Oceaneering International, Inc. — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Oceaneering provides technology, engineered services, products and robotics, primarily to offshore energy customers, with additional aerospace and defense, manufacturing, mobility and entertainment businesses. Foreign operations generated 57% of revenue.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $1.869 billion | $1.828 billion |
| Gross margin | $264 million; 14% | $164 million; 9% |
| Operating income (loss) | $40 million; 2% | $(446) million; (24)% |
| Net income (loss) | $(49) million; $(0.49) per diluted share | $(497) million; $(5.01) per diluted share |
| Cash from operating activities | $225 million | $137 million |
| Capital expenditures | $50 million | $61 million |
At year-end, cash and cash equivalents were $538 million and working capital was $687 million. The $450 million revolving credit facility was undrawn; the company reported compliance with its covenants. Long-term debt had a $702 million carrying value, comprising $400 million principal of 4.650% notes due 2024 and $300 million principal of 6.000% notes due 2028. The company repurchased $100 million principal of the 2024 notes during 2021. No quarterly dividend has been declared since 2017.
Material changes versus 2020
- Revenue increased 2%, while gross margin rose to 14% from 9% and operating results returned to positive territory.
- Net loss narrowed substantially, principally because 2020 included $467 million of impairments, write-downs, write-offs and other charges. 2021 included $32 million of charges, mainly related to Evergrande contract terminations.
- Operating cash flow increased to $225 million. Cash rose by $86 million, after $102 million of financing outflows, primarily the senior-note repurchase.
- Energy Services and Products revenue was $1.502 billion, up slightly. Subsea Robotics, OPG and IMDS revenue increased; Manufactured Products revenue declined 28% to $344 million. ADTech revenue increased to $367 million.
Outlook, commentary and risks
Management expected 2022 revenue to increase in every operating segment, led by Manufactured Products, and expected improved operating results across the segments. For Subsea Robotics, management forecast full-year ROV utilization in the mid-60% range and generally 55%–60% drill-support market share. Expected 2022 capital expenditures were $70 million–$90 million; unallocated expenses were expected to average in the mid-$30 million range per quarter. These are forward-looking expectations, not guarantees.
Year-end backlog was $1.699 billion, compared with $1.521 billion a year earlier. Management cautioned that backlog may be delayed, changed or cancelled and is not a reliable guarantee of future revenue or profit. Key risks include the cyclical offshore energy market, COVID-19 effects, foreign exchange and political exposure, inflation and supply constraints, climate and energy-transition regulation, operational hazards, and customer and government funding concentration. The U.S. Government represented 12% of 2021 revenue.
In the fourth quarter, the company terminated a number of entertainment ride-system contracts with Evergrande and recorded a net loss of about $30 million. The loss included a $49 million reserve for receivables and contract assets, partly offset by reclassifying $20 million of contract assets to salable inventory. Separately, a suspended Manufactured Products contract had about $33 million in contract assets outstanding at year-end; management expected to realize them at book value but gave no assurance on timing.
Other notable items: the company recorded a $44 million income tax provision despite a pretax loss, including an $87 million increase in valuation allowance during 2021. It expected approximately $23 million of CARES Act tax refunds to remain receivable and estimated 2022 cash tax payments of $40 million–$45 million. The independent auditor issued unqualified opinions on the financial statements and internal controls.
Investor verification priorities
- Assess the quality and timing of cash conversion, including collection of the $33 million contract asset and receipt of remaining tax refunds.
- Review the Evergrande reserve, contract termination terms and any remaining exposure or recoveries.
- Compare 2022 guidance with actual results, particularly segment margins, ROV utilization, backlog conversion and capital spending.
- Track refinancing and repayment plans for the $400 million 2024 notes and the revolving facility maturing in January 2023.
- Evaluate deferred-tax-asset realizability and the continuing effects of foreign currency movements, especially in Angola.