Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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For the quarterly period ended March 31, 2024

or

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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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For the transition period from__________ to__________

Commission File Number: 001-32936

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HELIX ENERGY SOLUTIONS GROUP, INC.

(Exact name of registrant as specified in its charter)

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​	​	​
Minnesota		95-3409686
(State or other jurisdiction of incorporation or organization)	​	(I.R.S. Employer Identification No.)
3505 West Sam Houston Parkway North	​	​
Suite 400	​	​
HoustonTexas	​	77043
(Address of principal executive offices)	​	(Zip Code)

​

(281) 618-0400

(Registrant's telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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​	​	​	​	​
Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value	​	HLX	​	New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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​	​	​	​	​
Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☑No

As of April 22, 2024, 152,453,000 shares of common stock were outstanding.

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Table of Contents

TABLE OF CONTENTS

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PART I.	​	FINANCIAL INFORMATION	PAGE
​	​	​	​
Item 1.	​	Financial Statements:	3
​	​	Condensed Consolidated Balance Sheets - March 31, 2024 (Unaudited) and December 31, 2023	3
​	​	​	​
​	​	Condensed Consolidated Statements of Operations (Unaudited) - Three months ended March 31, 2024 and 2023	4
​	​	​	​
​	​	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three months ended March 31, 2024 and 2023	4
​	​	​	​
​	​	Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - Three months ended March 31, 2024 and 2023	5
​	​	​	​
​	​	Condensed Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2024 and 2023	6
​	​	​	​
​	​	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
​	​	​	​
Item 2.	​	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
​	​	​	​
Item 3.	​	Quantitative and Qualitative Disclosures About Market Risk	34
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Item 4.	​	Controls and Procedures	34
​	​	​	​
PART II.	​	OTHER INFORMATION	35
​	​	​	​
Item 1.	​	Legal Proceedings	35
​	​	​	​
Item 1A.	​	Risk Factors	35
​	​	​	​
Item 2.	​	Unregistered Sales of Equity Securities and Use of Proceeds	35
​	​	​	​
Item 3.	​	Defaults Upon Senior Securities	35
​	​	​	​
Item 4.	​	Mine Safety Disclosures	35
​	​	​	​
Item 5.	​	Other Information	35
​	​	​	​
Item 6.	​	Exhibits	36
​	​	​	​
​	​	Signatures	37

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024		2023
​	​	(Unaudited)	​	​	​
ASSETS		​			​
Current assets:		​			​
Cash and cash equivalents	​	$	323,849	​	$	332,191
Accounts receivable, net of allowance for credit losses of $3,700 and $3,407, respectively	​		219,844	​		280,427
Other current assets	​		62,064	​		85,223
Total current assets	​		605,757	​		697,841
Property and equipment	​		3,067,478	​		3,078,571
Less accumulated depreciation	​		(1,537,843)	​		(1,505,722)
Property and equipment, net	​		1,529,635	​		1,572,849
Operating lease right-of-use assets	​		358,285	​		169,233
Deferred recertification and dry dock costs, net	​	​	73,091	​	​	71,290
Other assets, net	​		47,046	​		44,823
Total assets	​	$	2,613,814	​	$	2,556,036
​	​	​	​	​	​	​
LIABILITIES AND SHAREHOLDERS' EQUITY	​			​
Current liabilities:	​			​
Accounts payable	​	$	120,375	​	$	134,552
Accrued liabilities	​		163,797	​		203,112
Current maturities of long-term debt	​		8,965	​		48,292
Current operating lease liabilities	​		54,892	​		62,662
Total current liabilities	​		348,029	​		448,618
Long-term debt	​		309,199	​		313,430
Operating lease liabilities	​		314,351	​		116,185
Deferred tax liabilities	​		109,981	​		110,555
Other non-current liabilities	​		65,432	​		66,248
Total liabilities	​		1,146,992	​		1,055,036
Commitments and contingencies	​	​	​	​	​	​
Shareholders' equity:	​			​
Common stock, no par, 240,000 shares authorized, 152,450 and 152,291 shares issued, respectively	​		1,270,357	​		1,271,565
Retained earnings	​		286,163	​		312,450
Accumulated other comprehensive loss	​		(89,698)	​		(83,015)
Total shareholders' equity	​		1,466,822	​		1,501,000
Total liabilities and shareholders' equity	​	$	2,613,814	​	$	2,556,036

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​		2024		2023
Net revenues	​	$	296,211	​	$	250,084
Cost of sales	​		276,657	​		234,900
Gross profit	​		19,554	​		15,184
Gain (loss) on disposition of assets, net	​		(150)	​		367
Acquisition and integration costs	​	​	-	​	​	(231)
Change in fair value of contingent consideration	​	​	-	​	​	(3,992)
Selling, general and administrative expenses	​		(20,680)	​		(19,631)
Loss from operations	​		(1,276)	​		(8,303)
Net interest expense	​		(5,477)	​		(4,187)
Losses related to convertible senior notes	​		(20,922)	​		-
Other income (expense), net	​		(2,216)	​		3,444
Royalty income and other	​		1,906	​		1,863
Loss before income taxes	​		(27,985)	​		(7,183)
Income tax benefit	​		(1,698)	​		(2,018)
Net loss	​	$	(26,287)	​	$	(5,165)
​	​	​	​	​	​	​
Loss per share of common stock:	​			​
Basic	​	$	(0.17)	​	$	(0.03)
Diluted	​	$	(0.17)	​	$	(0.03)
​	​	​	​	​	​	​
Weighted average common shares outstanding:	​			​
Basic	​		152,369	​		151,764
Diluted	​		152,369	​		151,764

