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Summary Of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2012
Accounting Policies [Abstract] |
Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies Principles of Consolidation Our consolidated financial statements include the accounts of majority-owned subsidiaries. The equity method is used to account for investments in affiliates in which we do not have majority ownership, but have the ability to exert significant influence. We account for our Deepwater Gateway, Independence Hub and former Australian joint venture investments under the equity method of accounting. Noncontrolling interests represent the minority shareholders’ proportionate share of the equity in Kommandor LLC. All material intercompany accounts and transactions have been eliminated. 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. The most significant of these reclassifications are associated with our discontinued oil and gas operations. As noted in Note 1, ERT qualified as discontinued operations in December 2012 following the announcement of a definitive agreement for the sale of ERT. Accordingly, all operations and financial positions related to ERT have been presented as discontinued operations even if they did not qualify as a discontinued operation in that period. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents are highly liquid financial instruments with original maturities of three months or less. They are carried at cost plus accrued interest, which approximates fair value. Statement of Cash Flow Information The following table provides supplemental cash flow information for the periods stated (in thousands):
|  | Year Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
Interest paid, net of interest capitalized | $ | 68,735 | $ | 81,000 | $ | 68,534 |
Income taxes paid | $ | 43,111 | $ | 11,216 | $ | 10,071 |
Total non-cash investing activities for the years ended December 31, 2012, 2011 and 2010 included $51.1 million, $26.1 million and $21.9 million, respectively, of accruals for property and equipment capital expenditures. Accounts Receivable and Allowance for Uncollectible Accounts Accounts receivable are stated at the historical carrying amount net of write-offs and allowance for uncollectible accounts. The amount of our net accounts receivable approximates fair value. We establish an allowance for uncollectible accounts receivable based on historical experience and any specific customer collection issues that we have identified. Uncollectible accounts receivable are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when we have determined that the balance will not be collected (Note 15). Property and Equipment Overview. Property and equipment is recorded at cost. Property and equipment is depreciated on a straight line basis over the estimated useful life of each respective asset. The following is a summary of the gross components of property and equipment (dollars in thousands):
|  | Estimated Useful Life |  | 2012 |  | 2011 |
ROVs/Vessels |  | 10 to 30 years | $ | 1,822,642 | $ | 1,616,772 |
Machinery, equipment, buildings and leasehold improvements |  | 5 to 30 years |  | 229,154 |  | 198,240 |
Total property and equipment |  |  | $ | 2,051,796 | $ | 1,815,012 |
The cost of repairs and maintenance is charged to expense as incurred, while the cost of improvements is capitalized. The repair and maintenance expenses totaled $38.7 million, $32.3 million and $29.3 million for the years ended December 31, 2012, 2011 and 2010, respectively. Included in machinery, equipment, buildings and leasehold improvements were $18.5 million and $18.1 million of capitalized software costs at December 31, 2012 and 2011, respectively. The total amount charged to expense related to the amortization of these software costs was $2.6 million during each of the years ended December 31, 2012, 2011 and 2010. Assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted pretax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value and reported as an impairment charge in the periods in which the determination of the impairment is made. Individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Our marine vessels are assessed on a vessel by vessel basis, while our ROVs are grouped and assessed by asset class. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants or based on a multiple of operating cash flows validated with historical market transactions of similar assets where possible. The expected future cash flows used for impairment reviews and related fair value calculations are based on judgmental assessments, operating costs, project margins and capital project decisions, considering all available information at the date of review. