OCEANEERING INTERNATIONAL INCOII

OCEANEERING INTERNATIONAL INC Income Taxes Disclosure

10-KFiled Feb 20, 20267 min read
INCOME TAXES
The components of income (loss) before income taxes are as follows: 
 Year Ended December 31,
(in thousands)202520242023
Domestic$41,660 $(8,897)$(62,294)
Foreign244,240 233,813 223,349 
Income (loss) before income taxes
$285,900 $224,916 $161,055 
The components of the income tax provision (benefit) applicable for domestic and foreign taxes are as follows:
 Year Ended December 31,
(in thousands)202520242023
Current income tax expense (benefit):
U.S. federal$704 $842 $2,004 
U.S. state and local1,645 — 39 
Foreign70,393 87,899 88,394 
Total current income tax expense (benefit)72,742 88,741 90,437 
Deferred income tax expense (benefit):
U.S. federal(137,834)— (170)
U.S. state and local(7,608)— — 
Foreign4,839 (11,293)(26,615)
Total deferred income tax expense (benefit)(140,603)(11,293)(26,785)
Total income tax expense (benefit):
U.S. federal(137,130)842 1,834 
U.S. state and local(5,963)— 39 
Foreign75,232 76,606 61,779 
Total income tax expense (benefit)$(67,861)$77,448 $63,652 
The components of cash paid for income taxes are paid for the year ended December 31, 2025, and total amounts for the years ended December 31, 2024 and 2023, are as follows: 
 Year Ended December 31,
(in thousands)202520242023
U.S. federal$2,088 
U.S. state and local249 
Foreign: 
Angola20,388 
Brazil16,647 
Equatorial Guinea11,276 
United Kingdom7,938 
Canada7,092 
Norway5,666 
Other foreign jurisdictions30,166 
Total foreign99,173 
Total cash taxes paid, net$101,510 $94,730 $44,014 
The reconciliation between the actual income tax provision and income tax computed using the U.S. statutory federal income tax rate is summarized as follows:
(amounts in thousands)Year Ended December 31, 2025
AmountPercent
Income tax provision (benefit) at the U.S. federal statutory rate$60,039 21.0 %
State and local income taxes, net of federal income tax effect *(4,711)(1.6)%
Foreign tax effects:
Angola:  
Withholding tax expense16,431 5.7 %
Other(246)(0.1)%
Brazil: 
Statutory income tax rate differential4,892 1.7 %
Withholding tax expense6,799 2.4 %
Other(1,563)(0.5)%
Papua New Guinea: 
Release of withholding tax accrual(3,348)(1.2)%
Other19 — %
Switzerland:
Changes in valuation allowances(3,783)(1.3)%
Other213 0.1 %
Vanuatu:
Statutory income tax rate differential(9,746)(3.4)%
Other2 — %
Other foreign jurisdictions16,463 5.8 %
Changes in worldwide unrecognized tax benefits(2,482)(0.9)%
Effect of cross-border tax laws:  
 Global intangible low-taxed income4,570 1.6 %
 Other(55)— %
Tax Credits:
Research and development tax credits(6,046)(2.1)%
Change in Valuation Allowances(139,708)(48.9)%
Nontaxable or Nondeductible Items1,942 0.7 %
Other Adjustments:  
Prior period tax adjustments(7,644)(2.7)%
Other101 — %
Total provision (benefit) for income taxes$(67,861)(23.7)%
*
State tax benefit driven primarily by valuation allowance release. State taxes in Virginia and South Carolina made up the majority (greater than 50 percent) of the tax effect in this category.
Year Ended December 31,
(in thousands)20242023
Income tax provision (benefit) at the U.S. federal statutory rate$47,232 $33,821 
Base erosion and anti-abuse tax1,714 3,520 
Prior period tax adjustments(4,735)1,273 
Deferred tax rate change23,360 1,460 
Valuation allowances(21,042)(21,679)
Foreign tax rate differential22,733 44,514 
Foreign income inclusion6,884 (3,618)
Stock compensation(1,985)(1,428)
Excess compensation2,605 1,712 
Uncertain tax positions2,760 7,761 
General business credits(2,674)(4,078)
Other items, net596 394 
Total provision (benefit) for income taxes$77,448 $63,652 
Significant components of net deferred tax assets and liabilities were as follows: 
 December 31,
(in thousands)20252024
Deferred tax assets:
Deferred compensation$20,546 $19,912 
Deferred income5,841 8,192 
Accrued expenses38,565 28,213 
Net operating loss and other carryforwards533,183 516,201 
Long-term operating lease liabilities75,007 76,801 
Goodwill and intangibles26,927 48,672 
Interest29,230 34,569 
Other10,234 9,672 
Gross deferred tax assets739,533 742,232 
Valuation allowances(486,034)(640,393)
Total deferred tax assets$253,499 $101,839 
Deferred tax liabilities:
Property and equipment$(9,024)$(5,473)
Other(103)(3,855)
Right-of-use operating lease assets(71,612)(63,095)
Total deferred tax liabilities$(80,739)$(72,423)
Net deferred income tax assets (liabilities)$172,760 $29,416 
Our net deferred tax assets (liabilities) are reflected within our balance sheet as follows: 
 December 31,
(in thousands)20252024
Deferred tax assets$173,133 $31,903 
Deferred tax liabilities included in other long-term liabilities(373)(2,487)
Net deferred income tax assets (liabilities)$172,760 $29,416 
As of December 31, 2025, we had approximately $533 million of deferred tax assets related to net operating and other loss carryforwards and tax credit carryforwards that were generated in various worldwide jurisdictions. The carryforwards include $69 million that do not expire and $464 million that will expire from 2026 through 2045.