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​	​	2024		2023
Net loss	​	$	(26,287)		$	(5,165)
Other comprehensive income (loss), net of tax:	​				​
Foreign currency translation gain (loss)	​		(6,683)		​	8,432
Other comprehensive income (loss), net of tax	​		(6,683)		​	8,432
Comprehensive income (loss)	​	$	(32,970)		$	3,267

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

(in thousands)

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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Accumulated

​

​

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​

​

​

​

​

​

​

​

​

​

Other

​

Total

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​

Common Stock

​

Retained

​

Comprehensive

​

Shareholders'

​

Shares

Amount

Earnings

Loss

Equity

Balance, December 31, 2023

152,291

​

$

1,271,565

​

$

312,450

​

$

(83,015)

​

$

1,501,000

Net loss

-

​

-

​

(26,287)

​

-

​

(26,287)

Foreign currency translation adjustments

-

​

-

​

-

​

(6,683)

​

(6,683)

Settlement of convertible debt conversion

-

​

(84)

​

-

​

-

​

(84)

Repurchases of common stock

(463)

​

(5,032)

​

-

​

-

​

(5,032)

Termination of capped calls

-

​

4,381

​

-

​

-

​

4,381

Activity in company stock plans, net and other

622

​

(2,071)

​

-

​

-

​

(2,071)

Share-based compensation

-

​

1,598

​

-

​

-

​

1,598

Balance, March 31, 2024

152,450

​

$

1,270,357

​

$

286,163

​

$

(89,698)

​

$

1,466,822

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, December 31, 2022

151,935

​

$

1,298,740

​

$

323,288

​

$

(105,319)

​

$

1,516,709

Net loss

-

​

-

​

(5,165)

​

-

​

(5,165)

Foreign currency translation adjustments

-

​

-

​

-

​

8,432

​

8,432

Repurchases of common stock

​

(660)

​

​

(5,006)

​

​

-

​

​

-

​

​

(5,006)

Activity in company stock plans, net and other

219

​

(742)

​

-

​

-

​

(742)

Share-based compensation

-

​

1,492

​

-

​

-

​

1,492

Balance, March 31, 2023

151,494

​

$

1,294,484

​

$

318,123

​

$

(96,887)

​

$

1,515,720

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

​

​	​	​	​	​	​	​	​
​	​	Three Months Ended	​
​	​	March 31,	​
​		2024		2023
Cash flows from operating activities:		​		​	​
Net loss	​	$	(26,287)	​	$	(5,165)	​
Adjustments to reconcile net loss to net cash provided by operating activities:	​		​	​			​
Depreciation and amortization	​		46,353	​		37,537	​
Amortization of debt discount	​		53	​		-	​
Amortization of debt issuance costs	​		570	​		596	​
Share-based compensation	​		1,711	​		1,575	​
Deferred income taxes	​		(574)	​		(1,306)	​
(Gain) loss on disposition of assets, net	​		150	​		(367)	​
Losses related to convertible senior notes	​		20,922	​		-	​
Unrealized foreign currency (gain) loss	​		2,117	​		(3,333)	​
Change in fair value of contingent consideration	​	​	-	​	​	3,992	​
Changes in operating assets and liabilities:	​			​			​
Accounts receivable, net	​		59,059	​		(2,484)	​
Income tax receivable, net of income tax payable	​	​	(2,510)	​	​	(2,419)	​
Other current assets	​	​	23,196	​	​	(1,961)	​
Accounts payable and accrued liabilities	​		(50,489)	​		(18,036)	​
Deferred recertification and dry dock costs, net	​	​	(9,594)	​	​	(17,154)	​
Other, net	​		(193)	​		3,133	​
Net cash provided by (used in) operating activities	​		64,484	​		(5,392)	​
​	​	​	​	​	​	​	​
Cash flows from investing activities:	​			​			​
Capital expenditures	​		(3,605)	​		(6,665)	​
Proceeds from sale of assets	​	​	-	​	​	365	​
Proceeds from insurance recoveries	​		363	​		-	​
Net cash used in investing activities	​		(3,242)	​		(6,300)	​
​	​	​	​	​	​	​	​
Cash flows from financing activities:	​			​			​
Payments related to convertible senior notes	​		(60,699)	​		-	​
Repayment of MARAD Debt	​		(4,322)	​		(4,116)	​
Proceeds from settlement of capped calls	​		4,381	​		-	​
Debt issuance costs	​		(984)	​		-	​
Repurchases of common stock	​	​	(4,177)	​	​	(4,983)	​
Payments related to tax withholding for share-based compensation	​		(4,003)	​		(564)	​
Proceeds from issuance of ESPP shares	​		500	​		239	​
Net cash used in financing activities	​		(69,304)	​		(9,424)	​
​	​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents	​		(280)	​		1,187	​
Net decrease in cash and cash equivalents	​		(8,342)	​		(19,929)	​
Cash and cash equivalents:	​			​			​
Balance, beginning of year	​		332,191	​		189,111	​
Balance, end of period	​	$	323,849	​	$	169,182	​

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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Note 1 - Basis of Presentation and New Accounting Standards

The accompanying condensed consolidated financial statements include the accounts of Helix Energy Solutions Group, Inc. and its subsidiaries (collectively, "Helix"). Unless the context indicates otherwise, the terms "we," "us" and "our" in this report refer collectively to Helix and its subsidiaries. All material intercompany accounts and transactions have been eliminated. These unaudited condensed consolidated financial statements in U.S. dollars have been prepared in accordance with instructions for the Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission (the "SEC") and do not include all information and footnotes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP").