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. In 2012, we decided to cease our well intervention operations in Australia. We recorded a $4.6 million impairment charge to reduce our well intervention assets in Australia to their fair value of $5.0 million. In 2011, in association with the reorganization of our Australian well intervention operations, we conducted an impairment assessment of its subsea well intervention equipment, which resulted in a $6.6 million charge to reduce the carrying value of such well intervention equipment to its then estimated fair value. In 2012, as a result of diminished work opportunities for the Intrepid, we placed the vessel in cold-stack mode and later sold the vessel for $14.5 million in cash, which resulted in asset impairment and related loss on disposal charges totaling $28.1 million for the Intrepid. Also in 2012, we entered into an agreement to sell our two remaining pipelay vessels, the Express and the Caesar, and other related pipelay equipment for a total sales price of $238.3 million, of which we have received a $50 million deposit that is only refundable in very limited circumstances. The sales of these vessels are scheduled to close and fund in two stages in 2013 following the completion of each vessel’s existing backlog of work. In connection with the announcement of the sale of our remaining pipelay vessels and related equipment, we recorded an impairment charge of $157.8 million to reduce the carrying cost of the Caesar and other related pipelay equipment to their respective fair values as determined by the definitive sales agreement. We did not record impairments related to our vessels during 2011 and 2010. See Note 3 for disclosure related to the impairment charges associated with certain of our former oil and gas properties. Assets are classified as held for sale when we have a formalized plan for disposal and those assets meet the held for sale criteria. Assets classified as held for sale are included in other current assets. There were no assets meeting the requirements to be classified as assets held for sale at December 31, 2012 other than assets associated with our discontinued oil and gas operations (Note 3). We had no assets classified as assets held for sale at December 31, 2011. Interest from external borrowings is capitalized on major projects until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful life of the asset in the same manner as the underlying asset. The total of our interest expense capitalized during each of the three years ended December 31, 2012, 2011 and 2010 was $4.9 million, $1.3 million and $12.5 million, respectively. Equity Investments We periodically review our equity investments in Deepwater Gateway and Independence Hub for impairment. Under the equity method of accounting, an impairment loss would be recorded whenever the fair value of an equity investment is determined to be below its carrying amount and the reduction is considered to be other than temporary. In judging “other than temporary,” we would consider the length of time and extent to which the fair value of the investment has been less than the carrying amount of the equity investment, the near-term and long-term operating and financial prospects of the equity company and our longer-term intent of retaining the investment in the entity. We previously invested in an Australian joint venture that engaged in well intervention operations in the Southeast Asia region. We fully impaired our investment in that joint venture and recorded a $10.6 million other than temporary impairment charge in 2011. We exited this Australian joint venture in 2012. See Note 5 for discussion of other than temporary loss amounts recorded in both 2011 and 2010. Goodwill and Other Intangible Assets W e are required to perform an annual impairment analysis of goodwill. We elected November 1 to be our annual impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill prior to the annual assessment date if we experience disruption to the business, unexpected significant declines in operating results, divestiture of a significant component of the business, emergence of unanticipated competition, loss of key personnel or a sustained decline in market capitalization. Our goodwill impairment test involves a comparison of the fair value with our carrying amount. The fair value is determined using discounted cash flows and other market-related valuation models. At the time of our annual assessment of goodwill on November 1, 2012 we had two reporting units with goodwill and our impairment analysis. Goodwill impairment is determined using a two-step process. The first step is to identify if a potential impairment exists by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. If the implied fair value of goodwill exceeds the carrying amount, then goodwill is not considered impaired. However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit were acquired in a business combination). We use both the income approach and market approach to estimate the fair value of our reporting units under the first step of our goodwill impairment assessment. Under the income approach, a discounted cash flow analysis is performed requiring us to make various judgmental assumptions about future revenue, operating margins, growth rates and discount rates. These judgmental assumptions are based on our budgets, long-term business plans, economic projections, anticipated future cash flows and market place data. Under the market approach, the fair value of each reporting unit is calculated by applying an average peer total invested capital EBITDA (defined as earnings before interest, income taxes and depreciation and amortization) multiple to the upcoming fiscal year’s forecasted EBITDA for each reporting unit. Judgment is required when selecting peer companies that operate in the same or similar lines of business and are potentially subject to the same economic risks. In 2011, the Financial Accounting