Employee Benefit Plans and Shareholder Rights Plan

12 Months Ended

Dec. 31, 2011

Employee Benefit Plans and Shareholder Rights Plan [Abstract]

Employee Benefit Plans and Shareholder Rights Plan

EMPLOYEE BENEFIT PLANS AND SHAREHOLDER RIGHTS PLAN

Retirement Investment Plans

We have several employee retirement investment plans that, taken together, cover most of our full time employees. The Oceaneering Retirement Investment Plan is a 401(k) plan in which U.S. employees may participate by deferring a portion of their gross monthly salary and directing us to contribute the deferred amount to the plan. We match a portion of the employees' deferred compensation. Our contributions to the 401(k) plan were $14.5 million, $13.9 million and $13.2 million for the plan years ended December 31, 2011, 2010 and 2009, respectively.

We also make matching contributions to other foreign employee savings plans similar in nature to a 401(k) plan. In 2011, 2010 and 2009, these contributions, principally related to plans associated with U.K. and Norwegian subsidiaries, were $9.6 million, $7.1 million and $6.3 million, respectively.

The Oceaneering International, Inc. Supplemental Executive Retirement Plan covers selected key management employees and executives, as approved by the Compensation Committee of our Board of Directors (the "Compensation Committee"). Under this plan, we accrue an amount determined as a percentage of the participant's gross monthly salary and the amounts accrued are treated as if they are invested in one or more investment vehicles pursuant to this plan. Expenses related to this plan during 2011, 2010 and 2009 were $3.4 million, $3.3 million and $3.5 million, respectively.

We have defined benefit plans covering some of our employees in the U.K. and Norway. There are no further benefits accruing under the U.K. plan, and the Norway plan is closed to new participants. The projected benefit obligations for both plans were $25 million and $24 million, at December 31, 2011 and 2010, respectively, and the fair values of the plan assets (using Level 2 inputs) for both plans were $19 million and $17 million at December 31, 2011 and 2010, respectively.

Incentive and Stock Option Plans

Under our 2010 Incentive Plan (the "Incentive Plan"), shares of our common stock are made available for awards to employees and nonemployee members of our Board of Directors.

The Incentive Plan is administered by the Compensation Committee; however, the full Board of Directors makes determinations regarding awards to nonemployee directors under the Incentive Plan. The Compensation Committee or our Board of Directors, as applicable, determines the type or types of award(s) to be made to each participant and sets forth in the related award agreement the terms, conditions and limitations applicable to each award. Stock options, stock appreciation rights and stock and cash awards may be made under the Incentive Plan. There are no options outstanding under the Incentive Plan. Under the Incentive Plan, a stock option must have a term not exceeding seven years from the date of grant and must have an exercise price of not less than the fair market value of a share of our common stock on the date of grant. The Compensation Committee may not: (1) grant, in exchange for a stock option, a new stock option having a lower exercise price; or (2) reduce the exercise price of a stock option. We have not granted any stock options since 2005 and the Compensation Committee has expressed its intention to refrain from using stock options as a component of employee compensation for our executive officers and other employees for the foreseeable future. Additionally, the Board of Directors has expressed its intention to refrain from using stock options as a component of nonemployee director compensation for the foreseeable future.

In 2011, 2010 and 2009, the Compensation Committee granted awards of performance units under the Incentive Plan and a prior plan to certain of our key executives and employees, and our Board of Directors granted performance units under the Incentive Plan and a prior plan to our Chairman of the Board of Directors. The performance units awarded are scheduled to vest in full on the third anniversary of the award date, or pro rata over three years if the participant meets certain age and years of service requirements. The Compensation Committee and the Board of Directors have approved specific financial goals and measures (as defined in the Performance Award Goals and Measures), based on our cumulative cash flow from operations and a comparison of return on invested capital and cost of capital for each of the three-year periods ending December 31, 2013, 2012 and 2011 to be used as the basis for the final value of the performance units. The final value of each performance unit granted in 2011 and 2010 may range from $0 to $150 and the final value of each performance unit granted in 2009 may range from $0 to $125. Upon vesting and determination of value, the value of the performance units will be payable in cash. As of December 31, 2011, there were 393,025 performance units outstanding.

There was no stock option activity during the year ended December 31, 2011. The following is a summary of our stock option activity for the two years ended December 31, 2010:

	Shares under Option		Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance at December 31, 2008	305,800		$	8.55
Granted	—		—
Exercised	(218,800	)	8.60		$	3,257,000
Forfeited	(5,000	)	8.57
Balance at December 31, 2009	82,000		8.44
Granted	—		—
Exercised	(82,000	)	8.44		$	1,858,000
Forfeited	—		—
Balance at December 31, 2010	—		$	—

We received $0.7 million and $1.9 million from the exercise of stock options in 2010 and 2009, respectively. The excess tax benefit realized from tax deductions from stock options for 2010 and 2009 was $0.9 million and $0.9 million, respectively. Excess tax benefits from share-based compensation are classified as a cash outflow in cash flows from operating activities and an inflow in cash flows from financing activities in the statement of cash flows.