We assess the realizability of our deferred tax assets, considering all relevant factors, at each reporting period. Based on the available positive and negative evidence, including a trend of positive earnings, as well as our outlook and expectations for future taxable income positively influenced by favorable macroeconomic conditions, anticipated continued growth in demand for energy-related products, improving deepwater offshore activity expected toward the end of 2026 and beyond, and continued expansion of non-energy-related businesses, we believe it is more likely than not that some of our deferred tax assets in the U.S. and several non-U.S. jurisdictions will be realized. Accordingly, during the twelve-month periods ended December 31, 2025 and 2024, we released valuation allowances for the deferred tax assets that we believe are more likely than not to be realized. Our valuation allowance decreased by $154 million in 2025 and $23 million in 2024. The 2025 decrease in valuation allowance was primarily related to US federal and state valuation allowance releases of $140 million and $10 million, respectively. The 2024 decrease in valuation allowance was primarily related to valuation releases for certain non-US jurisdictions.
As of December 31, 2025, we continue to recognize a valuation allowance on certain identified deferred tax assets in the U.S. and non-U.S. jurisdictions where we believe that it is not more-likely-than-not that we would be able to realize the benefits of those specific deferred tax assets. In the U.S., a valuation allowance of approximately $35 million was maintained against the deferred tax assets for U.S. federal foreign tax credit carryovers with a limited carryforward period. In several non-US jurisdictions, a valuation allowance of approximately $451 million was maintained against deferred tax assets that the Company continues to believe are not more-likely-than-not to be realized. We will continue to monitor the need for a valuation allowance against its deferred tax assets and record adjustments as appropriate in future periods
During the twelve-month period ended December 31, 2023, we received refunds of $23 million, including interest of $1.7 million which was recorded as a tax benefit, under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").
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. As of December 31, 2025, we did not provide for deferred taxes on earnings of our foreign subsidiaries that are indefinitely reinvested. If we were to make a distribution from the unremitted earnings of these subsidiaries, we could be subject to taxes in various jurisdictions. If our expectations were to change regarding future tax consequences, we may be required to record additional deferred taxes that could have a material effect on our consolidated financial statements.
We recognize the expense or benefit for an uncertain tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the uncertain tax position is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement. We account for any applicable interest and penalties on these positions as a component of our provision for income taxes in our consolidated financial statements.
A reconciliation of the beginning and ending amount of gross uncertain tax positions, excluding penalties and interest, is as follows: 
 Year Ended December 31,
(in thousands)202520242023
Balance at beginning of year$18,537 $25,457 $15,846 
Additions based on tax positions related to the current year805 1,782 4,391 
Reductions for expiration of statutes of limitations(410)(505)(130)
Additions based on tax positions related to prior years517 2,790 12,576 
Reductions based on tax positions related to prior years(2,812)(7,020)(135)
Settlements(8,311)(3,967)(7,091)
Balance at end of year$8,326 $18,537 $25,457 
We increased (decreased) income tax expense by $(2.7) million, $1.0 million and $5.4 million in 2025, 2024 and 2023, respectively, for penalties and interest on uncertain tax positions. Our total liabilities for penalties and interest on uncertain tax positions were $2.9 million and $5.6 million in other long-term liabilities on our balance sheets as of December 31, 2025 and 2024, respectively. All additions or reductions to those liabilities would affect our effective income tax rate in the periods of change.
Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following table lists the earliest tax years open to examination by tax authorities where we have significant operations: 
JurisdictionPeriods
United States2022
United Kingdom2023
Norway2020
Angola2015
Brazil2020
Australia2021

Historical Timeline

Fiscal YearFiled
2025Feb 20, 2026Showing above
2024Feb 24, 2025
2023Feb 23, 2024
2022Feb 24, 2023
2021Feb 25, 2022
2020Feb 26, 2021
2019Feb 27, 2020
2018Feb 28, 2019
2017Mar 1, 2018
2016Feb 24, 2017
2015Feb 19, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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