Standards Board (“FASB”) issued an update to simplify goodwill impairment testing by giving an entity the option to first assess certain qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill. If an entity determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the currently prescribed two-step impairment test is unnecessary. The Company early adopted this standard for its annual goodwill impairment tests in 2011. All of our remaining goodwill at December 31, 2012 ($62.9 million) was associated with our Contracting Services segment. The reporting units that support the remaining goodwill amounts are strong operationally, and absent any significant downturn in their areas of service, should be able to support their goodwill amounts for the foreseeable future. Based on the current and historical evidence supporting these reporting units’ carrying value being sufficient to maintain their recorded goodwill amounts, we concluded, as allowed under applicable accounting guidance, to forego the quantitative step one impairment analysis. We will continue to monitor the current and future operations of these two reporting units to determine whether or not the quantitative assessment is once again necessary. We will conduct the quantitative test at least every three years with the last such test occurring on November 1, 2010. The changes in the carrying amount of goodwill are as follows (in thousands):
Balance at December 31, 2010 (1) | $ | 62,494 |
Other adjustments (2) |  | (279) |
Balance at December 31, 2011 |  | 62,215 |
Other adjustments (2) |  | 720 |
Balance at December 31, 2012 | $ | 62,935 |
(1) In 2010, we fully impaired $16.7 million of goodwill associated with our Australian well intervention subsidiary (“WOSEA”) (see below). (2) Reflects foreign currency adjustment for certain amounts of our goodwill. In 2010, WOSEA placed its main revenue generating asset back in service subsequent to major repairs to this equipment following an incident in which it was damaged. WOSEA also entered into an Australian joint venture in February 2010 (Note 5). Despite these positive developments, in 2010 WOSEA’s operating results were disappointing and its near-term outlook reflected the uncertainties involving the subsea market in the Southeast Asia region, including increased competition and a fragmented market. These factors were considered in our impairment test at November 1, 2010. Based on the results of that evaluation, WOSEA no longer passed its step one test and we concluded that a full write-off of its goodwill ($16.7 million) was required after we determined the fair value of its assets under the step two requirements. This impairment charge is reflected as a separate line item in the accompanying consolidated statement of operations titled “Goodwill impairment.” WOSEA is part of our Contracting Services segment. At December 31, 2012, our remaining intangible assets, other than goodwill, was $1.7 million ($0.5 million, net of accumulated amortization of $1.2 million) for intellectual property and patented technology related to our well intervention operations. Total amortization expenses for intangible assets was $0.1 mil lion for each of the years ended December 31, 2012, 2011, and 2010. We expect to record approximately $0.1 million of amort ization expense related to our remaining unamortized intangible assets for each of the next four years. Recertification Costs and Deferred Dry Dock Charges Our contracting services vessels are required by regulation to be recertified after certain periods of time. Recertification costs are incurred while a vessel is in dry dock. In addition, routine repairs and maintenance are performed and at times, major replacements and improvements are performed. We expense routine repairs and maintenance costs as they are incurred. We defer and amortize dry dock and related recertification costs over the length of time for which we expect to receive benefits from the dry dock and related recertification, which is generally 30 months but can be as long as 60 months if the appropriate permitting is obtained. Vessels are typically available to earn revenue for the period between dry dock and related recertification processes. A dry dock and related recertification process typically lasts one to two months, a period during which the vessel is not available to earn revenue. Major replacements and improvements that extend the vessel’s economic useful life or functional operating capability are capitalized and depreciated over the vessel’s remaining economic useful life. As of December 31, 2012 and 2011, capitalized deferred dry dock charges included within “Other assets, net” in the accompanying consolidated balance sheets (Note 4) totaled $22.7 million and $5.4 million, respectively. The increase in our deferred dry dock costs in 2012 was associated with extended regulatory dry docks of the Q4000, Seawell and Well Enhancer well intervention vessels. During the years ended December 31, 2012, 2011 and 2010, dry dock amortization expense was $8.6 million, $7.6 million and $6.9 million, respectively. Convertible Preferred Stock In December 2012, the holder of the remaining $1 million of Convertible Preferred Stock converted it into 361,402 shares of our common stock. We had previously presented the Convertible Preferred Stock below liabilities but not as a component of