempting to hire, or hiring any person employed by the Company so long as Executive is not directly or indirectly involved in the process including, but not limited to providing or suggesting (directly or indirectly) names of such employees to anyone for purposes of possible employment and/or directing such employees to contact anyone for purposes of possible employment. |
(f) | Confidential Information. Executive further agrees that he will not, except as the Company may otherwise consent or direct in writing, reveal or disclose, sell, use, lecture upon, publish, or otherwise disclose to any third party any Confidential Information or proprietary information of the Company, or authorize anyone else to do these things at any time either during or subsequent to his employment with the Company. This Section 9(f) shall continue in full force and effect after termination of Executive’s employment and after the termination of this Agreement for any reason. Executive’s obligations under this Section 9(f) of this Agreement with respect to any specific Confidential Information and proprietary information shall cease when that specific portion of Confidential Information and proprietary information becomes publicly known, in its entirety and without combining portions of such information obtained separately. It is understood that such Confidential Information and proprietary information of the Company include matters that Executive conceives or develops, as well as matters Executive learns from other employees of the Company. |
(g) | Confidential Information of Prior Employer. Executive will not disclose or use during the period of his employment with the Company any proprietary or confidential information or copyright works, which Executive may have acquired because of employment with an employer other than the Company. |
(h) | Time Period Tolled. The time periods referenced in this Section 9 during which Executive is restrained from competing against the Company shall not include any period of time during which Executive is in breach of this Agreement. Said time periods referenced in this Section 9 will be tolled, such that the Company will receive the full benefit of the time period in the event Executive breaches this Agreement. |
(i) | Breach. Executive agrees that any breach of Sections 9(a), (b), (c), (d), (e) or (f) above cannot be remedied solely by money damages, and that in addition to any other remedies the Company may have, the Company is entitled to obtain injunctive relief against Executive. Nothing herein, however, shall be construed as limiting the Company’s right to pursue any other available remedy at law or in equity, including recovery of damages and termination of this Agreement. |
(j) | Independent Covenants. All covenants contained in this Section 9 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. |
10. | Return of Company Property. Executive agrees to execute and deliver such documents and take all other actions as the Company may request from time to time in order to effect the transfer and delivery to the Company of any of the Company’s or its Affiliates’ assets in the possession or subject to the control of Executive including, without limitation, the Company’s or its Affiliates’ computers, printers, books, records, files, databases, software, Confidential Information, and other documents in whatever form or medium and wherever located, and the Company’s or its Affiliates’ credit cards, travel authority cards, parking and identification badges. |
11. | Right to Enter Agreement. Executive represents and covenants to the Company that he has full power and authority to enter into this Agreement and that the execution of this Agreement will not breach or constitute a default of any other agreement or contract to which he is a Party or by which he is bound. |
12. | Assignment. This Agreement may be assigned by the Company, but cannot be assigned by Executive. An assignment of this Agreement by the Company shall not relieve the Company of any liability or obligation under this Agreement except any such assignment in connection with or as a result of a Change in Control (including, but not limited to, by operation of law). |
13. | Binding Agreement. The Parties acknowledge that this Agreement shall be binding upon and inure to the benefit of (a) Executive’s heirs, successors, personal representatives, and legal representatives and (b) any successor of the Company. Any such successor of the Company shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, “successor” shall include any person, firm, corporation, or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. |
14. | Notices. All notices pursuant to this Agreement shall be in writing and sent certified mail, return receipt requested, by hand delivery or by overnight delivery service addressed as follows: |
If to Executive: | Ken Neikirk | |
13006 Perthshire Road | ||
Houston, TX 77079 | ||
If to the Company: | Helix Energy Solutions Group, Inc. | |
Attn: President and Chief Executive Officer | ||
3505 West Sam Houston Parkway North, Suite 400 | ||
Houston, TX 77043 | ||
With a copy to: | Helix Energy Solutions Group, Inc. | |
