OCEANEERING INTERNATIONAL INC (OII) FY 2022 MD&A

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the information contained in “Part I. Item 1. Business,” “Part I. Item 1A. Risk Factors” and the audited consolidated financial statements and the notes thereto included under “Item 8. Financial Statements and Supplementary Data” elsewhere in this annual report on Form 10-K. For management's discussion and analysis of our financial condition and results of operations for fiscal year 2021 as compared to fiscal year 2020 please refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Form 10-K for our fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on February 25, 2022.

Certain statements in this annual report on Form 10-K, including, without limitation, statements regarding the following matters, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995:

•our business strategy;

•industry conditions and commodity pricing;

•seasonality;

•our expectations about 2023 results of operations, items below the income from operations (“operating income”) line and segment operating results, and the factors underlying those expectations, including our expectations about demand and pricing for our energy services and products as a result of the factors we specify in “Overview” and “Results of Operations” below;

•tax refunds, including under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), and the expected timing thereof;

•our backlog, to the extent backlog may be an indicator of future revenue or productivity;

•the impacts of the COVID-19 pandemic on our business;

•projections relating to floating rig demand and subsea tree installations;

•the adequacy of our liquidity, cash flows and capital resources to support our operations and internally generated growth initiatives;

•the collectability of accounts receivable and realizability of contract assets at the amounts reflected on our most-recent balance sheet;

•our projected capital expenditures for 2023;

•the condition of debt markets and our possible future debt repurchases;

•our plans for future operations (including planned additions to and retirements from our remotely operated vehicle (“ROV”) fleet;

•our ability and intent to redeem Angolan bonds and repatriate cash;

•our expectations regarding shares that may be repurchased under our share repurchase plan;

•our expectations regarding the implementation of new accounting standards and related policies, procedures and controls;

•our expectations about our ROV fleet utilization in the future;

•our expectations about the balance between energy transition and energy security; and

•our expectations regarding the effect of inflation in the near future.

These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we refer to under the headings “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in Part I of this report. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.

Our Engagement in the Energy Transition

Oceaneering currently generates a substantial majority of its revenue from the oil and gas sector. Due to the continuing development of economies in developing countries, substantial projected population growth (particularly in developing countries), and the shortage of other sources of affordable, reliable, scalable and efficient energy, as well as rising worldwide demand for a myriad of products made with petrochemicals, we expect that the need for

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additional oil and gas exploration and development and IMR activities will continue for decades to come. At the same time, due to increasing concerns about climate change, there is growing demand for cleaner hydrocarbon-based and renewables energy sources. We strive to meet the growing need for lower-carbon energy by assisting customers to reduce their carbon emissions in exploring for, developing and producing oil and natural gas, while also diversifying our business into new strategic growth areas in emerging energy and non-energy markets. We believe this measured approach ensures our resilience in an ever-changing market. Today, the impacts of climate-related risks and opportunities and balancing energy security with energy transition are influencing our strategy in the following ways:

•we are continuing to support our customers in producing oil and natural gas to meet global demand for energy, while developing methods to minimize their carbon footprint through increased efficiency and technological innovation;

•we are deploying our competencies and capabilities to serve the energy-transition markets, including those utilizing offshore wind installations (fixed and floating), nuclear, hydrogen, carbon-capture-and-sequestration and tidal energy technologies; and

•we are diversifying our businesses outside the energy industry into new strategic growth areas, such as mobility solutions and digital asset management, as well as increasing our participation in the aerospace and defense sectors.

We are committed to the research and development of products and services intended to help our Energy business customers to produce energy safely and securely, with decreased risk to humans and sea life and reduced environmental impacts. As an example, we are working to advance remote operations, which allow customers to reduce their carbon footprints by transferring offshore workers to onshore control centers, and allows for less risk to human health and safety, greater collaboration and faster response to real-time events.

We are also committed to reducing our own energy consumption and the greenhouse gas emissions attributable to our operations. With the help of a third-party consultant, we are substantially complete with a global review of our assets and operations to identify and estimate our scope 1 and scope 2 emissions. Once we have completed that process, we intend to set appropriate ambition levels for both short- and long-term emissions reduction goals. We will then develop action plans to achieve these goals. Our capital investments and expenses required to achieve our goals cannot be estimated at this time, but are expected to be significant over the long term.

Overview of Our Results

The table that follows sets out our revenue and operating results for 2022, 2021 and 2020.