shareholders’ equity, because we were, under certain instances, required to settle any future conversions in cash. The dividend rate was 4% for 2012, 2011 and 2010. In May 2010, the holder converted $5 million of its Convertible Preferred stock into 1,807,011 shares of our common stock. Our Convertible Preferred Stock was assessed for inclusion in our diluted earnings per share calculation using the if converted method (see “Earnings Per Share”) below. Revenue Recognition Revenues from contracting services are derived from contracts, which are both short-term and long-term in duration. Our long-term contracting services contracts are contracts that contain either lump-sum, turnkey provisions or provisions for specific time, material and equipment charges, which are billed in accordance with the terms of such contracts. We recognize revenue as it is earned at estimated collectible amounts. Further, we record revenues net of taxes collected from customers and remitted to governmental authorities. Unbilled revenue represents revenue attributable to work completed prior to period end that has not yet been invoiced. All amounts included in unbilled revenue at December 31, 2012 and 2011 are expected to be billed and collected within one year. Dayrate Contracts. Revenues generated from specific time, materials and equipment contracts are generally earned on a dayrate basis and recognized as amounts are earned in accordance with contract terms. In connection with these contracts, we may receive revenues for mobilization of equipment and personnel. Revenues related to mobilization are deferred and recognized over the period in which contracted services are performed using the straight-line method. Incremental costs incurred directly for mobilization of equipment and personnel to the contracted site, which typically consist of materials, supplies and transit costs, are also deferred and recognized over the period in which contracted services are performed using the straight-line method. Our policy to amortize the revenues and costs related to mobilization on a straight-line basis over the estimated contract service period is consistent with the general pace of activity, level of services being provided and dayrates being earned over the service period of the contract. Mobilization costs to move vessels when a contract does not exist are expensed as incurred. Turnkey Contracts. Revenue on significant turnkey contracts is recognized on the percentage-of-completion method based on the ratio of costs incurred to total estimated costs at completion. In determining whether a contract should be accounted for using the percentage-of-completion method, we consider whether:
| • |  | the customer provides specifications for the construction of facilities or for the provision of related services;
| • |  | we can reasonably estimate our progress towards completion and our costs;
| • |  | the contract includes provisions as to the enforceable rights regarding the goods or services to be provided, consideration to be received, and the manner and terms of payment;
| • |  | the customer can be expected to satisfy its obligations under the contract; and
| • |  | we can be expected to perform our contractual obligations.
Under the percentage-of-completion method, we recognize estimated contract revenue based on costs incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor, productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors, including weather and other factors outside of our control, may also affect the progress and estimated cost of a project’s completion and, therefore, the timing of income and revenue recognition. We routinely review estimates related to our contracts and reflect revisions to profitability in earnings on a current basis. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when it is first determined. We recognize additional contract revenue related to claims when the claim is probable and legally enforceable. Whenever we have a contract that qualifies as a loss contract, we estimate the future shortfall between our anticipated future revenues and future costs. See Note 13 for information regarding our more significant loss contracts during the three-year period ended December 31, 2012. Income Taxes Deferred income taxes are based on the differences between financial reporting and tax bases of assets and liabilities. We utilize the liability method of computing deferred income taxes. The liability method is based on the amount of current and future taxes payable using tax rates and laws in effect at the balance sheet date. Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. We consider the undistributed earnings of our principal non-U.S. subsidiaries to be permanently reinvested. It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31, 2012, we believe we have appropriately accounted for any unrecognized tax benefits. