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in entities or jurisdictions that have net operating loss carryforwards available. Theprimary difference between our 2011 effective tax rate of 30.3% and the federal statutoryrate of 35% reflects our intent to indefinitely reinvest in certain of our internationaloperations. Therefore, we are no longer providing for U.S. taxes on a portion of ourforeign earnings. The effective tax rate of 30.3% in our financial statements for 2011 is aresult of our effective rate of 31.5% adjusted by $4.9 million of additional tax benefits,primarily attributable to amending prior years' U.S. federal income tax returns to reflect abroader interpretation of our pre-tax income eligible for certain deductions allowable foroil and gas construction activities, and tax effecting the $19.6 million gain on the sale ofthe Ocean Legend at the U.S. federal statutory rate of 35%. The primary differencebetween our 2010 effective tax rate of 34.3% and the federal statutory rate of 35% is thelesser federal tax rate applied to our U.S. manufacturing profits. Income taxes, computedby applying the federal statutory income tax rate to income before income taxes, are notmaterially different than our actual provisions for income taxes for 2009.We consider $132 million of unremitted earnings of our foreign subsidiaries to beindefinitely reinvested. It is not practical for us to compute the amount of additional U.S.tax that would be due on this amount. We have provided deferred income taxes on theforeign earnings we expect to repatriate.We recognize the benefit for a tax position if the benefit is more likely than not to besustainable upon audit by the applicable taxing authority. If this threshold is met, the taxbenefit is then measured and recognized at the largest amount that is greater than 50%likely of being realized upon ultimate settlement.We account for any applicable interest and penalties on uncertain tax positions as acomponent of our provision for income taxes on our financial statements. We charged$0.4 million, $0.2 million and $0.5 million to income tax expense in 2011, 2010 and 2009,respectively, for penalties and interest on uncertain tax positions, which brought our totalliabilities for penalties and interest on uncertain tax positions to $4.4 million and$4.0 million on our balance sheets at December 31, 2011 and 2010, respectively.Including associated foreign tax credits and penalties and interest, we have accrued a nettotal of $5.6 million in the caption "other long-term liabilities" on our balance sheet forunrecognized tax benefits at December 31, 2011. All additions or reductions to thoseliabilities affect our effective income tax rate in the periods of change.A reconciliation of the beginning and ending amount of gross unrecognized tax benefits,not including associated foreign tax credits and penalties and interest, is as follows:Year Ended December 31,(in thousands) 2011 2010 2009Beginning of year $ 9,991 $ 9,488 $ 8,402Additions based on tax positions related to thecurrent year 947 1,296 1,361Reductions for expiration of statutes of limitations (834) (793) (81)Settlements — — (194)Balance at end of year $ 10,104 $ 9,991 $ 9,488We do not believe that the total of unrecognized tax benefits will significantly increase ordecrease in the next 12 months.42 Oceaneering International, Inc.
We file a consolidated U.S. federal income tax return for Oceaneering International, Inc.and our domestic subsidiaries. We conduct our international operations in a number oflocations that have varying laws and regulations with regard to income and other taxes,some of which are subject to interpretation. Our management believes that adequateprovisions have been made for all taxes that will ultimately be payable, although finaldetermination of tax liabilities may differ from our estimates.Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. Theseaudits often take years to complete and settle. The following lists the earliest tax yearsopen to examination by tax authorities where we have significant operations:JurisdictionPeriodsUnited States 2007United Kingdom 2009Norway 2001Angola 2006Nigeria 2005Brazil 2006Australia 2008Canada 20082011 Annual Report 43
Page 3 and 4: Financial Highlights($ in thousands
Page 5 and 6: In December we secured a three-year
Page 7: 2011 Financial SectionOceaneering I
Page 10 and 11: Oceaneering Common StockOur common
Page 12 and 13: Management's Discussion and Analysi
Page 14 and 15: Critical Accounting Policies and Es
Page 16 and 17: We establish valuation allowances t
Page 18 and 19: In 2009, we used $162 million in in
Page 20 and 21: For 2011, our ROV revenue and opera
Page 22 and 23: We earn equity income from our 50%
Page 24 and 25: Controls and ProceduresDisclosure C
Page 26 and 27: In our opinion, Oceaneering Interna
Page 28 and 29: OCEANEERING INTERNATIONAL, INC. AND
Page 34 and 35: for marine services equipment (such
Page 36 and 37: segment and its Australian assets a
Page 38 and 39: Revenue in Excess of Amounts Billed
Page 40 and 41: elationship and, if it is, the type
Page 42 and 43: December 31,(in thousands) 2011 201
Page 46 and 47: 4. SELECTED BALANCE SHEET AND INCOM
Page 48 and 49: On January 6, 2012, we entered into
Page 50 and 51: Financial Instruments and Risk Conc
Page 52 and 53: The table that follows presents Rev
Page 54 and 55: The following table presents Assets
Page 56 and 57: Geographic Operating AreasThe follo
Page 58 and 59: equirements. The Compensation Commi
Page 60 and 61: in 2011, 2010 and 2009 were subject
Page 62 and 63: Forward-Looking StatementsAll state
Page 64: Oceaneering International, Inc.1191

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