Our business segments are contained within two businesses—services and products provided primarily to the oil and gas industry and, to a lesser extent, the offshore renewables and mobility solutions industry, among others (“Energy”) and services and products provided to non-energy industries (“Aerospace and Defense Technologies” or “ADTech”). Our four business segments within the Energy business are Subsea Robotics, Manufactured Products, Offshore Projects Group (“OPG”) and Integrity Management & Digital Solutions (“IMDS”). We report our Aerospace and Defense Technologies business as one segment. Unallocated Expenses are expenses not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses, including corporate administrative expenses.

Our business primarily depends on the level of spending on offshore developments and related operating activities by our customers in the energy industry. During 2022, we generated a substantial majority of our revenue from services and products we provided to the energy industry. In our offshore energy markets, 2022 generally unfolded

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as we expected, with seasonally lower activity levels and increased preparation costs during the first half of the year progressing into higher activity levels and increased margins during the second half of the year. Compared to 2021, our 2022 revenue increased 11% or $2.1 billion, with revenue growth in our Subsea Robotics, Manufactured Products and OPG segments partially offset by revenue declines in our IMDS and ADTech segments.

We had operating income of $111 million in 2022 and operating income of $40 million, including charges of $32 million, in 2021 primarily related to provision for one customer. In 2022, on a consolidated level, we had a net income of $26 million, or diluted earnings of $0.26 per share, compared to net loss of $49 million, or diluted loss of $0.49 per share, in 2021. The increases in 2022 operating income and net income as compared to 2021 were primarily due to positive energy markets that spurred increased offshore activity in our Subsea Robotics and OPG segments, which in turn resulted in improved pricing and increased utilization in the second half of the year. Impacts from the U.S. government’s Continuing Resolution in the early part of 2022 resulted in lower revenue and lower operating income from our ADTech segment. The significant gains in operating income for our Subsea Robotics and OPG segments in 2022 as compared to 2021 were partially offset by declines in our IMDS and ADTech segments along with our Manufactured Products segment, exclusive of certain charges of $30 million in 2021.

In 2021, we incurred certain charges of $32 million primarily due to the net loss of $30 million related to the termination of a number of entertainment ride systems contracts with the China Evergrande Group and its affiliated companies (collectively, “Evergrande”). Additionally, we recognized other costs, as we adapted our geographic footprint and staffing levels to the conditions of the markets we serve. Charges for 2021 are summarized as follows (in thousands):

We use our ROVs to provide drill support, vessel-based inspection, maintenance and repair, subsea hardware installation, construction, and pipeline inspection services to customers in the energy industry. Most of our ROVs have historically been used to provide drill support services. Therefore, the contracted number of floating drilling rigs is a leading market indicator for this business. The following table shows average floating rigs under contract and our ROV utilization.

Demand for floating rigs is the primary leading indicator of the strength of the deepwater market. According to industry data published by IHS Petrodata, excluding rigs under construction, at the end of 2022 there were 191 floating drilling rigs in operation or available for work throughout the world, with 141 of those rigs under contract. The average contracted offshore floating rig count in 2022 increased to approximately 137 rigs.

In addition to floating rig demand, the number of subsea tree orders and installations is another leading indicator, and is the primary demand driver for our Manufactured Products lines. According to data published by Rystad Energy in December 2022, there are projected to be 339 subsea tree installations in 2023, compared to 322 in 2022, 291 in 2021 and 273 in 2020.

Outlook

Based on our 2022 year-end backlog, the expected meaningful increases in backlog conversion, anticipated 2023 order intake, and current market fundamentals, we are expecting increased revenue in 2023 as compared to 2022 for each of our operating segments, led by Subsea Robotics and Manufactured Products. We are expecting

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sequential improvement in our 2023 operating results as compared to 2022 based on our expectations for: higher operating results in our Subsea Robotics, Manufactured Products and OPG segments; slightly higher operating results in our ADTech segment; and relatively stable operating results in our IMDS segment. Based on current market conditions, we expect opportunities for improved pricing and margins in our energy-focused businesses and stable pricing and margins in our government-focused businesses.

We expect improved results in our Subsea Robotics segment in 2023 as a result of increased ROV days on hire and higher tooling activity, minor favorable shifts in geographic mix and continued pricing improvements. Survey operating results are expected to improve as well, with both geophysical and survey and positioning businesses seeing increased international activity.