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or are required to pay amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected. Foreign Currency Because we operate in various regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar (primarily with respect to Helix Well Ops (U.K.) Limited (“WOUK”)). The functional currency for WOUK is the applicable local currency (British Pound). Previously, WOSEA also had currency risk as its functional currency was the applicable local currency (Australian Dollar). We ceased operations in Australia in 2012. Results of operations for these subsidiaries are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rate in effect at December 31, 2012 and 2011 and the resulting translation adjustment, which was an unrealized gain (loss) of $7.3 million and $(1.0) million, respectively, is included in accumulated other comprehensive income (loss), a component of shareholders’ equity. All foreign currency transaction gains and losses are recognized currently in the consolidated statements of operations. Our foreign currency gains (losses) totaled $(0.5) million in 2012, $(2.1) million in 2011 and $1.9 million in 2010. These realized amounts are exclusive of any unrealized gains or losses from our foreign currency exchange derivative contracts. Derivative Instruments and Hedging Activities Our continuing operations are exposed to market risks associated with interest rates and foreign currency exchange rates. Our risk management activities involve the use of derivative financial instruments to hedge the impact of market risk exposure related to variable interest rates and foreign currency exchange rates. All derivatives are reflected in our balance sheet at fair value, unless otherwise noted. We formally document all relationships between hedging instruments and the related hedged items, as well as our risk management objectives, strategies for undertaking various hedge transactions and our methods for assessing and testing correlation and hedge ineffectiveness. All hedging instruments are linked to the hedged asset, liability, firm commitment or forecasted transaction. We also assess, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in our hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. We discontinue hedge accounting if we determine that a derivative is no longer highly effective as a hedge, or it is probable that a hedged transaction will not occur. If hedge accounting is discontinued because it is probable the hedged transaction will not occur, deferred gains or losses on the hedging instruments are recognized in earnings immediately. If the forecasted transaction continues to be probable of occurring, any deferred gains or losses in accumulated other comprehensive income (loss) are amortized to earnings over the remaining period of the original forecasted transaction. We engage solely in cash flow hedges. Hedges of cash flow exposure are entered into to hedge a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. Changes in the derivative fair values that are designated as cash flow hedges are deferred to the extent that they are effective and are recorded as a component of accumulated other comprehensive income or loss (a component of shareholders’ equity) until the hedged transactions occur and are recognized in earnings. The ineffective portion of a cash flow hedge’s change in fair value is recognized immediately in earnings. In addition, any change in the fair value of a derivative that does not qualify for hedge accounting is recorded in earnings in the period in which the change occurs. Interest Rate Risk As some of our long-term debt has variable interest rates and therefore is subject to market influences, in January 2010 we entered into various interest rate swaps to stabilize cash flows relating to interest payments for $200 million of our Term Loan debt under our Credit Agreement (Note 7). The last of these monthly contracts matured in January 2012. In August 2011, we entered into additional interest rate swap contracts to fix the interest rate on $200 million of our Term Loan debt. These monthly contracts began in January 2012 and extend through January 2014. Changes in the fair value of an interest rate swap are deferred to the extent the swap is effective. These changes are recorded as a component of accumulated other comprehensive income (loss) until the anticipated interest payments occur and are recognized in interest expense. The ineffective portion of the interest rate swap, if any, is recognized immediately in earnings within the line titled “Net interest expense.” The amount of ineffectiveness associated with our interest rate swap contracts was immaterial in 2011 and 2010. Under the terms of our Credit Agreement, we are required to use at a minimum 60% of the after-tax proceeds from the sales of the Caesar, the Express and ERT to make payments to reduce our Term Loan debt and borrowings under the Revolving Credit Facility. Because it was probable that we would pay off the Term Loan debt before the expiration of our interest rate swaps, we concluded that the swaps no longer qualified as cash flow hedges in December 2012. At December 31, 2012, we recorded losses of approximately $0.6 million ($0.4 million net of tax) to reflect the mark-to-market adjustments for changes in the fair values of the interest rate swaps. We settled all of our remaining interest rate swap contracts for $0.6 million in February 2013. Foreign Currency Exchange Rate Risk Because we operate in various regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar. We entered into various foreign currency forwards to stabilize expected cash outflows relating to certain vessel charters that are denominated in British pounds. The aggregate fair value of the foreign currency forwards was a net asset of $0.1 million at