Attn: Chief Financial Officer 3505 West Sam Houston | ||
Parkway North, Suite 400 | ||
Houston, TX 77043 |
15. | Waiver. No waiver by either Party to this Agreement of any right to enforce any term or condition of this Agreement, or of any breach hereof, shall be deemed a waiver of such right in the future or of any other right or remedy available under this Agreement. |
16. | Severability. If any provision of this Agreement is determined to be void, invalid, unenforceable, or against public policy, such provisions shall be deemed severable from the Agreement, and the remaining provisions of the Agreement will remain unaffected and in full force and effect. Furthermore, any breach by the Company of any provision of this Agreement shall not excuse Executive’s compliance with the requirements of Sections 8 or 9, to the extent they are otherwise enforceable. |
17. | Arbitration. Except with respect to injunctive relief which may be sought by the Company or Executive from a court in Harris County, Texas, to which the Parties hereby submit to personal jurisdiction, the Parties agree to resolve any and all claims or controversies past, present, or future arising out of or relating to this Agreement, Executive’s employment and/or termination of employment with the Company, including but not limited to claims for wrongful termination of employment, and claims under the Civil Rights Act of 1866, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family Medical Leave Act, the Sarbanes-Oxley Act, the Equal Pay Act, the Fair Labor Standards Act, Chapter 21 of the Texas Labor Code, formerly known as the Texas Commission on Human Rights Act, the retaliatory discharge provisions of the Texas Worker’s Compensation Act, the Texas Pay Day Act, and any similar state law or local ordinance to binding arbitration under the Federal Arbitration Act, before one neutral arbitrator in the City of Houston, State of Texas, under the American Arbitration Association (“AAA”) National Rules for the Resolution of Employment Disputes. If the Parties cannot agree on one arbitrator, a list of seven (7) arbitrators will be requested from AAA, and the arbitrator will be selected using alternate strikes with Executive striking first. The Parties further agree that (i) except as expressly awarded in arbitration and subject to Section 25 below, each party shall be responsible for its own expenses, including but not limited to attorneys’ fees in connection with the cost of the arbitration except that the fees of the arbitrators shall be shared equally by Executive and the Company, (ii) collective actions are not permissible unless agreed upon by the parties in writing, (iii) administrative proceedings under the National Labor Relations Act and Title VII of the Civil Rights Act are |
18. | Entire Agreement. The terms and provisions contained herein shall constitute the entire agreement between the Parties with respect to Executive’s employment with the Company during the time period covered by this Agreement. This Agreement replaces and supersedes any and all existing agreements entered into between Executive and the Company relating generally to the same subject matter. |
19. | Modification of Agreement. This Agreement may not be changed or modified or released or discharged or abandoned or otherwise terminated, in whole or in part, except by an instrument in writing signed by Executive and an officer or other authorized executive of the Company. |
20. | Understand Agreement. Executive represents and warrants that he has read and understood each and every provision of this Agreement, acknowledges that he has obtained or has had the opportunity to obtain independent legal advice from attorneys of his choice, and confirms that Executive has freely and voluntarily entered into this Agreement. |
21. | Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas without giving any effect to the conflict of laws provisions thereof. |
22. | Code Section 409A. The Parties agree that the Company may amend and/or operate this Agreement to be exempt from or to comply with Code Section 409A including, but not limited to, using the definitions or other terms required by Code Section 409A and including without limitation any notices, rulings, interpretations or regulations issued under Code Section 409A after the date hereof to avoid the application of penalty taxes under Code Section 409A. The Company and Executive shall cooperate in good faith for the adoption of such amendments and/or the operation of the Agreement to avoid the application of penalty taxes under Code Section 409A. The Parties agree that Executive shall have no right to specify the calendar year during which any payment hereunder shall be made. |
23. | No Guarantee of Tax Consequences. None of the Company nor any of its Affiliates or their officers, directors or employees guarantees or shall be responsible or liable for the federal, state, local, domestic and foreign, tax consequences to Executive respecting any payments or benefits provided to Executive under this Agreement, including but not limited to, any excise taxes that may be imposed under Code Section 409A. Executive acknowledges that the Company has advised him to consult his own counsel and/or tax advisor respecting all of the terms of this Agreement, including but not limited to, Sections 7, 8 and 9. |