We expect our Manufactured Products segment operating results in 2023 to improve on a significant increase in revenue, primarily based on 2022 order intake in our energy businesses in 2022. Bidding activity in our energy businesses remains robust and we expect this to continue during 2023. We are seeing growing interest in our mobility solutions businesses and expect increased activity in 2023. Our Manufactured Products backlog was $467 million as of December 31, 2022, a $149 million, or 47%, increase over December 31, 2021.

We expect operating results for our OPG segment to improve in 2023 on a modest increase in revenue. This expectation is based on improved vessel utilization in the Gulf of Mexico and increased international activity in installation, intervention and diving, most notably in the second and third quarters.

We anticipate our 2023 operating results for IMDS to by relatively flat on a modest increase in revenue. We expect global opportunities for contract renewals and growth, especially in areas where we believe we can leverage our digital and robotic capabilities.

We project our ADTech 2023 revenue and operating results to be higher as compared to 2022. We anticipate growth in all of our government-focused businesses, which secured several key contract awards during the second half of 2022.

For 2023, we anticipate Unallocated Expenses to average in the mid- to high-$30 million range per quarter.

Effects of Inflation and Changing Prices

In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts. Previously, the protracted downturn in prices for crude oil and over-capacity in the energy market in which we compete had made pricing for such increasing costs challenging; however, our success in achieving price escalation clauses improved in 2022. Inflation has not had a material effect on our revenue or income from operations in the past three years, but could have a material impact on our results in the future if we are unable to secure price escalation clauses in our contracts.

Results of Operations

Additional information on our business segments is shown in Note 11—“Operations by Business Segment and Geographic Area” in the Notes to Consolidated Financial Statements included in this report.

Energy. The table that follows sets out revenue and profitability for the business segments within our Energy business. In the Subsea Robotics section of the table that follows, “ROV Days Available” includes all days from the first day that an ROV is placed in service until the ROV is retired. All days in this period are considered available days, including periods when an ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time when the ROVs are not available for utilization.

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Subsea Robotics. Historically, we built new ROVs to increase the size of our fleet in response to demand to support deepwater drilling and vessel-based IMR and installation work. These vehicles are designed for use around the world in water depths of 10,000 feet or more. In 2015, as a result of declining market conditions, we began building fewer ROVs, generally limiting additions to meet contractual commitments. During the year ended December 31, 2022, we retired 10 of our conventional work-class ROV systems and replaced them with eight upgraded conventional work-class ROV systems and two IsurusTM work-class ROV systems (which are capable of operating in severe conditions and are ideal for renewables projects and high-speed surveys), which are currently engaged in renewables work. We added a total of 10, 10 and three ROVs in 2022, 2021 and 2020, respectively, while retiring 23 units over the three-year period. Our ROV fleet size was 250 as of December 31, 2022, 2021 and 2020.

We believe we are the world's largest provider of ROV services and, generally, this business segment has been the largest contributor to our Energy business operating income. Our Subsea Robotics segment revenue reflects the

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utilization percentages, fleet sizes and average pricing in the respective periods. Our survey services business provides survey and positioning, and geoscience services. The following table presents revenue from ROV services as a percentage of total Subsea Robotics revenue:

For the year ended December 31, 2022, our Subsea Robotics operating income increased as compared to 2021, on higher revenue, as a result of higher levels of activity for ROV and tooling, along with the positive impact of new contract pricing and utilization efficiencies in 2022. We had a 6% increase in days on hire and a year-over-year increase in both drill support and vessel support days.

Manufactured Products. For the year ended December 31, 2022, our Manufactured Products operating results increased, as compared to 2021, primarily due to $30 million of charges in 2021 for the net loss related to the termination of a number of entertainment ride systems contracts with Evergrande. The 2021 Evergrande net loss included a reserve of $49 million in receivables and contract assets partially offset by the reclassification of $20 million of contract assets into salable inventory. Exclusive of those charges, Manufactured Products operating income for the year ended December 31, 2022 decreased as compared to the corresponding period of the prior year. The revenue increase in 2022 was primarily due to receipt of certain umbilical materials in 2022 in our energy-related businesses that did not contribute to manufacturing activity or profitability in the same period. The operating results decrease in 2022 was primarily due to lower revenue and operating results in our theme park and mobile robotics businesses combined with inflationary pressures, partially offset by additional umbilical storage income in our energy-related businesses year over year.

Our Manufactured Products backlog was $467 million as of December 31, 2022, a $149 million, or 47%, increase over December 31, 2021. Our book-to-bill ratio was 1.39 for the year ended December 31, 2022, as compared with a book-to-bill ratio of 1.1 for the year ended December 31, 2021.