December 31, 2012 and a net liability of $0.1 million at December 31, 2011. All of our remaining foreign exchange contracts are not accounted for as hedge contracts and changes in their fair value are being marked-to-market each reporting period. We recorded gains (losses) totaling $0.4 million in 2012, $0.2 million in 2011 and $(2.6) million in 2010 associated with foreign exchange contracts not qualifying for hedge accounting. In January 2013, we entered into foreign currency exchange contracts to hedge the foreign currency exposure to potential variability in cash flows associated with Grand Canyon charter payments ($104.6 million) denominated in Norwegian Kroner (NOK 591.3 million), through September 2017. These contracts currently qualify for hedge accounting treatment. See Note 17 for more information regarding the accounting for our derivative contracts including our commodity contracts associated with ERT. Earnings Per Share We have shares of restricted stock issued and outstanding, some of which remain subject to vesting requirements. Holders of such shares of unvested restricted stock are entitled to the same liquidation and dividend rights as the holders of our outstanding common stock and are thus considered participating securities. Under applicable accounting guidance, the undistributed earnings for each period are allocated based on the participation rights of both the common shareholders and holders of any participating securities as if earnings for the respective periods had been distributed. Because both the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, we are required to compute earnings per share (“EPS”) amounts under the two class method in periods in which we have earnings from continuing operations. 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 contractually obligated to share in such losses. The presentation of basic EPS amounts on the face of the accompanying consolidated statements of operations is computed by dividing the net income applicable to Helix common shareholders by the weighted average shares of outstanding common stock. The calculation of diluted EPS is similar to basic EPS, except that the denominator includes dilutive common stock equivalents and the income included in the numerator excludes the effects of the impact of dilutive common stock equivalents, if any. The computations of the numerator (Income) and denominator (Shares) to derive the basic and diluted EPS amounts presented on the face of the accompanying consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
|  | Income |  | Shares |  | Income |  | Shares |  | Income |  | Shares |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) applicable to Helix common shareholders | $ | (46,334) |  |  | $ | 129,939 |  |  | $ | (127,102) |  |  |
Less: Undistributed net income allocable to participating securities |  | - |  |  |  | (1,599) |  |  |  | - |  |  |
Undistributed net income (loss) applicable to common shareholders |  | (46,334) |  |  |  | 128,340 |  |  |  | (127,102) |  |  |
Less: (Income) loss from discontinued operations, net of tax |  | (23,684) |  |  |  | (95,221) |  |  |  | 106,657 |  |  |
Add: Undistributed net income from discontinued operations allocable to participating securities |  | - |  |  |  | 1,172 |  |  |  | - |  |  |
Income (loss) from continuing operations applicable to Helix common shareholders | $ | (70,018) |  | 104,449 | $ | 34,291 |  | 104,528 | $ | (20,445) |  | 103,857 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations applicable to Helix common shareholders - Basic | $ | (70,018) |  | 104,449 | $ | 34,291 |  | 104,528 | $ | (20,445) |  | 103,857 |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Share-based awards other than participating securities |  | - |  | - |  | - |  | 64 |  | - |  | - |
Undistributed net income reallocated to participating securities |  | - |  | - |  | 2 |  | - |  | - |  | - |
Convertible preferred stock |  | - |  | - |  | 40 |  | 361 |  | - |  | - |
Income (loss) from continuing operations applicable to Helix common shareholders - Diluted |  | (70,018) |  |  |  | 34,333 |  |  |  | (20,445) |  |  |
Income (loss) from discontinued operations, net of tax |  | 23,684 |  |  |  | 95,221 |  |  |  | (106,657) |  |  |
Net income (loss) applicable to Helix common shareholders - Diluted | $ | (46,334) |  | 104,449 | $ | 129,554 |  | 104,953 | $ | (127,102) |  | 103,857 |
We had net losses from continuing operations for the years ended December 31, 2012 and 2010. Accordingly, our diluted EPS calculation for 2012 and 2010 was equivalent to our basic EPS calculation because it excluded any assumed exercise or conversion of common stock equivalents because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in those respective years. Shares that otherwise would have been included in the diluted per share calculations for the year ended December 31, 2012 and 2010, assuming we had earnings from continuing operations, are as follows (in thousands):
|  | 2012 |  | 2010 |
Diluted shares (as reported) |  | 104,449 |  | 103,857 |
Share-based awards |  | 382 |  | 466 |
Convertible preferred stock |  | 334 |  | 1,015 |
Total |  | 105,165 |  | 105,338 |
