Oceaneering Amends Service Agreement for Chairman
Oceaneering International announced that its Board of Directors, acting on the recommendation of the Compensation Committee, has approved an amendment and restatement of John R. Huff's Service Agreement. Mr. Huff, formerly Oceaneering's Chief Executive Officer, is currently serving as nonexecutive Chairman of Oceaneering's Board of Directors.
The amendments effected pursuant to the Amended and Restated Service Agreement were primarily made to address changes in U.S. tax law arising under Section 409A of the Internal Revenue Code regarding "nonqualified deferred compensation arrangements." Changes to the Service Agreement included a $6.4 million lump-sum cash buyout payable in August 2007 of Mr. Huff's entitlement to perquisites and administrative assistance after his anticipated tenure as nonexecutive Chairman. The Amended and Restated Service Agreement also clarified and resolved other issues that existed under the previous agreement. Oceaneering has filed a current report on Form 8-K with the SEC which contains a description of the amendments effected pursuant to the Amended and Restated Service Agreement and includes as an exhibit a copy of the Amended and Restated Service Agreement.
Oceaneering has been recording quarterly accruals for the amounts to be paid to Mr. Huff in the ten-year period following his service as nonexecutive Chairman, which is currently assumed to extend until August 15, 2011. As a result of the agreement to effect the lump-sum cash buyout of Mr. Huff's entitlement to the perquisites and administrative assistance for that period, Oceaneering expects to record a $2.8 million increase in the accrued liability associated with this arrangement in the quarter ending December 31, 2006. This will result in a corresponding after-tax charge to Oceaneering's net income of approximately $1.8 million.
The effect of the acceleration of the accruals for the lump-sum payment of these amounts will reduce Oceaneering's anticipated fourth quarter EPS by $0.03 per share. The foregoing is not intended as a complete update to Oceaneering's EPS guidance, as it does not give effect to any possible changes in Oceaneering's fourth quarter results from its business operations from those results originally anticipated at the time it issued its fourth quarter guidance.
Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward looking. The forward-looking statements in this press release include the statements concerning Oceaneering's expected financial impact of the lump-sum cash buyout arrangement within the Amended and Restated Service Agreement on its fourth quarter results. Furthermore, Oceaneering has not yet completed its analysis of any other financial statement effects the Amended and Restated Service Agreement may have. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current information and expectations of Oceaneering.
Oceaneering is a global oilfield provider of engineered services and products primarily to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of its applied technology expertise, Oceaneering also serves the defense and aerospace industries.
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