24. | Withholding Taxes. The Company may withhold from all salary, bonuses, or other benefits or payments under this Agreement all federal, state, local, domestic and foreign, taxes as shall be required pursuant to any law or governmental ruling or regulation as reasonably determined by the Company. |
25. | Legal Fees on Change in Control. If a Date of Termination occurs after a Change in Control occurs, the Company agrees, upon reasonable documentation, to reimburse to the full extent permitted by law, all legal fees and expenses to a maximum of $50,000.00 which Executive, Executive’s legal representatives or Executive’s family may reasonably incur arising out of or in connection with any arbitration or litigation, if applicable, concerning the validity or enforceability of any provision of the Agreement, or any action by Executive, Executive’s legal representatives, or Executive’s family to enforce his or their rights under this Agreement, regardless of the outcome of such arbitration or litigation. The expenses that may be reimbursed under this Section 25 shall in no way modify Executive’s duty to arbitrate any such claims or the arbitration provisions under Section 17. Notwithstanding the foregoing, to the extent that Code Section 409A is applicable to the expenses under this subsection, and to the extent that no exception under Code Section 409A is applicable, the following shall apply: (a) all expenses that are includable in income to be paid under this subsection shall only be paid if such expenses are incurred prior to the last day of the second (2nd) calendar year following the calendar year in which the Date of Termination occurs; (b) all expenses must be paid by the end of the third (3rd) calendar year following the calendar year in which the Date of Termination occurs; (c) Executive (or his legal representative or family) must provide the Company with reasonable documentation of such expenses; (d) payments for such expenses will be made within 15 business days after reasonable documentation of the expenses incurred has been provided to the Company (and such documentation must be provided within 45 days after the expenses are incurred) but in no event later than the end of Executive’s taxable year following the year in which the expenses were incurred; and (e) the payments under this subsection cannot be substituted for another benefit. |
26. | Disputed Payments and Refusals to Pay. If following the Date of Termination, the Company fails to make a payment due under Section 7(e) or Section 25 of this Agreement in whole or in part as of the payment date specified in this Agreement, either intentionally or unintentionally, other than with the express or implied consent of Executive, the Company shall owe Executive interest on the delayed payment, compounded quarterly, if Executive (i) accepts the portion (if any) of the payment that the Company is willing to make (unless such acceptance will result in a relinquishment of the claim to all or part of the remaining amount) and (ii) makes prompt and reasonable good faith efforts to collect the remaining portion of the payment (determined utilizing the standards set forth in Treasury Regulation § 1.409A-3(g)). Any such interest payments shall become due and payable effective as of the applicable payment date(s) specified in (i) Section 7(e) with respect to the delinquent payment(s) due under Section 7(e) and (ii) Section 25 with respect to the delinquent payment(s) due under Section 25. Such interest payable under this Section 26 shall be calculated at a rate equal to an amount equal to two percentage points in excess of the prime commercial lending rate announced from time to time by JPMorgan Chase Bank or its successor during the period of such nonpayment, compounded quarterly. The Company shall pay such interest payable under this Section 26 no later than the deadline specified in Treasury Regulation § 1.409A-3(g). |
27. | Counterparts. Any number of counterparts of this Agreement may be executed and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one instrument. This Agreement may be executed by portable document format (PDF) or facsimile signature which signature shall be binding upon the Parties. |
EXECUTIVE | THE COMPANY | ||||
HELIX ENERGY SOLUTIONS GROUP, INC. | |||||
/s/ Ken Neikirk | By: | /s/ Owen Kratz | |||
Name: | Ken Neikirk | Owen Kratz | |||
President and Chief Executive Officer | |||||
Date: | 5-1-19 | Date: | May 1, 2019 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Helix Energy Solutions Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Owen Kratz | |||
Owen Kratz | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Helix Energy Solutions Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Erik Staffeldt | |||
Erik Staffeldt | |||
Executive Vice President and | |||
Chief Financial Officer |
/s/ Owen Kratz | |||
Owen Kratz | |||
President and Chief Executive Officer |
/s/ Erik Staffeldt | |||
Erik Staffeldt | |||
Executive Vice President and | |||
Chief Financial Officer |