The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements and the related disclosures. Actual results may differ from our estimates. We have made all adjustments, which, unless otherwise disclosed, are of normal recurring nature, that we believe are necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive loss, statements of shareholders' equity and statements of cash flows, as applicable. The operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. Our balance sheet as of December 31, 2023 included herein has been derived from the audited balance sheet as of December 31, 2023 included in our 2023 Annual Report on Form 10-K (our "2023 Form 10-K"). These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in our 2023 Form 10-K.

Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current presentation format.

New accounting standards

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Improvements to Reportable Segment Disclosures," which requires entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (the "CODM") and included within each reported measure of segment profit or loss as well as an amount for other segment items by reportable segment and a description of its composition. ASU No. 2023-07 requires all annual disclosures about a reportable segment's profit or loss and assets to be provided in interim periods as well. Among other things, this ASU also requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU No. 2023-07 will be effective on a retrospective basis for annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025. This ASU is not expected to have a material impact on our consolidated financial statements other than increased disclosure requirements.

In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures," which requires entities to disclose, on an annual basis, specific categories in a tabular rate reconciliation using both percentages and reporting currency amounts and to provide additional information for reconciling items that meet a quantitative threshold. This ASU also requires that entities disclose on an annual basis: a) income taxes paid (net) disaggregated by federal, state and foreign taxes, b) income taxes paid (net) by individual jurisdiction, c) income (or loss) from continuing operations before income tax expense (or benefit) between domestic and foreign, and d) income tax expense (or benefit) from continuing operations by federal, state and foreign. Certain previous disclosure requirements on unrecognized tax benefits and cumulative amount of temporary differences are eliminated. ASU No. 2023-09 will be effective for us for annual periods beginning January 1, 2025. This ASU is not expected to have a material impact on our consolidated financial statements other than increased disclosure requirements.

We do not expect other recently issued accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.

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Note 2 - Company Overview

We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention, robotics and decommissioning operations. Our services are key in supporting a global energy transition:

●	Production maximization -our assets and methodologies are specifically designed to efficiently enhance and extend the lives of existing oil and gas reserves; we also offer an alternative to take over end-of-life reserves in preparation for their abandonment;

●	Decommissioning -we are a full-field abandonment contractor and believe that regulatory push for plug and abandonment ("P&A") and transition to renewable energy will facilitate the continued growth of the abandonment market; and

●	Renewables -we are an established global leader in jet trenching and provide specialty support services to renewable energy developments such as offshore wind farms, including boulder removal and unexploded ordnance clearance.

We provide a range of services to the oil and gas and renewable energy markets primarily in the Gulf of Mexico (deepwater and shelf), U.S. East Coast, Brazil, North Sea, Asia Pacific and West Africa regions. Our North Sea operations and our Gulf of Mexico shelf operations are usually subject to seasonal changes in demand, which generally peaks in the summer months and declines in the winter months. Our services are segregated into four reportable business segments: Well Intervention, Robotics, Shallow Water Abandonment and Production Facilities.

Our Well Intervention segment provides services enabling our customers to safely access subsea offshore wells for the purpose of performing production enhancement or decommissioning operations, thereby mitigating the need to drill new wells by extending the useful lives of existing wells and preserving the environment by preventing uncontrolled releases of oil and natural gas. Our well intervention vessels include the Q4000, the Q5000, the Q7000, the Seawell, the Well Enhancer, and two chartered monohull vessels, the Siem Helix 1 and the Siem Helix 2. Our well intervention equipment includes intervention systems such as intervention riser systems ("IRSs"), subsea intervention lubricators ("SILs") and the Riserless Open-water Abandonment Module, some of which we provide on a stand-alone basis.

Our Robotics segment provides trenching, seabed clearance, offshore construction and inspection, repair and maintenance ("IRM") services to both the oil and gas and the renewable energy markets globally, thereby assisting the delivery of renewable energy and supporting the responsible transition away from a carbon-based economy. Additionally, our robotics services are used in and complement our well intervention services. Our Robotics segment includes remotely operated vehicles ("ROVs"), trenchers, IROV boulder grabs and robotics support vessels under term charters as well as spot vessels as needed. We offer our ROVs, trenchers and IROV boulder grabs on a stand-alone basis or on an integrated basis with chartered robotics support vessels.

Our Shallow Water Abandonment segment provides services in support of the upstream and midstream ‎industries predominantly in the Gulf of Mexico shelf, including offshore oilfield decommissioning and ‎reclamation, project management, engineered solutions, intervention, maintenance, repair, heavy lift and commercial diving services. Our Shallow Water Abandonment segment includes Helix Alliance that was acquired in July 2022, which offers a diversified fleet of marine assets including liftboats, offshore supply vessels ("OSVs"), dive support vessels ("DSVs"), a heavy lift derrick barge, a crew boat, P&A systems and coiled tubing ("CT") systems.