Offshore Projects Group. Our OPG operating results for the year ended December 31, 2022 increased as compared to 2021, on significantly higher revenue, primarily due to improved pricing in the second half of 2022 and increased intervention, installation and controls work in the Gulf of Mexico.

Integrity Management & Digital Solutions. For the year ended December 31, 2022, compared to 2021, our IMDS operating results and revenue decreased primarily on lower activity levels and the continuing impact of employee wage inflation.

Aerospace and Defense Technologies.

Revenue, gross margin and operating income information for our ADTech segment are as follows:

For the year ended December 31, 2022, compared to 2021, our ADTech segment operating results decreased significantly on lower levels of revenue primarily due to reduced activity in both defense subsea technologies and space systems.

Unallocated Expenses.

Our unallocated expenses, (i.e., those not associated with a specific business segment), within gross margin consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance

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units and bonuses, as well as other general expenses. Our unallocated expenses within operating expenses consist of those expenses within gross margin plus general and administrative expenses related to corporate functions.

The following table sets forth our Unallocated Expenses for the periods indicated:

Our unallocated expenses for the year ended December 31, 2022 decreased compared to 2021, primarily due to lower accruals in 2022 for incentive-based compensation, partially offset by increased information technology costs.

Other. The following table sets forth our significant financial statement items below the income (loss) from operations line:

Interest income for the year ended December 31, 2022 as compared to 2021, increased primarily due to higher interest rates.

In addition to interest on borrowings, interest expense includes amortization of loan costs and interest rate swap settlements, fees for lender commitments under our senior secured revolving credit agreement and fees for standby letters of credit and bank guarantees that banks issue on our behalf for performance bonds, bid bonds and self-insurance requirements.

Interest expense decreased slightly for the year ended December 31, 2022 as compared to 2021, as a result of our 2021 repurchase of $100 million in aggregate principal amount of the 4.650% Senior Notes due 2024 (the “2024 Senior Notes”). We have not capitalized interest since 2019 and do not anticipate capitalizing interest on any long-lived assets in 2023.

Foreign currency transaction gains and losses are the principal component of other income (expense), net. In the year ended December 31, 2022 and 2021, we incurred foreign currency transaction gains (losses) of less than $(0.1) million and $(8.4) million, respectively. Foreign currency losses in 2021 primarily related to the Angolan kwanza and were principally due to declining exchange rates for the Angolan kwanza, which devalued its currency by 13%. We could incur further foreign currency exchange gains (losses) due to foreign currency exchange fluctuations.

Our tax provision is based on (1) our earnings for the period and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographical mix of our results. The effective tax rate for the 12-month periods ended December 31, 2022 and 2021 was different than the federal statutory rate of 21%, primarily due to the geographical mix of revenue and earnings, changes in valuation allowances and uncertain tax positions, and other discrete items; therefore, we do not believe a discussion of the effective tax rate is meaningful. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur material tax consequences upon the distribution of such earnings.

On March 27, 2020, the CARES Act was signed into law in the United States. In accordance with the rules and procedures under the CARES Act, we filed certain refund claims to carry back a portion of our U.S. net operating loss. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expected to receive combined refunds of approximately $33 million, of which we have previously received $10

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million as of December 31, 2022. During the third quarter of 2022, we reached an agreement in principle to settle our 2014 U.S. tax return audit, which reduces the outstanding refunds by approximately $3.0 million. The remaining refunds of approximately $20 million are classified as other noncurrent assets, in our consolidated balance sheet as of December 31, 2022. While the exact timing for the receipt of these refunds remains uncertain, we do not anticipate receiving any portion of these refunds in 2023.

We continue to believe it is more likely than not that we would not be able to utilize all of our deferred tax assets. In accordance with applicable accounting standards, we recorded an additional valuation allowance of $6.0 million and $87 million in 2022 and 2021, respectively.

Our income tax payments for the full year of 2023 are estimated to be in the range of $60 million to $65 million, which includes taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations.

Liquidity and Capital Resources

We consider our liquidity and capital resources adequate to support our operations, capital commitments and strategic growth initiatives. Our ability to generate substantial cash flow over the last several years has allowed us to repurchase $100 million of our 2024 Senior Notes in 2021 and grow our cash balance to address the pending maturity of the 2024 Senior Notes. As of December 31, 2022, we had working capital of $729 million, including cash and cash equivalents of $569 million. Additionally, as of December 31, 2022, we had $215 million of unused commitments through our senior secured revolving credit agreement (the “Revolving Credit Agreement”) that we entered into in April 2022, which is further described below.