The diluted EPS calculation also excluded dividends and related costs associated with the convertible preferred stock that otherwise would have been added back to net income if assumed conversion of the shares was dilutive during the year. There were no diluted shares associated with our 2025 Convertible Senior Notes as the conversion price of $32.14 (and conversion trigger of $38.57 per share) was not met in any of the years ended December 31, 2012, 2011 and 2010. Also, no diluted shares were included for our 2032 Notes for the year ended December 31, 2012 as the conversion price of $25.02 (and conversion trigger of $32.53 per share) was not met, and because we have the right to settle any such future conversions in cash at our sole discretion (Note 7). Major Customers and Concentration of Credit Risk The market for our products and services is primarily the offshore oil and gas industry. Oil and gas companies spend capital on exploration, drilling and production operations, the amount of which is generally dependent on the prevailing view of future oil and gas prices that are subject to many external factors which may contribute to significant volatility. Our customers consist primarily of major oil and gas companies, well-established oil and gas pipeline companies and independent oil and gas producers and suppliers. We perform ongoing credit evaluations of our customers and provide allowances for probable credit losses when necessary. The percent of consolidated revenue from major customers, those whose total represented 10% or more of our consolidated revenues from continuing operations is as follows: 2012 — Shell (12%); 2011 — Shell (10%) and 2010 — BP plc. (26%). The percent of revenue from major customers, those whose total represented 10% or more of our discontinued oil and gas revenues, is as follows: 2012 — Shell (64%) and JP Morgan Ventures (26%); 2011 — Shell (89%); and 2010 — Shell (67%) and Louis Dreyfus Energy Services (19%). We estimate that in 2012 we provided subsea services to over 70 customers. F air Value Measurements Current fair value accounting standards define fair value, establish a consistent framework for measuring fair value and expand disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. These standards also clarify that fair value is an exit price, representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. These fair value accounting rules establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| • |  | Level 1. Observable inputs such as quoted prices in active markets;
| • |  | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
| • |  | Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation techniques as follows:
(a) | Market Approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
(b) | Cost Approach. Amount that would be required to replace the service capacity of an asset (replacement cost).
(c) | Income Approach. Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models).
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, our long-term debt and various derivative instruments. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the highly liquid nature of these instruments. The following table provides additional information related to other financial instruments measured at fair value on a recurring basis at December 31, 2012 (in thousands):
|  |  | Level 1 |  |  |  | Level 2 (1) |  |  |  | Level 3 |  |  |  | Total |  |  |  | Valuation Technique |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil contracts |  | $ | – |  |  | $ | 5,800 |  |  | $ | – |  |  | $ | 5,800 |  |  |  | (c) |
Foreign currency forwards |  |  | – |  |  |  | 146 |  |  |  | – |  |  |  | 146 |  |  |  | (c) |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil contracts |  |  | – |  |  |  | 15,777 |  |  |  | – |  |  |  | 15,777 |  |  |  | (c) |
Fair value of long-term debt (2) |  |  | 994,311 |  |  |  | 123,187 |  |  |  | – |  |  |  | 1,117,498 |  |  |  | (a) |
Interest rate swaps |  |  | – |  |  |  | 521 |  |  |  | – |  |  |  | 521 |  |  |  | (c) |
Total net liability |  | $ | 994,311 |  |  | $ | 133,539 |  |  | $ | – |  |  | $ | 1,127,850 |  |  |  |  |
(1) Unless otherwise indicated, the fair value of our Level 2 derivative instruments reflects our best estimate and is based upon exchange or over-the-counter quotations whenever they are available. Quoted valuations may not be available due to location differences or terms that extend beyond the period for which quotations are available. Where quotes are not available, we utilize other valuation techniques or models to estimate market values. These modeling techniques require us to make estimations of future prices, price correlation and market volatility and liquidity based on market data. Our actual results may differ from our estimates, and these differences could be positive or negative. (2) See Note 7 for additional information regarding our long-term debt. The fair value of our long-term debt at December 31, 2012 and 2011 is as follows:
|  | 2012 |  | 2011 |
|  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value |
Term Loans (mature July 2015) (a) | $ | 367,181 | $ | 368,295 | $ | 279,750 | $ | 279,750 |
Revolving Credit Facility (matures July 2015) (a) |  | 100,000 |  | 100,000 |  | - |  | - |
2025 Notes (mature December 2025) (b) |  | 3,487 |  | 3,487 |  | 300,000 |  | 300,543 |
2032 Notes (mature March 2032) (c) |  | 200,000 |  | 239,320 |  | - |  | - |
Senior Unsecured Notes (mature January 2016) |  | 274,960 |  | 283,209 |  | 474,960 |  | 501,083 |