Our Production Facilities segment includes the Helix ProducerI (the "HP I"), a ship-shaped dynamically positioned floating production vessel, the Helix Fast Response System (the "HFRS"), which combines the HP 1, the Q4000 and the Q5000 with certain well control equipment that can be deployed to respond to a well control incident, and our ownership of mature oil and gas properties. All of our current Production Facilities activities are located in the Gulf of Mexico.

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Note 3 - Details of Certain Accounts

Other current assets consist of the following (in thousands):

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024		2023
Prepaids	​	$	23,813		$	28,352
Income tax receivable	​	​	447	​	​	-
Contract assets (Note 8)	​	​	5,520	​	​	5,824
Deferred costs (Note 8)	​		21,581		​	36,041
Other	​		10,703		​	15,006
Total other current assets	​	$	62,064		$	85,223

​

Other assets, net consist of the following (in thousands):

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024		2023
Prepaid charter (1)	​	$	12,544		$	12,544
Deferred costs (Note 8)	​	​	2,450		​	587
Other receivable (2)	​		26,236		​	25,623
Intangible assets with finite lives, net	​		3,968		​	4,105
Other	​		1,848		​	1,964
Total other assets, net	​	$	47,046		$	44,823

(1)	Represents prepayments to the owner of the Siem Helix 1and the Siem Helix 2to offset certain payment obligations associated with the vessels at the end of their respective charter term.

(2)	Represents the present value of the agreed-upon amounts that we are entitled to receive from Marathon Oil Corporation ("Marathon Oil") for remaining P&A work to be performed by us on Droshky oil and gas properties we acquired from Marathon Oil in 2019.

Accrued liabilities consist of the following (in thousands):

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024		2023
Accrued payroll and related benefits	​	$	31,472		$	59,010
Accrued interest	​	​	2,720	​	​	4,181
Income tax payable	​		-		​	1,938
Deferred revenue (Note 8)	​		20,856		​	32,763
Earn-out consideration (1)	​		85,000		​	85,000
Other (2)	​		23,749		​	20,220
Total accrued liabilities	​	$	163,797		$	203,112

(1)	Represents the final amount of the earn-out consideration associated with the acquisition of the Alliance group of companies (collectively "Alliance") on July 1, 2022, which was paid to the seller of Alliance in cash on April 3, 2024.

(2)	Amounts as of March 31, 2024 and December 31, 2023 included $11.6million and $9.0million, respectively, of credits towards future services that we granted for the purchase of fiveP&A systems and other assets.

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Other non-current liabilities consist of the following (in thousands):

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024		2023
Asset retirement obligations (Note 12)	​	$	62,732		$	61,356
Other (1)	​		2,700		​	4,892
Total other non-current liabilities	​	$	65,432		$	66,248

(1)	Amount as of December 31, 2023 included $2.6million of credits offered by us in exchange for the purchase of P&A equipment (see above).

​

​

Note 4 - Leases

We charter vessels and lease facilities and equipment under non-cancelable contracts that expire on various dates through 2031.

The following table details the components of our lease cost (in thousands):

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​		2024		2023
Operating lease cost	​	$	20,475		$	17,006
Variable lease cost	​		3,057		​	4,910
Short-term lease cost	​		8,914		​	6,977
Sublease income	​		(22)		​	(331)
Net lease cost	​	$	32,424		$	28,562

​

Maturities of our operating lease liabilities as of March 31, 2024 are as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​		​	​		Facilities and		​	​
​		Vessels		Equipment		Total
Less than one year	​	$	75,235	​	$	6,232		$	81,467
One to two years	​		76,992	​		2,575		​	79,567
Two to three years	​		63,907	​		1,270		​	65,177
Three to four years	​		61,941	​		1,262		​	63,203
Four to five years	​		53,539	​		1,169		​	54,708
Over five years	​		125,999	​		1,656		​	127,655
Total lease payments	​	$	457,613	​	$	14,164		$	471,777
Less: imputed interest	​		(100,746)	​		(1,788)		​	(102,534)
Total operating lease liabilities	​	$	356,867	​	$	12,376		$	369,243
​	​	​	​	​	​	​	​	​	​
Current operating lease liabilities	​	$	49,135	​	$	5,757		$	54,892
Non-current operating lease liabilities	​		307,732	​		6,619		​	314,351
Total operating lease liabilities	​	$	356,867	​	$	12,376		$	369,243

​

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Table of Contents

Maturities of our operating lease liabilities as of December 31, 2023 are as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​		​	​		Facilities and		​	​
​		Vessels		Equipment		Total
Less than one year	​	$	67,488	​	$	6,639		$	74,127
One to two years	​		55,453	​		3,508		​	58,961
Two to three years	​		35,200	​		1,289		​	36,489
Three to four years	​		26,245	​		1,272		​	27,517
Four to five years	​		3,040	​		1,244		​	4,284
Over five years	​		-	​		1,926		​	1,926
Total lease payments	​	$	187,426	​	$	15,878		$	203,304
Less: imputed interest	​		(22,419)	​		(2,038)		​	(24,457)
Total operating lease liabilities	​	$	165,007	​	$	13,840		$	178,847
​	​	​	​	​	​	​	​	​	​
Current operating lease liabilities	​	$	56,602	​	$	6,060		$	62,662
Non-current operating lease liabilities	​		108,405	​		7,780		​	116,185
Total operating lease liabilities	​	$	165,007	​	$	13,840		$	178,847

​

The following table presents the weighted average remaining lease term and discount rate:

​

​	​	​	​	​	​	​
​	​	March 31,	​	December 31,
​		2024	​	2023
Weighted average remaining lease term		6.3	years	​	3.1	years
Weighted average discount rate		7.96	%	​	8.20	%

​

The following table presents other information related to our operating leases (in thousands):

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​		2024		2023
Cash paid for operating lease liabilities	​	$	18,720		$	16,184
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	​		203,040		​	6,070

(1)

Our operating lease additions during the three-month period ended March 31, 2024 are primarily related to the charter extensions forthe Siem Helix 1, the Siem Helix 2, the Grand Canyon IIand the Shelia Bordelon(Note 13).Our operating lease additions during the three-month period ended March 31, 2023 are primarily related to the vessel charter for the Glomar Wave.