Our material cash commitments consist primarily of obligations for long-term debt, purchase obligations as part of normal operations and operating leases for land, buildings, vessels and equipment for the operation of our business and to support some of our service line revenue streams. See Note 4—”Leases” in the Notes to Consolidated Financial Statements included in this report for a description of the scheduled maturities for our operating leases.

Our revolving credit facility provided under the Revolving Credit Agreement was undrawn as of December 31, 2022, and remains undrawn as of the date of this report, and our nearest maturity of indebtedness is $400 million of our 2024 Senior Notes. In 2021, we repurchased $100 million in aggregate principal amount of the 2024 Senior Notes in open-market transactions. We may, from time to time, complete additional limited repurchases of the 2024 Notes, via open-market or privately negotiated repurchase transactions or otherwise, prior to their maturity date. We can provide no assurances as to the timing of any such additional repurchases or whether we will complete any such repurchases at all. We do not intend to disclose further information regarding any such repurchase transactions, except to the extent required in our subsequent periodic filings on Forms 10-K or 10-Q, or unless otherwise required by applicable law. See Note 9—”Debt” in the Notes to Consolidated Financial Statements included in this report for more information regarding the scheduled maturities of our long-term debt.

As of December 31, 2022, we had $464 million of total purchase obligations including $324 million payable within the next twelve months and $140 million thereafter. Our purchase obligations include agreements to purchase goods and services as well as commitments for capital assets used in the normal operations of our business.

We remain committed to maintaining strong liquidity and believe that our cash position, undrawn Revolving Credit Agreement, and debt maturity profile should provide us ample resources and time to address potential future growth opportunities and to improve our returns.

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Changes impacting our cash and cash equivalents for the years ended December 31, 2022, 2021 and 2020 are summarized as follows:

Operating activities

Our primary sources and uses of cash from operating activities for the years ended December 31, 2022, 2021 and 2020 are as follows:

Net cash provided by operating activities for the years ended December 31, 2022 and 2021 of $121 million and $225 million, respectively, was affected by the following:

•Accounts receivable and contract assets - The decrease in cash related to accounts receivable and contract assets in 2022 reflects the increase in accounts receivable corresponding with the increase in revenue as compared to the prior year, along with the timing of project milestones and customer payments. The increase in 2021 reflects the timing of project milestones and customer payments.

•Inventory - The decrease in cash related to inventory in 2022 corresponds with an increase in our backlog along with the impact of higher inflation in 2022. The increase in cash related to inventory in 2021 was primarily due to higher project activity in the fourth quarter of 2021 as we worked through backlog orders awarded prior to the COVID-19 pandemic in our Manufactured Products segment.

•Current liabilities - The increase in cash related to current liabilities in 2022 and 2021 reflects the timing of vendor payments and increased contract liabilities due to an increase in deferred customer prepayments.

Investing activities

In 2022, we used $77 million in net investing activities, primarily for capital expenditures of $81 million that included increased spending in our Subsea Robotics segment for ROV upgrades and replacements and other increased

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capital expenditures for information technology systems. In 2021, we used $34 million in net investing activities, primarily for capital expenditures of $50 million.

Our capital expenditures during 2022 and 2021 included $56 million and $28 million, respectively, in our Subsea Robotics segment, principally for upgrades to our ROV fleet and to replace certain units we retired. We currently plan to add new ROVs only to meet contractual commitments. In 2022, we retired ten of our conventional work-class ROV systems and replaced them with eight upgraded conventional work-class ROV systems and two IsurusTM work-class ROV systems (which are capable of operating in severe conditions and are ideal for renewables projects and high-speed surveys), which are currently engaged in renewables work. We added seven upgraded conventional work-class ROV systems and three IsurusTM work-class ROV systems to our fleet and retired 10 units during 2021. Our ROV fleet size was 250 as of December 31, 2022 and 2021.

These outlays were partially offset in 2022 by $6.5 million of proceeds received from the sale of various assets and in 2021 by $4.5 million of proceeds received from the sale of a portion of our Angolan bonds and $7.1 million of proceeds received from the sale of various assets.

We have several deepwater vessels under a mix of short-term charters where we can see firm workload and spot charters as market opportunities arise, along with four long-term charters that began in 2022. With the current market conditions, we may add additional chartered vessels throughout the year to align with our strategy that balances vessel cost, availability and capability to capture work. We expect to do this through the continued utilization of a mix of short-term, spot and long-term charters.