MARAD Debt (matures February 2027) (d) |  | 105,288 |  | 123,187 |  | 110,166 |  | 124,488 |
Total debt | $ | 1,050,916 | $ | 1,117,498 | $ | 1,164,876 | $ | 1,205,864 |
(a) In February 2013, we repaid $293.9 million of our Term Loans and $24.5 million under our Revolving Credit Facility with the after-tax proceeds from the sale of ERT. (b) Carrying value excludes the related unamortized debt discount of $9.6 million at December 31, 2011. This remaining amount was repurchased by us in February 2013. (c) Carrying value excludes the related unamortized debt discount of $31.7 million at December 31, 2012. (d ) The estimated fair value of all debt, other than the MARAD debt, was determined using Level 1 inputs using the market approach. The fair value of the MARAD debt was determined using a third party evaluation of the remaining average life and outstanding principal balance of the MARAD indebtedness as compared to other governmental obligations in the marketplace with similar terms. The fair value of the MARAD Debt was estimated using Level 2 fair value inputs using the market approach. We review long-lived assets for impairment whenever events occur or changes in circumstances indicate that the carrying amount of assets may not be recoverable. In such evaluation, the estimated future undiscounted cash flows to be generated by the asset are compared with the carrying value of the asset to determine if an impairment may be required. For our former oil and gas properties, the estimated future undiscounted cash flows are based on estimated crude oil and natural gas proved and probable reserves and published future market commodity prices, estimated operating costs and estimates of future capital expenditures. If the estimated undiscounted cash flows for a particular asset are not sufficient to cover the asset’s carrying value, it is impaired and the carrying value is reduced to the asset’s current fair value. The fair value of these assets is determined using an income approach by calculating the present value of future cash flows attributable to the asset based on market information (such as forward commodity prices), estimates of future costs and estimated proved and probable reserve quantities. These fair value measurements fall within Level 3 of the fair value hierarchy. Debt Discount On January 1, 2009, we recorded a discount of $60.2 million related to our Convertible Senior Notes due 2025 (“2025 Notes”) as required. To arrive at this discount amount, we estimated the fair value of the liability component of the 2025 Notes as of the date of their issuance (March 30, 2005) using an income approach. To determine this estimated fair value, we used borrowing rates of similar market transactions involving comparable liabilities at the time of issuance and an expected life of 7.75 years, which represented the earliest period that the holders could require us to repurchase the 2025 Notes (Note 7). The discount related to our 2025 Notes became fully amortized in December 2012. In connection with the issuance of our Convertible Senior Notes due 2032 (“2032 Notes”), we recorded a discount of $35.4 million under existing accounting requirements. To arrive at this discount amount, we estimated the fair value of the liability component of the 2032 Notes as of the date of their issuance (March 12, 2012) using an income approach. To determine this estimated fair value, we used borrowing rates of similar market transactions involving comparable liabilities at the time of issuance and an expected life of 6.0 years. In selecting the expected life, we selected the earliest date that the holders could require us to repurchase all or a portion of the 2032 Notes (March 15, 2018). The remaining unamortized amount of the discount of the 2032 Notes was $31.7 million at December 31, 2012 (Note 7). Investment Available for Sale In 2009 we sold substantially all of our owned shares of the publicly-traded Cal Dive common stock for net proceeds of $418.2 million, net of underwriting fees. Following these sale transactions, we owned 0.5 million shares of Cal Dive common stock, representing less than 1% of the total outstanding shares of Cal Dive. Accordingly we classified our remaining interest in Cal Dive as an investment available for sale. As an investment available for sale, the value of our remaining interest was marked-to-market at each period end with the corresponding change in value being reported as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheet. In 2010, we recorded a $2.2 million non-cash other than temporary impairment charge that reflected the substantial reduction in Cal Dive’s common stock price since our sale of shares of Cal Dive common stock in 2009. In March 2011, we sold our remaining 0.5 million shares of Cal Dive common stock on the open market for gross proceeds of $3.6 million resulting in a pre-tax gain of $0.8 million. New Accounting Standards In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the statement of financial position (balance sheet). U.S. GAAP allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party where rights of set-off are only available in the event of default or bankruptcy. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. We are currently assessing the impact of ASU 2011-11 on our consolidated financial statement s.

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