​

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Note 5 - Long-Term Debt

Scheduled maturities of our long-term debt outstanding as of March 31, 2024 are as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​	​	MARAD	​	2029	​	​	​
​		Debt		Notes		Total
Less than one year	​	$	8,965	​	$	-		$	8,965
One to two years	​		9,412	​		-		​	9,412
Two to three years	​		9,881	​		-		​	9,881
Three to four years	​		-	​		-		​	-
Four to five years	​		-	​		-		​	-
Over five years	​		-	​		300,000		​	300,000
Gross debt	​		28,258	​		300,000		​	328,258
Unamortized debt discount (1)	​	​	-	​	​	(1,351)	​	​	(1,351)
Unamortized debt issuance costs (1)	​		(1,463)	​		(7,280)		​	(8,743)
Total debt	​		26,795	​		291,369		​	318,164
Less current maturities	​		(8,965)	​		-		​	(8,965)
Long-term debt	​	$	17,830	​	$	291,369		$	309,199

(1)	Debt discount and debt issuance costs are amortized to interest expense over the term of the applicable debt agreement.

Below is a summary of our indebtedness:

Credit Agreement

On September 30, 2021 we entered into an asset-based credit agreement with Bank of America, N.A. ("Bank of America"), Wells Fargo Bank, N.A. and Zions Bancorporation and subsequently we entered into amendments to the credit agreement on July 1, 2022, June 23, 2023 and November 15, 2023 (collectively, the "Amended ABL Facility"). The Amended ABL Facility provides a $120 million asset-based revolving credit facility, which matures on September 30, 2026, with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $50 million. The Amended ABL Facility also permits us to request an increase of the facility by up to $30 million, subject to certain conditions.

Commitments under the Amended ABL Facility are comprised of separate U.S. and U.K. revolving credit facility commitments of $85 million and $35 million, respectively. The Amended ABL Facility provides funding based on a borrowing base calculation that includes eligible U.S. and U.K. customer accounts receivable and cash, and provides for a $20 million sub-limit for the issuance of letters of credit. As of March 31, 2024, we had no borrowings under the Amended ABL Facility, and our available borrowing capacity, based on the borrowing base, totaled $95.6 million, net of $3.4 million of letters of credit issued.

We and certain of our U.S. and U.K. subsidiaries are the current borrowers under the Amended ABL Facility, whose obligations under the Amended ABL Facility are guaranteed by those borrowers and certain other U.S. and U.K. subsidiaries, excluding Cal Dive I - Title XI, Inc. ("CDI Title XI"), Helix Offshore Services Limited and certain other enumerated subsidiaries. Other subsidiaries may be added as guarantors of the facility in the future. The Amended ABL Facility is secured by all accounts receivable and designated deposit accounts of the U.S. borrowers and guarantors, and by substantially all of the assets of the U.K. borrowers and guarantors.

U.S. borrowings under the Amended ABL Facility bear interest at the Term SOFR rate (also known as CME Term SOFR as administered by CME Group, Inc.) plus a margin of 1.50% to 2.00% or at a base rate plus a margin of 0.50% to 1.00%. U.K. borrowings under the Amended ABL Facility denominated in U.S. dollars bear interest at the Term SOFRratewith SOFR adjustment of 0.10% and U.K. borrowings denominated in the British pound bear interest at the SONIA daily rate, each plus a margin of 1.50% to 2.00%. We also pay a commitment fee of 0.375% to 0.50% per annum on the unused portion of the facility.

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The Amended ABL Facility includes certain limitations on our ability to incur additional indebtedness, grant liens on assets, pay dividends and make distributions on equity interests, dispose of assets, make investments, repay certain indebtedness, engage in mergers, and other matters, in each case subject to certain exceptions. The Amended ABL Facility contains customary default provisions which, if triggered, could result in acceleration of all amounts then outstanding. The Amended ABL Facility requires us to satisfy and maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 if availability is less than the greater of 10% of the borrowing base or $12 million.

The Amended ABL Facility also (i) limits the amount of permitted debt for the deferred purchase price of property not to exceed $50 million, and (ii) provides for potential ESG-related pricing adjustments based on specific metrics and performance targets determined by us and Bank of America, as agent with respect to the Amended ABL Facility.