In 2023, we expect our organic capital expenditures to total between $90 million and $110 million, exclusive of business acquisitions, as compared to capital expenditures of $81 million in 2022. Our anticipated capital expenditures for 2023 includes approximately $45 million to $50 million of maintenance capital expenditures and $45 million to $60 million of growth capital expenditures, which we expect to fund using our available cash. We remain committed to maintaining strong liquidity and believe that our cash position, undrawn revolving credit facility, and debt maturity profile should provide us ample resources and time to address potential future growth opportunities and to improve our returns.

Financing activities

In 2022 we used $1.9 million of cash in financing activities. In 2021 we used $102 million of cash in financing activities primarily due to repurchases of $100 million in aggregate principal amount of the 2024 Senior Notes in open-market transactions.

As of December 31, 2022 we had long-term debt in the principal amount of $700 million outstanding and $215 million of unused commitments under our Revolving Credit Agreement. As of December 31, 2022, we were in compliance with all the covenants set forth in the credit agreement governing the Revolving Credit Agreement.

In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024. We pay interest on the 2024 Senior Notes on May 15 and November 15 of each year. The 2024 Senior Notes are scheduled to mature on November 15, 2024.

In February 2018, we completed the public offering of $300 million aggregate principal amount of 6.000% Senior Notes due 2028 (the “2028 Senior Notes”). We pay interest on the 2028 Senior Notes on February 1 and August 1 of each year. The 2028 Senior Notes are scheduled to mature on February 1, 2028. We used the net proceeds from the 2028 Senior Notes to repay our term loan indebtedness described further below.

We may redeem some or all of the 2024 Senior Notes and 2028 Senior Notes (collectively, the “Senior Notes”) at specified redemption prices. In 2021, we repurchased $100 million in aggregate principal amount of the 2024 Senior Notes in open-market transactions. The aggregate purchase price in the year ended December 31, 2021 included accrued and unpaid interest to the repurchase date of $0.7 million and we recorded loss on extinguishment of debt of $1.1 million (including premiums and fees associated with the repurchases).

In October 2014, we entered into a credit agreement (as amended, the “Prior Credit Agreement”) with a group of banks. The Prior Credit Agreement initially provided for a $500 million five-year revolving credit facility (the “Prior Revolving Credit Facility”). The Prior Credit Agreement also provided for a $300 million term loan, which we repaid in full in February 2018, using net proceeds from the issuance of our 2028 Senior Notes referred to above, and cash on hand. In February 2018, we entered into Agreement and Amendment No. 4 to the Prior Credit Agreement to, among other things, extend the maturity of the Prior Revolving Credit Facility to January 25, 2023.

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On April 8, 2022, we entered into a new senior secured revolving credit agreement with a group of banks that will mature in April 2026. In connection with entering into the Revolving Credit Agreement, we terminated our Prior Revolving Credit Facility. No borrowings were outstanding under the Prior Revolving Credit Facility. We repaid all accrued fees and expenses in connection with the termination of the Prior Revolving Credit Facility and all commitments thereunder were terminated. No early termination penalties were incurred in connection with the termination of the Prior Revolving Credit Facility.

The Revolving Credit Agreement includes a $215 million revolving credit facility (the “Revolving Credit Facility”) with a $100 million sublimit for the issuance of letters of credit. Our obligations under the Revolving Credit Agreement are guaranteed by certain of our wholly owned subsidiaries and are secured by first priority liens on certain of our assets and those of the guarantors, including, among other things, intellectual property, inventory, accounts receivable, equipment and equity interests in subsidiaries. As of December 31, 2022, we had no borrowings outstanding under the Revolving Credit Facility and no letters of credit outstanding under the Revolving Credit Agreement.

We may borrow under the Revolving Credit Facility at either (1) a base rate, determined as the greatest of (A) the prime rate of Wells Fargo Bank, National Association, (B) the federal funds effective rate plus 1⁄2 of 1% and (C) Adjusted Term SOFR (as defined in the Revolving Credit Agreement for a one-month tenor plus 1%, in each case plus the applicable margin, which varies from 1.25% to 2.25% depending on our Consolidated Net Leverage Ratio (as defined in the Revolving Credit Agreement), or (2) Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus the applicable margin, which varies from 2.25% to 3.25% depending on our Consolidated Net Leverage Ratio. We will also pay a facility fee based on the amount of the underlying commitment that is being utilized, which fee varies from 0.300% to 0.375%, with the higher rate owed when we use the Revolving Credit Facility less.