Restricted Stock Plan Information

During 2011, 2010 and 2009, the Compensation Committee granted restricted units of our common stock to certain of our key executives and employees. During 2011, 2010 and 2009, our Board of Directors granted restricted units of our common stock to our Chairman of the Board of Directors (our "Chairman") and restricted common stock to our other nonemployee directors. Over 50% of the grants made in 2011 to our employees and over 60% of the grants made in 2010 and 2009 to our employees vest in full on the third anniversary of the award date, conditional upon continued employment. The remainder of the grants made to employees and all the grants made to our Chairman vest pro rata over three years, as these participants meet certain age and years-of-service requirements. For the grants to each of the participant employees and the Chairman, the participant will be issued a share of our common stock for the participant's vested restricted stock units at the earlier of three years or, if the participant vested earlier after meeting the age and service requirements, at termination of employment or service. The grants to our nonemployee directors vest in full on the first anniversary of the award date conditional upon continued service as a director. Pursuant to grants of restricted common stock units to our employees made prior to 2005, at the time of each vesting, a participant received a tax-assistance payment. Our tax assistance payments were $1.8 million in 2010 and $3.7 million in 2009. There were no tax assistance payments in 2011. In April 2009, the Compensation Committee adopted a policy that Oceaneering will not provide U.S. federal income tax gross-up payments to any of its directors or executive officers in connection with future awards of restricted stock or stock units. This policy had no effect on existing change-in-control agreements with several of our executive officers or the existing service agreement with our Chairman, which provide for tax gross-up payments that could become applicable to such future awards in limited circumstances, such as following a change in control of our company. Since August 2010, there have been no outstanding awards that provide for tax gross-up payments.

The tax benefit realized from tax deductions in excess of financial statement expense was $1.3 million, $0.8 million and $1.6 million in 2011, 2010 and 2009, respectively.

The following is a summary of our restricted stock and restricted stock unit activity for 2011, 2010 and 2009:

	Number		Weighted Average Fair Value		Aggregate Intrinsic Value
Balance at December 31, 2008	1,649,500		$	17.37
Granted	411,850		15.53
Issued	(752,500	)	11.97		$	14,239,000
Forfeited	(65,800	)	20.71
Balance at December 31, 2009	1,243,050		19.86
Granted	421,850		29.58
Issued	(595,790	)	16.23		$	16,673,000
Forfeited	(24,960	)	24.73
Balance at December 31, 2010	1,044,150		25.74
Granted	463,400		41.26
Issued	(379,952	)	30.81		$	15,563,000
Forfeited	(36,748	)	27.77
Balance at December 31, 2011	1,090,850		$	30.49

The restricted stock units granted in 2011, 2010 and 2009 carry no voting rights and no dividend rights. Each grantee of shares of restricted common stock is deemed to be the record owner of those shares during the restriction period, with the right to vote and receive any dividends on those shares.

Effective January 1, 2006, the unvested portions of our grants of restricted stock units were valued at their estimated fair values as of their respective grant dates. The grants in 2011, 2010 and 2009 were subject only to vesting conditioned on continued employment or service as a nonemployee director; therefore, these grants were valued at the grant date fair market value using the closing price of our stock on the New York Stock Exchange.

Compensation expense under the restricted stock plans was $29.9 million, $25.5 million and $23.8 million for 2011, 2010 and 2009, respectively. As of December 31, 2011, we had $11.5 million of future expense to be recognized related to our restricted stock unit plans over a weighted average remaining life of 1.8 years.

Post-Employment Benefit

In 2001, we entered into an agreement with our Chairman who was also then our Chief Executive Officer. That agreement was amended in 2006 and in 2008. Pursuant to the amended agreement, the Chairman relinquished his position as Chief Executive Officer in May 2006 and began his post-employment service period on December 31, 2006, which continued through August 15, 2011, during which service period the Chairman, acting as an independent contractor, agreed to serve as nonexecutive Chairman of our Board of Directors. The agreement provides the Chairman with post-employment benefits for ten years following August 15, 2011. The agreement also provides for medical coverage on an after-tax basis to the Chairman, his spouse and children for their lives. We recognized the net present value of the post-employment benefits over the expected service period. Our total accrued liabilities, current and long-term, under this post-employment benefit were $7.3 million and $7.6 million at December 31, 2011 and 2010, respectively.

As part of the arrangements relating to the Chairman's post-employment benefits, we established an irrevocable grantor trust, commonly known as a "rabbi trust," to provide the Chairman greater assurance that we will set aside an adequate source of funds to fund payment of the post-retirement benefits under this agreement, including the medical coverage benefits payable to the Chairman, his spouse and their children for their lives. In connection with establishment of the rabbi trust, we contributed to the trust a life insurance policy on the life of the Chairman, which we had previously obtained, and we agreed to continue to pay the premiums due on that policy. When the life insurance policy matures, the proceeds of the policy will become assets of the trust. If the value of the trust exceeds $4 million, as adjusted by the consumer price index, at any time after January 1, 2012, the excess may be paid to us. However, because the trust is irrevocable, the assets of the trust are generally not available to fund our future operations until the trust terminates, which is not expected to be during the lives of the Chairman, his spouse or their children. Furthermore, no tax deduction will be available for our contributions to the trust; however, we may benefit from future tax deductions for benefits actually paid from the trust (although benefit payments from the trust are not expected to occur in the near term, because we expect to make direct payments of those benefits for the foreseeable future).

Stockholder Rights Plan

We adopted a Stockholder Rights Plan on November 20, 1992, which was amended and restated as of November 16, 2001. The Stockholder Rights Plan expired on November 16, 2011.