MARAD Debt

In 2005, Helix's subsidiary CDI - Title XI issued its U.S. Government Guaranteed Ship Financing Bonds, Q4000 Series, to refinance the construction financing originally granted in 2002 of the Q4000 vessel (the "MARAD Debt"). The MARAD Debt is guaranteed by the U.S. government pursuant to Title XI of the Merchant Marine Act of 1936, administered by the Maritime Administration ("MARAD"). The obligation of CDI Title XI to reimburse MARAD in the event CDI Title XI fails to repay the MARAD Debt is collateralized by the Q4000 and is guaranteed 50% by us. In addition, we have agreed to bareboat charter the Q4000 from CDI Title XI for so long as the MARAD Debt remains outstanding. The MARAD Debt is payable in equal semi-annual installments through February 2027 and bears interest at a rate of 4.93%. We believe the agreements relating to the bonds and the terms and conditions of our obligations to MARAD in respect of the MARAD Debt were typical for U.S. government-guaranteed ship financing transactions when they were entered into, including customary restrictions on incurring additional liens on the Q4000 and trading restrictions with respect to the vessel as well as working capital requirements.

Senior Notes Due 2029 ("2029 Notes")

On December 1, 2023, we issued $300 million aggregate principal amount of the 2029 Notes. The net proceeds from the issuance of the 2029 Notes were approximately $291.1 million, after deducting the purchasers' discount and debt issuance costs. We used cash proceeds from the offering to retire the Convertible Senior Notes due 2026 (the "2026 Notes"). See details regarding the 2026 Notes below.

The 2029 Notes bear interest at a coupon interest rate of 9.75% per annum payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2024. The 2029 Notes mature on March 1, 2029 unless earlier redeemed or repurchased by us.

Prior to March 1, 2026, we may, at our option, redeem the 2029 Notes, in whole or in part, at a price equal to 100% of the aggregate principal amount of the notes to be redeemed, plus a make-whole premium and accrued and unpaid interest, if any, to, but excluding, the redemption date. On or after March 1, 2026, we may, at our option, redeem the 2029 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to March 1, 2026, following certain equity offerings we may, at our option, on any one or more occasions, redeem up to 40% of the 2029 Notes at a price equal to 109.750% of the aggregate principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, in an amount not exceeding the proceeds of such equity offerings.

​

​	​	​
​	​	Redemption
Year		Price
2026	​	104.875%
2027	​	102.438%
2028 and thereafter	​	100.000%

​

Upon the occurrence of a Change of Control Triggering Event, as defined in the indenture governing the 2029 Notes, we may be required to make an offer to repurchase all of the notes then outstanding at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

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Table of Contents

The indenture governing the 2029 Notes contains customary terms and covenants, including limitations on additional indebtedness, restricted payments, liens, asset sales, transactions with affiliates, mergers and consolidations, designation of unrestricted subsidiaries, and dividend and other restrictions affecting restricted subsidiaries.

The 2029 Notes are guaranteed on a senior unsecured basis by the subsidiaries that guarantee the Amended ABL Facility, as well as certain future subsidiaries that may guarantee certain of our indebtedness, including the Amended ABL Facility. The 2029 Notes are junior in right of payment to all our existing and future secured indebtedness and obligations and rank equally in right of payment with all our existing and future senior unsecured indebtedness. The 2029 Notes rank senior in right of payment to any of our future subordinated indebtedness and are fully and unconditionally guaranteed by the guarantors described above on a senior basis.

2026 Notes

During December 2023 and the first quarter 2024, we retired the 2026 Notes through various transactions using proceeds from the 2029 Notes as well as the issuance of our common stock.

In December 2023, we entered into privately negotiated agreements with certain holders of the 2026 Notes to repurchase $159.8 million aggregate principal amount of the 2026 Notes (the "2026 Notes Repurchases") for 1.5 million shares of our common stock and aggregate cash payments of $229.7 million, plus accrued and unpaid cash interest of $3.8 million. We recognized pre-tax inducement charges of $37.4 million for the 2026 Notes Repurchases in the fourth quarter 2023, representing the total settlement value in excess of the total conversion value of the 2026 Notes Repurchases when the final negotiated offers were accepted. The conversion value paid in excess of the carrying amount of the 2026 Notes Repurchases is reflected in "Common stock" in the shareholders' equity section of the accompanying condensed consolidated balance sheets.

In December 2023, $0.2 million aggregate principal amount of the 2026 Notes was tendered for conversion. We settled the conversions for $0.3 million cash in March 2024. The conversion value paid in excess of the $0.2 million carrying amount of the 2026 Notes that were tentered for conversion is reflected in "Common stock" in the shareholders' equity section of the accompanying condensed consolidated balance sheet.

In January 2024, we issued a notice for the redemption of the remaining $40.0 million aggregate principal amount of the 2026 Notes to be settled in March 2024 (the "2026 Notes Redemptions"). The redemption price consisted of the principal amount and the make-whole premium, plus accrued and unpaid interest. Our redemption notice enabled holders of $39.7 million aggregate principal amount of the 2026 Notes to tender their notes for conversion prior to the redemption date, with the remaining $0.3 million aggregate principal amount of the notes redeemed. We settled both the conversions and redemptions for an aggregate $60.2 million cash in March 2024 and recognized pre-tax losses of $20.9 million. These losses are reflected in "Losses related to convertible senior notes" in the accompanying condensed consolidated statement of operations.

The 2026 Notes had a coupon interest rate of 6.75% per annum and an effective interest rate of 7.6%. For the three-month periods ended March 31, 2024 and 2023, total interest expense related to the 2026 Notes was $0.4 million and $3.7 million, respectively, with coupon interest expense of $0.3 million and $3.4 million, respectively, and the amortization of debt issuance costs of $0.1 million and $0.3 million, respectively.