The Revolving Credit Agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted Consolidated Net Leverage Ratio is initially 4.00 to 1.00 and decreases to 3.25 to 1.00 during the term of the Revolving Credit Facility. The minimum Consolidated Interest Coverage Ratio (as defined in the Revolving Credit Agreement) is 3.00 to 1.00 throughout the term of the Revolving Credit Facility. In addition, the Revolving Credit Agreement contains various covenants that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets and enter into certain restrictive agreements. As of December 31, 2022, we were in compliance with all the covenants set forth in the Revolving Credit Agreement.

We had two interest rate swaps in place relating to a total of $200 million of the 2024 Senior Notes for the period to November 2024. In March 2020, we settled both interest rate swaps with the counterparty for cash proceeds of $13 million. The settlement resulted in a $13 million increase to our long-term debt balance that will be amortized to interest expense prospectively through the maturity date for the 2024 Senior Notes using the effective interest method. As a result, we amortized $2.2 million to interest expense for the year ended December 31, 2022. We amortized $4.3 million to interest expense, including $1.8 million for the pro-rata write-off of interest rate swap settlement gains associated with the 2024 Senior Notes repurchases discussed above, for the year ended December 31, 2021. See Note 9—”Debt” in the Notes to Consolidated Financial Statements included in this report for a description of these interest rate swaps.

We incurred $6.9 million and $4.2 million of issuance costs related to the 2024 Senior Notes and the 2028 Senior Notes, respectively, and $4.0 million of new loan costs related to the Revolving Credit Agreement. These costs, net of accumulated amortization, are included as a reduction of long-term debt in our Consolidated Balance Sheets, as they pertain to the Senior Notes, and in other noncurrent assets as they pertain to the Revolving Credit Agreement. We are amortizing these costs to interest expense through the respective maturity dates for the Senior Notes and the Revolving Credit Agreement using the straight-line method, which approximates the effective interest rate method. As a result, we amortized $2.1 million and $1.3 million for the years ended December 31, 2022 and 2021, respectively.

Our maximum outstanding indebtedness during 2022 under the Revolving Credit Agreement and the Senior Notes was $700 million, and our total interest costs, including commitment fees, were $38 million.

We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of December 31, 2022 and 2021, and we do not have any off-balance-sheet arrangements, as defined by SEC rules.

In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock on a discretionary basis. The program calls for any repurchases to be made in the open market, or in privately

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negotiated transactions from time to time, in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and other relevant factors. Under this program, in 2015, we repurchased 2.0 million shares of our common stock for $100 million. We have not repurchased any shares under the program since December 2015. As of December 31, 2022, we retained 11 million of the shares we had repurchased through this and a prior repurchase program. We account for the shares we hold in treasury under the cost method, at average cost. The timing and amount of any future repurchases will be determined by our management. We expect that any additional shares repurchased under the plan will be held as treasury stock for possible future use. The plan does not obligate us to repurchase any particular number of shares.

Because of our significant foreign operations, we are exposed to currency fluctuations and exchange rate risks. A stronger U.S. dollar against any of the foreign currencies where we conduct business could result in lower operating income. We generally minimize these risks primarily through matching, to the extent possible, revenue and expense in the various currencies in which we operate. Cumulative translation adjustments as of December 31, 2022 relate primarily to our net investments in, including long-term loans to, our foreign subsidiaries. See Item 7A—“Quantitative and Qualitative Disclosures About Market Risk.”

Critical Accounting Policies and Estimates

We have based the following discussion and analysis of our financial condition and results of operations on our consolidated financial statements, which we have prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the periods we present. We base our estimates on historical experience, available information and other assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates; however, our actual results may differ from these estimates under different assumptions or conditions. The following discussion summarizes the accounting policies we believe (1) require our management's most difficult, subjective or complex judgments and (2) are the most critical to our reporting of results of operations and financial position. See Note 1—“Summary of Major Accounting Policies” in the Notes To Consolidated Financial Statements included in this report for discussion of our significant accounting policies.