2026 Capped Calls

In connection with the 2026 Notes offering, we had entered into capped call transactions (the "2026 Capped Calls") with three separate counterparties to hedge the dilution risk of the 2026 Notes. Concurrently with the 2026 Notes Repurchases in December 2023, we terminated a proportionate amount of the 2026 Capped Calls and received $15.6 million in cash, recognizing an increase to "Common stock" of $14.2 million and a $1.4 million gain. Concurrent with the settlement of the 2026 Notes Redemptions in March 2024, we terminated the remaining 2026 Capped Calls and received $4.4 million in cash, recognizing an increase to "Common stock" in the shareholders' equity section of the accompanying condensed consolidated balance sheet.

14

Table of Contents

Other

In accordance with the Amended ABL Facility, the MARAD Debt and the 2029 Notes, we are required to comply with certain covenants, including minimum liquidity and a springing fixed charge coverage ratio (applicable under certain conditions that are currently not applicable) with respect to the Amended ABL Facility and the maintenance of net worth, working capital and debt-to-equity requirements with respect to the MARAD Debt. As of March 31, 2024, we were in compliance with these covenants.

The Convertible Senior Notes due 2023 (the "2023 Notes") matured on September 15, 2023. Upon maturity of the 2023 Notes, we paid $29.6 million in cash to settle the conversion of $29.2 million aggregate principal amount of the notes, plus accrued and unpaid interest. We recorded the conversion value in excess of such principal amount converted to "Common stock" in the accompanying condensed consolidated balance sheets. Notes representing the remaining $0.8 million aggregate principal amount of the 2023 Notes were redeemed at par, plus accrued and unpaid interest. The 2023 Notes had a coupon interest rate of 4.125% per annum and an effective interest rate of 4.8%. For the three-month period ended March 31, 2023, total interest expense related to the 2023 Notes was $0.4 million, primarily from coupon interest expense.

The following table details the components of our net interest expense (in thousands):

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
​		2024		2023
Interest expense	​	$	8,778		$	4,869
Interest income	​		(3,301)		​	(682)
Net interest expense	​	$	5,477		$	4,187

​

​

Note 6 - Income Taxes

We operate in multiple jurisdictions with complex tax laws subject to interpretation and judgment. We believe that our application of such laws and the tax impact thereof are reasonable and fairly presented in our condensed consolidated financial statements.

For the three-month periods ended March 31, 2024 and 2023, we recognized income tax benefit of $1.7 million and $2.0 million, respectively, resulting in effective tax rates of 6.1% and 28.1%, respectively. The effective tax rate for the three-month period ended March 31, 2024 was lower than the U.S. statutory rate primarily due to the non-deductibility of certain losses associated with the 2026 Notes Redemptions, which was characterized as a discrete event and reported in the current quarter. The effective tax rate for the three-month period ended March 31, 2023 was higher than the U.S. statutory rate primarily due to certain non-deductible expenses and non-creditable foreign income taxes.

​

​

​

Note 7 - Share Repurchase Programs

In February 2023, our Board of Directors (our "Board") authorized a share repurchase program to repurchase issued and outstanding shares of our common stock up to $200 million (the "2023 Repurchase Program"). During the three-month period ended March 31, 2024, we repurchased a total of 462,585 shares of our common stock pursuant to the 2023 Repurchase Program for approximately $5.0 million or an average of $10.88 per share, of which approximately $0.9 million was accrued as of March 31, 2024.

The 2023 Repurchase Program has no set expiration date. Repurchases under the 2023 Repurchase Program have been made through open market purchases in compliance with Rule 10b-18 under the Exchange Act, but may also be made through privately negotiated transactions or plans, instructions or contracts established under Rule 10b5-1 under the Exchange Act. The manner, timing and amount of any purchase will be determined by management at its discretion based on an evaluation of market conditions, stock price, liquidity and other factors. The 2023 Repurchase Program does not obligate us to acquire any particular amount of common stock and may be modified or superseded at any time at our discretion. Any repurchased shares are cancelled.

​

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Table of Contents

Note 8 - Revenue from Contracts with Customers

Disaggregation of Revenue

Our service contracts generally contain provisions for specific time, material and equipment charges that are billed in accordance with the terms of such contracts (dayrate contracts) but we occasionally contract on a lump sum basis (lump sum contracts). We record revenues net of taxes collected from customers and remitted to governmental authorities.

Our revenues are primarily derived from short-term and long-term service contracts with customers. 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. The following table provides information about disaggregated revenue by contract duration (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Well

​

​

​

Shallow Water

​

Production

​

Intercompany

​

Total

​

Intervention

Robotics

Abandonment

Facilities

Eliminations

Revenue

Three months ended March 31, 2024

​

​

​

​

​

​

​

Short-term

​

$

134,414

​

$

25,176

​

$

25,363

​

$

-

​

$

(6,327)

​

$

178,626

Long-term

​

82,045

​

25,133

​

1,490

​

24,152

​

(15,235)

​

117,585

Total

​

$

216,459

​

$

50,309

​

$

26,853

​

$

24,152

​

$

(21,562)

​

$

296,211

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended March 31, 2023

​

​

​

​

​

​

​

Short-term

​

$

77,767

​

$

35,205

​

$

49,381

​

$

-

​

$

-

​

$

162,353

Long-term

​

64,671

​

14,017

​

-

​

20,905

​

(11,862)