Revenue Recognition. We account for significant fixed-price contracts, mainly relating to our Manufactured Products segment, and to a lesser extent in our OPG and ADTech segments, by recognizing revenue over time using the cost-to-cost input method to measure progress toward satisfaction of an over-time performance obligation. This commonly used method is based on the premise that costs incurred are proportionate to progress towards satisfaction of the performance obligation and is measured by comparing project costs-to-date to total estimated costs. The performance obligation is satisfied as we create a product on behalf of the customer over the life of the contract. We apply judgment in estimating project status and the costs necessary to complete projects. For the year ended December 31, 2022, we recognized approximately 93% of our revenue over time and 7% at a point in time.

We apply judgment in the determination and allocation of transaction price to performance obligations, and the subsequent recognition of revenue, based on the facts and circumstances of each contract. We routinely review estimates related to our contracts and, where required, reflect revisions to profitability in earnings immediately. If an element of variable consideration has the potential for a significant future reversal of revenue, we will constrain that variable consideration to a level intended to remove the potential future reversal. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine it. We did not have any material adjustments during the years ended December 31, 2022, 2021 or 2020, however, should our judgments and estimates regarding the elements of revenue recognition change, it could have a material effect on our results of operations for the periods involved.

Impairment of Property and Equipment, Long-lived Intangible Assets and Right-of-Use Operating Lease Assets. We periodically, and upon the occurrence of a triggering event, review the realizability of our property and equipment, long-lived intangible assets and right-of-use operating lease assets to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which

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identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset.

Our estimates of fair values for our asset groups require us to use significant unobservable inputs, classified as Level 3 fair value measurements, including assumptions related to future performance, risk-adjusted discount rates, future commodity prices and demand for our services and estimates of expected realizable value. These assumptions incorporate inherent uncertainties, including estimates of projected supply and demand for our products and services and future market conditions, which are subjective and difficult to predict due to volatility in overall economic environments, among other things, and could result in impairment charges in future periods if actual results differ materially from the assumptions used in our forecasts. Also, if market conditions deteriorate significantly, we could be required to record additional impairments, which could have a material adverse impact on our operating results.

We did not identify any triggering events and, accordingly, no impairments of long-lived assets were recorded in the years ended December 31, 2022 or 2021. In the year ending December 31, 2020, we recognized long-lived asset impairment losses of $70 million. See Note 5—“Impairments” and Note 11—“Operations by Business Segment and Geographic Area” in the Notes To Consolidated Financial Statements included in this report for further discussion of these impairments.

Income Taxes. Our tax provisions are based on our expected taxable income, statutory rates and tax-planning opportunities available to us in the various jurisdictions in which we operate. The determination of taxable income in any jurisdiction requires the interpretation of the related tax laws. We are at risk that a taxing authority's final determination of our tax liabilities may differ from our interpretation.

We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. Current income tax expense represents either nonresident withholding taxes or the liabilities expected to be reflected on our income tax returns for the current year, while the net deferred income tax expense or benefit generally represents the change in the balance of deferred tax assets or liabilities, except for currency translation adjustments, as reported on our balance sheet.

We establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future. If the current market dynamics are sustained and absent any additional objective negative evidence, we may have sufficient positive evidence in the next twelve months to adjust our valuation allowance position. Exact timing and amount of the adjustment to the valuation allowance is not certain at this time. Changes for valuation allowances impact our income tax provision in the period in which such adjustments are identified and recorded.

Allowance for Credit Losses—Financial Assets Measured at Amortized Costs. We are required to use judgments and estimates regarding our customers’ ability to pay amounts that are due to us in order to estimate anticipated credit losses that we may incur. We use the loss-rate method in developing the allowance for credit losses which involves identifying pools of assets with similar risk characteristics, reviewing historical loss experiences for the last three years and considering the economic environment of our customers, both from a marketplace and geographic perspective, in evaluating the need for an allowance. Based on our review of these factors, we establish or adjust allowances for our customers. Our results of operations could be affected by adjustments to the allowance for credit losses due to uncertainties regarding changes in the financial condition of our customers, either positive or negative, that could impact the amount and timing of any credit losses that may differ from the estimated amounts. As of December 31, 2022 and 2021, our allowance for credit losses totaled $2.3 million and $1.2 million, respectively or less than 1% of gross accounts receivable for both years, respectively.

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Contractual Obligations

As of December 31, 2022, we had payments due under contractual obligations as follows:

Pursuant to a service agreement we entered into with a former Chairman of the Board of Directors, we are obligated to provide for medical coverage on an after-tax basis to him, his spouse and two adult children for their lives. Our total accrued liabilities, current and long-term, under this post-employment benefit were $1.8 million as of both December 31, 2022 and 2021.

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