​

87,731

Total

​

$

142,438

​

$

49,222

​

$

49,381

​

$

20,905

​

$

(11,862)

​

$

250,084

​

We provide services to our customers in the following markets that are key to our energy transition strategy: Production maximization, Decommissioning and Renewables. The following table provides information about disaggregated revenue by market strategy (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Well

​

​

​

Shallow Water

​

Production

​

Intercompany

​

Total

​

Intervention

Robotics

Abandonment

Facilities

Eliminations

Revenue

Three months ended March 31, 2024

​

​

​

​

​

​

​

Production maximization

​

$

70,449

​

$

18,436

​

$

3,242

​

$

24,152

​

$

(11,392)

​

$

104,887

Decommissioning

​

142,685

​

5,412

​

23,611

​

-

​

(6,928)

​

164,780

Renewables

​

2,504

​

24,172

​

-

​

-

​

(2,504)

​

24,172

Other

​

821

​

2,289

​

-

​

-

​

(738)

​

2,372

Total

​

$

216,459

​

$

50,309

​

$

26,853

​

$

24,152

​

$

(21,562)

​

$

296,211

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended March 31, 2023

​

​

​

​

​

​

​

Production maximization

​

$

47,267

​

$

26,719

​

$

3,407

​

$

20,905

​

$

(3,817)

​

$

94,481

Decommissioning

​

92,620

​

11,048

​

45,974

​

-

​

(5,071)

​

144,571

Renewables

​

1,326

​

8,678

​

-

​

-

​

(1,326)

​

8,678

Other

​

1,225

​

2,777

​

-

​

-

​

(1,648)

​

2,354

Total

​

$

142,438

​

$

49,222

​

$

49,381

​

$

20,905

​

$

(11,862)

​

$

250,084

​

Contract Balances

Contract assets are rights to consideration in exchange for services that we have provided to a customer when those rights are conditioned on our future performance. Contract assets generally consist of (i) demobilization fees recognized ratably over the contract term but invoiced upon completion of the demobilization activities and (ii) revenue recognized in excess of the amount billed to the customer for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract assets are reflected in "Other current assets" in the accompanying condensed consolidated balance sheets (Note 3). Contract assets were $5.5 million as of March 31, 2024 and $5.8 million as of December 31, 2023. We had no credit losses on our contract assets for the three-month periods ended March 31, 2024 and 2023.

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Table of Contents

Contract liabilities are obligations to provide future services to a customer for which we have already received, or have the unconditional right to receive, the consideration for those services from the customer. Contract liabilities may consist of (i) advance payments received from customers, including upfront mobilization fees allocated to a single performance obligation and recognized ratably over the contract term and/or (ii) amounts billed to the customer in excess of revenue recognized for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract liabilities are reflected as "Deferred revenue," a component of "Accrued liabilities" in the accompanying condensed consolidated balance sheets (Note 3). Contract liabilities totaled $20.9 million as of March 31, 2024 and $32.8 million as of December 31, 2023. Revenue recognized for the three-month periods ended March 31, 2024 and 2023 included $16.4 million and $3.9 million, respectively, that were included in the contract liability balance at the beginning of each period.

We report the net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period.

Performance Obligations

As of March 31, 2024, $996.6 million related to unsatisfied performance obligations was expected to be recognized as revenue in the future, with $663.4 million, $309.7 million and $23.5 million in 2024, 2025and 2026, respectively. These amounts include fixed consideration and estimated variable consideration for both wholly and partially unsatisfied performance obligations, including mobilization and demobilization fees. These amounts are derived from the specific terms of our contracts, and the expected timing for revenue recognition is based on the estimated start date and duration of each contract according to the information known at March 31, 2024.

For the three-month periods ended March 31, 2024 and 2023, revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.

Contract Fulfillment Costs

Contract fulfillment costs consist of costs incurred in fulfilling a contract with a customer. Our contract fulfillment costs primarily relate to costs incurred for mobilization of personnel and equipment at the beginning of a contract and costs incurred for demobilization at the end of a contract. Mobilization costs are deferred and amortized ratably over the contract term (including anticipated contract extensions) based on the pattern of the provision of services to which the contract fulfillment costs relate. Demobilization costs are recognized when incurred at the end of the contract. Deferred contract costs are reflected as "Deferred costs," a component of "Other current assets" and "Other assets, net" in the accompanying condensed consolidated balance sheets (Note 3). Our deferred contract costs totaled $24.0 million as of March 31, 2024 and $36.6 million as of December 31, 2023. For the three-month periods ended March 31, 2024 and 2023, we recorded $20.3 million and $4.7 million, respectively, related to amortization of these deferred contract costs. There were no associated impairment losses for any period presented.

For additional information regarding revenue recognition, see Notes 2 and 11 to our 2023 Form 10-K.

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Note 9 - Earnings Per Share

We have shares of restricted stock issued and outstanding that are currently unvested. Because holders of shares of unvested restricted stock are entitled to the same liquidation and dividend rights as the holders of our unrestricted common stock, we are required to compute earnings per share ("EPS") under the two-class method in periods in which we have earnings. Under the two-class method, net income for each period is allocated based on the participation rights of both common shareholders and the holders of any participating securities as if earnings for the respective periods had been distributed. For periods in which we have a net loss we do not use the two-class method as holders of our restricted shares are not obligated to share in such losses.